Saudi Arabian Airlines vs CA (1998)- Refer to batch 1
contracts abroad.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, vs. V.P. EUSEBIO CONSTRUCTION, INC.;
3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO;
SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA
SANTOS; AND FIRST INTEGRATED BONDING AND
INSURANCE COMPANY, INC., respondents.; [G.R. No.
140047. July 13, 2004]; DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a
Filipino construction firm with the Iraqi Government for the
construction of the Institute of Physical Therapy-Medical
Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq
war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch
58, petitioner Philippine Export and Foreign Loan Guarantee
Corporation (hereinafter Philguarantee) sought reimbursement
from the respondents of the sum of money it paid to Al Ahli
Bank of Kuwait pursuant to a guarantee it issued for
respondent V.P. Eusebio Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as
follows:
On 8 November 1980, the State Organization of Buildings
(SOB), Ministry of Housing and Construction, Baghdad, Iraq,
awarded the construction of the Institute of Physical
TherapyMedical Rehabilitation Center, Phase II, in Baghdad,
Iraq, (hereinafter the Project) to Ajyal Trading and Contracting
Company (hereinafter Ajyal), a firm duly licensed with the
Kuwait Chamber of Commerce for a total contract price of
ID5,416,089/046 (or about US$18,739,668).
On 7 March 1981, respondent spouses Eduardo and Iluminada
Santos, in behalf of respondent 3-Plex International, Inc.
(hereinafter 3-Plex), a local contractor engaged in construction
business, entered into a joint venture agreement with Ajyal
wherein the former undertook the execution of the entire
Project, while the latter would be entitled to a commission of
4% of the contract price. Later, or on 8 April 1981, respondent
3-Plex, not being accredited by or registered with the Philippine
Overseas Construction Board (POCB), assigned and
transferred all its rights and interests under the joint venture
agreement to VPECI, a construction and engineering firm duly
registered with the POCB. However, on 2 May 1981, 3-Plex
and VPECI entered into an agreement that the execution of the
Project would be under their joint management.
The SOB required the contractors to submit (1) a performance
bond of ID271,808/610 representing 5% of the total contract
price and (2) an advance payment bond of ID541,608/901
representing 10% of the advance payment to be released upon
signing of the contract. To comply with these requirements,
respondents 3-Plex and VPECI applied for the issuance of a
guarantee with petitioner Philguarantee, a government financial
institution empowered to issue guarantees for qualified Filipino
contractors to secure the performance of approved service
Petitioner Philguarantee approved respondents application.
Subsequently, letters of guarantee were issued by
Philguarantee to the Rafidain Bank of Baghdad covering 100%
of the performance and advance payment bonds, but they
were not accepted by SOB. What SOB required was a letter-
guarantee from Rafidain Bank, the government bank of Iraq.
Rafidain Bank then issued a performance bond in favor of SOB
on the condition that another foreign bank, not Philguarantee,
would issue a counter-guarantee to cover its exposure. Al Ahli
Bank of Kuwait was, therefore, engaged to provide a counter-
guarantee to Rafidain Bank, but it required a similar counter-
guarantee in its favor from the petitioner. Thus, three layers of
guarantees had to be arranged.
Upon the application of respondents 3-Plex and VPECI,
petitioner Philguarantee issued in favor of Al Ahli Bank of
Kuwait Letter of Guarantee No. 81-194-F (Performance Bond
Guarantee) in the amount of ID271,808/610 and Letter of
Guarantee No. 81-195-F (Advance Payment Guarantee) in the
amount of ID541,608/901, both for a term of eighteen months
from 25 May 1981. These letters of guarantee were secured by
(1) a Deed of Undertaking executed by respondents VPECI,
Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex,
and Spouses Eduardo E. Santos and Iluminada Santos; and
(2) a surety bond issued by respondent First Integrated
Bonding and Insurance Company, Inc. (FIBICI). The Surety
Bond was later amended on 23 June 1981 to increase the
amount of coverage from P6.4 million to P6.967 million and to
change the bank in whose favor the petitioners guarantee was
issued, from Rafidain Bank to Al Ahli Bank of Kuwait.
On 11 June 1981, SOB and the joint venture VPECI and Ajyal
executed the service contract for the construction of the
Institute of Physical Therapy Medical Rehabilitation Center,
Phase II, in Baghdad, Iraq, wherein the joint venture contractor
undertook to complete the Project within a period of 547 days
or 18 months. Under the Contract, the Joint Venture would
supply manpower and materials, and SOB would refund to the
former 25% of the project cost in Iraqi Dinar and the 75% in US
dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars.
The construction, which was supposed to start on 2 June 1981,
commenced only on the last week of August 1981. Because of
this delay and the slow progress of the construction work due
to some setbacks and difficulties, the Project was not
completed on 15 November 1982 as scheduled. But in October
1982, upon foreseeing the impossibility of meeting the deadline
and upon the request of Al Ahli Bank, the joint venture
contractor worked for the renewal or extension of the
Performance Bond and Advance Payment Guarantee.
Petitioners Letters of Guarantee Nos. 81-194-F (Performance
Bond) and 81-195-F (Advance Payment Bond) with expiry date
of 25 November 1982 were then renewed or extended to 9
February 1983 and 9 March 1983, respectively. The surety
bond was also extended for another period of one year, from
12 May 1982 to 12 May 1983. The Performance Bond was
further extended twelve times with validity of up to 8 December
1986, while the Advance Payment Guarantee was extended
three times more up to 24 May 1984 when the latter was
cancelled after full refund or reimbursement by the joint venture
contractor. The surety bond was likewise extended to 8 May
1987.
As of March 1986, the status of the Project was 51%
accomplished, meaning the structures were already finished.
The remaining 47% consisted in electro-mechanical works and
the 2%, sanitary works, which both required importation of
equipment and materials.
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to
the petitioner demanding full payment of its performance bond
counter-guarantee.
Upon receiving a copy of that telex message on 27 October
1986, respondent VPECI requested Iraq Trade and Economic
Development Minister Mohammad Fadhi Hussein to recall the
telex call on the performance guarantee for being a drastic
action in contravention of its mutual agreement with the latter
that (1) the imposition of penalty would be held in abeyance
until the completion of the project; and (2) the time extension
would be open, depending on the developments on the
negotiations for a foreign loan to finance the completion of the
project. It also wrote SOB protesting the call for lack of factual
or legal basis, since the failure to complete the Project was due
to (1) the Iraqi governments lack of foreign exchange with
which to pay its (VPECIs) accomplishments and (2) SOBs
noncompliance for the past several years with the provision in
the contract that 75% of the billings would be paid in US
dollars. Subsequently, or on 19 November 1986, respondent
VPECI advised the petitioner not to pay yet Al Ahli Bank
because efforts were being exerted for the amicable settlement
of the Project.
On 14 April 1987, the petitioner received another telex
message from Al Ahli Bank stating that it had already paid to
Rafidain Bank the sum of US$876,564 under its letter of
guarantee, and demanding reimbursement by the petitioner of
what it paid to the latter bank plus interest thereon and related
expenses.
Both petitioner Philguarantee and respondent VPECI sought
the assistance of some government agencies of the
Philippines. On 10 August 1987, VPECI requested the Central
Bank to hold in abeyance the payment by the petitioner to
allow the diplomatic machinery to take its course, for otherwise,
the Philippine government , through the Philguarantee and the
Central Bank, would become instruments of the Iraqi
Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor.
On 27 August 1987, the Central Bank authorized the
remittance for its account of the amount of US$876,564
(equivalent to ID271, 808/610) to Al Ahli Bank representing full
payment of the performance counter-guarantee for VPECIs
project in Iraq.
On 6 November 1987, Philguarantee informed VPECI that it
would remit US$876,564 to Al Ahli Bank, and reiterated the
joint and solidary obligation of the respondents to reimburse
the petitioner for the advances made on its counter-guarantee.
The petitioner thus paid the amount of US$876,564 to Al Ahli
Bank of Kuwait on 21 January 1988. Then, on 6 May 1988, the
petitioner paid to Al Ahli Bank of Kuwait US$59,129.83
representing interest and penalty charges demanded by the
latter bank.
On 19 June 1991, the petitioner sent to the respondents
separate letters demanding full payment of the amount of
P47,872,373.98 plus accruing interest, penalty charges, and
10% attorneys fees pursuant to their joint and solidary
obligations under the deed of undertaking and surety bond.
When the respondents failed to pay, the petitioner filed on 9
July 1991 a civil case for collection of a sum of money against
the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and
held that the latter had no valid cause of action against the
respondents. It opined that at the time the call was made on
the guarantee which was executed for a specific period, the
guarantee had already lapsed or expired. There was no valid
renewal or extension of the guarantee for failure of the
petitioner to secure respondents express consent thereto. The
trial court also found that the joint venture contractor incurred
no delay in the execution of the Project. Considering the
Project owners violations of the contract which rendered
impossible the joint venture contractors performance of its
undertaking, no valid call on the guarantee could be made.
Furthermore, the trial court held that no valid notice was first
made by the Project owner SOB to the joint venture contractor
before the call on the guarantee. Accordingly, it dismissed the
complaint, as well as the counterclaims and cross-claim, and
ordered the petitioner to pay attorneys fees of P100,000 to
respondents VPECI and Eusebio Spouses and P100,000 to 3-
Plex and the Santos Spouses, plus costs.
In its 14 June 1999 Decision, the Court of Appeals affirmed the
trial courts decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of
the status of project implementation as well as the problems
besetting the contractors, between 1982 to 1985, having sent
some of its people to Baghdad during that period. The
successive renewals/extensions of the guarantees in fact, was
prompted by delays, not solely attributable to the contractors,
and such extension understandably allowed by the SOB
(project owner) which had not anyway complied with its
contractual commitment to tender 75% of payment in US
Dollars, and which still retained overdue amounts collectible by
VPECI.
Second, appellant was very much aware of the violations
committed by the SOB of its contractual undertakings with
VPECI, principally, the payment of foreign currency (US$) for
75% of the total contract price, as well as of the complications
and injustice that will result from its payment of the full amount 1. A surety is usually bound with his principal by the same
of the performance guarantee, as evident in instrument executed at the same time and on the same
PHILGUARANTEEs letter dated 13 May 1987. consideration. On the other hand, the contract of guaranty is
the guarantor's own separate undertaking often supported by a
Third, appellant was fully aware that SOB was in fact still consideration separate from that supporting the contract of the
obligated to the Joint Venture and there was still an amount principal; the original contract of his principal is not his contract.
collectible from and still being retained by the project owner,
which amount can be set-off with the sum covered by the 2. A surety assumes liability as a regular party to the
performance guarantee. undertaking; while the liability of a guarantor is conditional
depending on the failure of the primary debtor to pay the
Fourth, well-apprised of the above conditions obtaining at the obligation.
Project site and cognizant of the war situation at the time in
Iraq, appellant, though earlier has made representations with 3. The obligation of a surety is primary, while that of a
the SOB regarding a possible amicable termination of the guarantor is secondary.
Project as suggested by VPECI, made a complete turn-around
and insisted on acting in favor of the unjustified call by the 4. A surety is an original promissor and debtor from the
foreign banks. beginning, while a guarantor is charged on his own
undertaking.
The petitioner then came to this Court via Rule 45 of the Rules
of Court claiming that the Court of Appeals erred in affirming 5. A surety is, ordinarily, held to know every default of his
the trial courts ruling that principal; whereas a guarantor is not bound to take notice of
the non-performance of his principal.
I. RESPONDENTS ARE NOT LIABLE UNDER
THE DEED OF UNDERTAKING THEY 6. Usually, a surety will not be discharged either by the mere
EXECUTED IN FAVOR OF PETITIONER IN indulgence of the creditor to the principal or by want of notice
CONSIDERATION FOR THE ISSUANCE OF ITS of the default of the principal, no matter how much he may be
COUNTER-GUARANTEE AND THAT injured thereby. A guarantor is often discharged by the mere
PETITIONER CANNOT PASS ON TO indulgence of the creditor to the principal, and is usually not
RESPONDENTS WHAT IT HAD PAID UNDER liable unless notified of the default of the principal.
THE SAID COUNTER-GUARANTEE.
II. PETITIONER CANNOT CLAIM SUBROGATION. In determining petitioners status, it is necessary to read Letter
III. IT IS INIQUITOUS AND UNJUST FOR of Guarantee No. 81-194-F, which provides in part as follows:
PETITIONER TO HOLD RESPONDENTS
LIABLE UNDER THEIR DEED OF
In consideration of your issuing the above performance
UNDERTAKING.
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay
The main issue in this case is whether the petitioner is entitled you on your first written or telex demand Iraq Dinars Two
to reimbursement of what it paid under Letter of Guarantee No. Hundred Seventy One Thousand Eight Hundred Eight and fils
81-194-F it issued to Al Ahli Bank of Kuwait based on the deed six hundred ten (ID271,808/610) representing 100% of the
of undertaking and surety bond from the respondents. performance bond required of V.P. EUSEBIO for the
construction of the Physical Therapy Institute, Phase II,
The petitioner asserts that since the guarantee it issued was Baghdad, Iraq, plus interest and other incidental expenses
absolute, unconditional, and irrevocable the nature and extent related thereto.
of its liability are analogous to those of suretyship. Its liability
accrued upon the failure of the respondents to finish the In the event of default by V.P. EUSEBIO, we shall pay you
construction of the Institute of Physical Therapy Buildings in 100% of the obligation unpaid but in no case shall such
Baghdad. amount exceed Iraq Dinars (ID) 271,808/610 plus interest and
other incidental expenses. (Emphasis supplied)
By guaranty a person, called the guarantor, binds himself to
the creditor to fulfill the obligation of the principal debtor in case Guided by the abovementioned distinctions between a surety
the latter should fail to do so. If a person binds himself and a guaranty, as well as the factual milieu of this case, we
solidarily with the principal debtor, the contract is called find that the Court of Appeals and the trial court were correct in
suretyship. ruling that the petitioner is a guarantor and not a surety. That
the guarantee issued by the petitioner is unconditional and
Strictly speaking, guaranty and surety are nearly related, and irrevocable does not make the petitioner a surety. As a
many of the principles are common to both. In both contracts, guaranty, it is still characterized by its subsidiary and
there is a promise to answer for the debt or default of another. conditional quality because it does not take effect until the
However, in this jurisdiction, they may be distinguished thus: fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound
himself. In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default
in his obligation first before resort to the guarantor could be
had. A conditional guaranty, as opposed to an unconditional
guaranty, is one which depends upon some extraneous event,
beyond the mere default of the principal, and generally upon
notice of the principals default and reasonable diligence in
exhausting proper remedies against the principal.
It appearing that Letter of Guarantee No. 81-194-F merely
stated that in the event of default by respondent VPECI the
petitioner shall pay, the obligation assumed by the petitioner
was simply that of an unconditional guaranty, not conditional
guaranty. But as earlier ruled the fact that petitioners guaranty
is unconditional does not make it a surety. Besides, surety is
never presumed. A party should not be considered a surety
where the contract itself stipulates that he is acting only as a
guarantor. It is only when the guarantor binds himself solidarily
with the principal debtor that the contract becomes one of
suretyship.
Having determined petitioners liability as guarantor, the next
question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify
resort to the guaranty. This is a mixed question of fact and law
that is better addressed by the lower courts, since this Court is
not a trier of facts.
It is a fundamental and settled rule that the findings of fact of
the trial court and the Court of Appeals are binding or
conclusive upon this Court unless they are not supported by
the evidence or unless strong and cogent reasons dictate
otherwise. The factual findings of the Court of Appeals are
normally not reviewable by us under Rule 45 of the Rules of
Court except when they are at variance with those of the trial
court. The trial court and the Court of Appeals were in unison
that the respondent contractor cannot be considered to have
defaulted in its obligations because the cause of the delay was
not primarily attributable to it.
A corollary issue is what law should be applied in determining
whether the respondent contractor has defaulted in the
performance of its obligations under the service contract. The
question of whether there is a breach of an agreement, which
includes default or mora, pertains to the essential or intrinsic
validity of a contract.
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal
systems, however, is that the intrinsic validity of a contract
must be governed by the lex contractus or proper law of the
contract. This is the law voluntarily agreed upon by the parties
(the lex loci voluntatis) or the law intended by them either
expressly or implicitly (the lex loci intentionis). The law selected
may be implied from such factors as substantial connection
with the transaction, or the nationality or domicile of the parties.
Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to
select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy
of the forum and that the chosen law must bear a substantive
relationship to the transaction.
It must be noted that the service contract between SOB and
VPECI contains no express choice of the law that would
govern it. In the United States and Europe, the two rules that
now seem to have emerged as kings of the hill are (1) the
parties may choose the governing law; and (2) in the absence
of such a choice, the applicable law is that of the State that has
the most significant relationship to the transaction and the
parties. Another authority proposed that all matters relating to
the time, place, and manner of performance and valid excuses
for non-performance are determined by the law of the place of
performance or lex loci solutionis, which is useful because it is
undoubtedly always connected to the contract in a significant
way.
In this case, the laws of Iraq bear substantial connection to the
transaction, since one of the parties is the Iraqi Government
and the place of performance is in Iraq. Hence, the issue of
whether respondent VPECI defaulted in its obligations may be
determined by the laws of Iraq. However, since that foreign law
was not properly pleaded or proved, the presumption of identity
or similarity, otherwise known as the processual presumption,
comes into play. Where foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that foreign law is
the same as ours.
Our law, specifically Article 1169, last paragraph, of the Civil
Code, provides: In reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not ready to
comply in a proper manner with what is incumbent upon him.
Default or mora on the part of the debtor is the delay in the
fulfillment of the prestation by reason of a cause imputable to
the former. It is the non-fulfillment of an obligation with respect
to time.
It is undisputed that only 51.7% of the total work had been
accomplished. The 48.3% unfinished portion consisted in the
purchase and installation of electro-mechanical equipment and
materials, which were available from foreign suppliers, thus
requiring US Dollars for their importation. The monthly billings
and payments made by SOB reveal that the agreement
between the parties was a periodic payment by the Project
owner to the contractor depending on the percentage of
accomplishment within the period. The payments were, in turn,
to be used by the contractor to finance the subsequent phase
of the work. However, as explained by VPECI in its letter to
the Department of Foreign Affairs (DFA), the payment by SOB
purely in Dinars adversely affected the completion of the
project; thus:
4. Despite protests from the plaintiff, SOB continued paying the
accomplishment billings of the Contractor purely in Iraqi Dinars
and which payment came only after some delays.
5. SOB is fully aware of the following:
5.2 That Plaintiff is a foreign contractor in Iraq and as such,
would need foreign currency (US$), to finance the purchase of
various equipment, materials, supplies, tools and to pay for the
cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or
obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the
Philippines requires the remittance into the Philippines of 70%
of the salaries of Filipino workers working abroad in US
Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency
such that the same cannot be used to purchase equipment,
materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the
CONTRACT are not available in Iraq and therefore have to be
imported;
5.7 That the government of Iraq prohibits the bringing of local
currency (Iraqui Dinars) out of Iraq and hence, imported
materials, equipment, etc., cannot be purchased or obtained
using Iraqui Dinars as medium of acquisition.
8. Following the approved construction program of the
CONTRACT, upon completion of the civil works portion of the
installation of equipment for the building, should immediately
follow, however, the CONTRACT specified that these
equipment which are to be installed and to form part of the
PROJECT have to be procured outside Iraq since these are
not being locally manufactured. Copy f the relevant portion of
the Technical Specification is hereto attached as Annex C and
made an integral part hereof;
10. Due to the lack of Foreign currency in Iraq for this
purpose, and if only to assist the Iraqi government in
completing the PROJECT, the Contractor without any
obligation on its part to do so but with the knowledge
and consent of SOB and the Ministry of Housing &
Construction of Iraq, offered to arrange on behalf of SOB, a
foreign currency loan, through the facilities of Circle
International S.A., the Contractors Sub-contractor and SACE
MEDIO CREDITO which will act as the guarantor for this
foreign currency loan.
Arrangements were first made with Banco di Roma.
Negotiation started in June 1985. SOB is informed of the
developments of this negotiation, attached is a copy of the draft
of the loan Agreement between SOB as the Borrower and
Agent. The Several Banks, as Lender, and counter-guaranteed
by Istituto Centrale Per II Credito A Medio Termine
(Mediocredito) Sezione Speciale Per LAssicurazione Del
Credito AllExportazione (Sace). Negotiations went on and
continued until it suddenly collapsed due to the reported default
by Iraq in the payment of its obligations with Italian
government, copy of the news clipping dated June 18, 1986 is
hereto attached as Annex D to form an integral part hereof;
15. On September 15, 1986, Contractor received information
from Circle International S.A. that because of the news report
that Iraq defaulted in its obligations with European banks, the
approval by Banco di Roma of the loan to SOB shall be
deferred indefinitely, a copy of the letter of Circle International
together with the news clippings are hereto attached as
Annexes F and F-1, respectively.
As found by both the Court of Appeals and the trial court, the
delay or the non-completion of the Project was caused by
factors not imputable to the respondent contractor. It was
rather due mainly to the persistent violations by SOB of the
terms and conditions of the contract, particularly its failure to
pay 75% of the accomplished work in US Dollars. Indeed,
where one of the parties to a contract does not perform in a
proper manner the prestation which he is bound to perform
under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay
if the other party fails to perform the obligation incumbent upon
him.
The petitioner, however, maintains that the payments by SOB
of the monthly billings in purely Iraqi Dinars did not render
impossible the performance of the Project by VPECI. Such
posture is quite contrary to its previous representations. In his
26 March 1987 letter to the Office of the Middle Eastern and
African Affairs (OMEAA), DFA, Manila, petitioners Executive
Vice-President Jesus M. Taedo stated that while VPECI had
taken every possible measure to complete the Project, the war
situation in Iraq, particularly the lack of foreign exchange, was
proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of
the project but the war situation in Iraq particularly the lack of
foreign exchange is proving to be a great obstacle. Our
performance counterguarantee was called last 26 October
1986 when the negotiations for a foreign currency loan with the
Italian government through Banco de Roma bogged down
following news report that Iraq has defaulted in its obligation
with major European banks. Unless the situation in Iraq is
improved as to allay the banks apprehension, there is no
assurance that the project will ever be completed.
In order that the debtor may be in default it is necessary that
the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of
the creditor must have ended.
As stated earlier, SOB cannot yet demand complete
performance from VPECI because it has not yet itself
performed its obligation in a proper manner, particularly the
payment of the 75% of the cost of the Project in US Dollars.
The VPECI cannot yet be said to have incurred in delay. Even
assuming that there was delay and that the delay was
attributable to VPECI, still the effects of that delay ceased upon
the renunciation by the creditor, SOB, which could be implied
when the latter granted several extensions of time to the
former. Besides, no demand has yet been made by SOB
against the respondent contractor. Demand is generally
necessary even if a period has been fixed in the obligation.
And default generally begins from the moment the creditor
demands judicially or extra-judicially the performance of the
obligation. Without such demand, the effects of default will not
arise.
Moreover, the petitioner as a guarantor is entitled to the benefit
of excussion, that is, it cannot be compelled to pay the creditor
SOB unless the property of the debtor VPECI has been
exhausted and all legal remedies against the said debtor have
been resorted to by the creditor. It could also set up
compensation as regards what the creditor SOB may owe the
principal debtor VPECI. In this case, however, the petitioner
has clearly waived these rights and remedies by making the
payment of an obligation that was yet to be shown to be
rightfully due the creditor and demandable of the principal
debtor.
As found by the Court of Appeals, the petitioner fully knew that
the joint venture contractor had collectibles from SOB which
could be set off with the amount covered by the performance
guarantee. In February 1987, the OMEAA transmitted to the
petitioner a copy of a telex dated 10 February 1987 of the
Philippine Ambassador in Baghdad, Iraq, informing it of the
note verbale sent by the Iraqi Ministry of Foreign Affairs stating
that the past due obligations of the joint venture contractor from
the petitioner would be deducted from the dues of the two
contractors.
Also, in the project situationer attached to the letter to the
OMEAA dated 26 March 1987, the petitioner raised as among
the arguments to be presented in support of the cancellation of
the counter-guarantee the fact that the amount of
ID281,414/066 retained by SOB from the Project was more
than enough to cover the counter-guarantee of ID271,808/610;
thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
The Iraqi Government does not have the foreign
exchange to fulfill its contractual obligations of paying
75% of progress billings in US dollars.
It could also be argued that the amount of
ID281,414/066 retained by SOB from the
proposed project is more than the amount
of the outstanding counterguarantee.
In a nutshell, since the petitioner was aware of the contractors
outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the
predicament of the respondents. In fact, in its 13 May 1987
letter to the OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the
project was mainly due to SOBs violation of contract terms and
as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be
an instrument in any case of inequity committed against a
Filipino contractor. It is for this reason that we are constrained
to seek your assistance not only in ascertaining the veracity of
Al Ahli Banks claim that it has paid Rafidain Bank but possibly
averting such an event. As any payment effected by the banks
will complicate matters, we cannot help underscore the
urgency of VPECIs bid for government intervention for the
amicable termination of the contract and release of the
performance guarantee.
But surprisingly, though fully cognizant of SOBs violations of
the service contract and VPECIs outstanding receivables from
SOB, as well as the situation obtaining in the Project site
compounded by the Iran-Iraq war, the petitioner opted to pay
the second layer guarantor not only the full amount of the
performance bond counter-guarantee but also interests and
penalty charges.
This brings us to the next question: May the petitioner as a
guarantor secure reimbursement from the respondents for
what it has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be
indemnified by the latter and would be legally subrogated to the
rights which the creditor has against the debtor. However, a
person who makes payment without the knowledge or against
the will of the debtor has the right to recover only insofar as the
payment has been beneficial to the debtor. If the obligation was
subject to defenses on the part of the debtor, the same
defenses which could have been set up against the creditor
can be set up against the paying guarantor.
From the findings of the Court of Appeals and the trial court, it
is clear that the payment made by the petitioner guarantor did
not in any way benefit the principal debtor, given the project
status and the conditions obtaining at the Project site at that
time. Moreover, the respondent contractor was found to have
valid defenses against SOB, which are fully supported by
evidence and which have been meritoriously set up against the
paying guarantor, the petitioner in this case. And even if the
deed of undertaking and the surety bond secured petitioners
guaranty, the petitioner is precluded from enforcing the same
by reason of the petitioners undue payment on the guaranty.
Rights under the deed of undertaking and the surety bond do
not arise because these contracts depend on the validity of the
enforcement of the guaranty.
The petitioner guarantor should have waited for the natural
course of guaranty: the debtor VPECI should have, in the first
place, defaulted in its obligation and that the creditor SOB
should have first made a demand from the principal debtor. It is
only when the debtor does not or cannot pay, in whole or in
part, that the guarantor should pay. When the petitioner
guarantor in this case paid against the will of the debtor VPECI,
the debtor VPECI may set up against it defenses available
against the creditor SOB at the time of payment. This is the
hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing
the necessary support and assistance in order to enable
[Filipino exporters and contractors to operate viably under the
prevailing economic and business conditions, the petitioner
should have exercised prudence and caution under the
circumstances. As aptly put by the Court of Appeals, it would
be the height of inequity to allow the petitioner to pass on its
losses to the Filipino contractor VPECI which had sternly
warned against paying the Al Ahli Bank and constantly
apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby
DENIED for lack of merit, and the decision of the Court of
appeals in CA-G.R. CV No. 39302 is AFFIRMED. No
pronouncement as to costs. SO ORDERED.
CRESCENT PETROLEUM, LTD. - versus M/V LOK
MAHESHWARI, THE SHIPPING CORPORATION OF INDIA,
and PORTSERV LIMITED and/or TRANSMAR SHIPPING,
INC., G.R. No. 155014 . November 11, 2005; PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the
(a) reversal of the November 28, 2001 Decision of the Court of
Appeals in CA-G.R. No. CV-54920, which dismissed for want
of jurisdiction the instant case, and the September 3, 2002
Resolution of the same appellate court, which denied
petitioners motion for reconsideration, and (b) reinstatement of
the July 25, 1996 Decision of the Regional Trial Court (RTC) in
Civil Case No. CEB-18679, which held that respondents were
solidarily liable to pay petitioner the sum prayed for in the
complaint.
The facts are as follows: Respondent M/V Lok Maheshwari
(Vessel) is an oceangoing vessel of Indian registry that is
owned by respondent Shipping Corporation of India (SCI), a
corporation organized and existing under the laws of India and
principally owned by the Government of India. It was time-
chartered by respondent SCI to Halla Merchant Marine Co. Ltd.
(Halla), a South Korean company. Halla, in turn, sub-chartered
the Vessel through a time charter to Transmar Shipping, Inc.
(Transmar). Transmar further sub-chartered the Vessel to
Portserv Limited (Portserv). Both Transmar and Portserv are
corporations organized and existing under the laws of Canada.
On or about November 1, 1995, Portserv requested
petitioner Crescent Petroleum, Ltd. (Crescent), a corporation
organized and existing under the laws of Canada that is
engaged in the business of selling petroleum and oil products
for the use and operation of oceangoing vessels, to deliver
marine fuel oils (bunker fuels) to the Vessel. Petitioner
Crescent granted and confirmed the request through an advice
via facsimile dated November 2, 1995. As security for the
payment of the bunker fuels and related services, petitioner
Crescent received two (2) checks in the amounts of
US$100,000.00 and US$200,000.00. Thus, petitioner Crescent
contracted with its supplier, Marine Petrobulk Limited (Marine
Petrobulk), another Canadian corporation, for the physical
delivery of the bunker fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk
delivered the bunker fuels amounting to US$103,544 inclusive
of barging and demurrage charges to the Vessel at the port of
Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer
of the Vessel duly acknowledged and received the delivery
receipt. Marine Petrobulk issued an invoice to petitioner
Crescent for the US$101,400.00 worth of the bunker fuels.
Petitioner Crescent issued a check for the same amount in
favor of Marine Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent
issued a revised invoice dated November 21, 1995 to Portserv
Limited, and/or the Master, and/or Owners, and/or Operators,
and/or Charterers of M/V Lok Maheshwari in the amount of
US$103,544.00 with instruction to remit the amount on or
before December 1, 1995. The period lapsed and several
demands were made but no payment was received. Also, the
checks issued to petitioner Crescent as security for the
payment of the bunker fuels were dishonored for insufficiency
of funds. As a consequence, petitioner Crescent incurred
additional expenses of US$8,572.61 for interest, tracking fees,
and legal fees.
On May 2, 1996, while the Vessel was docked at the
port of Cebu City, petitioner Crescent instituted before the RTC
of Cebu City an action for a sum of money with prayer for
temporary restraining order and writ of preliminary attachment
against respondents Vessel and SCI, Portserv and/or
Transmar. The case was raffled to Branch 10 and docketed as
Civil Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of
attachment against the Vessel with bond at P2,710,000.00.
Petitioner Crescent withdrew its prayer for a temporary
restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents
Vessel and SCI, and Portserv and/or Transmar through the
Master of the Vessel. On May 28, 1996, respondents Vessel
and SCI, through Pioneer Insurance and Surety Corporation
(Pioneer), filed an urgent ex-parte motion to approve Pioneers
letter of undertaking, to consider it as counter-bond and to
discharge the attachment. On May 29, 1996, the trial court
granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of
petitioner Crescent, the trial court declared respondents Vessel
and SCI, Portserv and/or Transmar in default. Petitioner
Crescent was allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor
of petitioner Crescent, thus:
 WHEREFORE, premises considered, REVERSED and SET ASIDE, and a new
judgment is hereby rendered in favor of plaintiff one is entered DISMISSING the instant
[Crescent] and against the defendants [Vessel, SCI, case for want of jurisdiction.
Portserv and/or Transmar].
The appellate court denied petitioner Crescents
motion for reconsideration explaining that it dismissed the
instant action primarily on the ground of forum non conveniens
Consequently, the latter are hereby ordered considering that the parties are foreign corporations which are
to pay plaintiff jointly and solidarily, the not doing business in the Philippines.
following:
Hence, this petition submitting the following issues for
(a) the sum of resolution, viz:
US$103,544.00,
representing the 1. Philippine courts have jurisdiction
outstanding obligation; over a foreign vessel found inside
Philippine waters for the
(b) interest of enforcement of a maritime lien
US$10,978.50 as of against said vessel and/or its
July 3, 1996, plus owners and operators;
additional interest at 2. The principle of forum non
18% per annum for conveniens is inapplicable to the
the period thereafter, instant case;
until the principal 3. The trial court acquired jurisdiction
account is fully paid; over the subject matter of the
instant case, as well as over the
(c) attorneys fees of res and over the persons of the
P300,000.00; and parties;
4. The enforcement of a maritime lien
(d) P200,000.00 as litigation on the subject vessel is expressly
expenses. granted by law. The Ship
Mortgage Acts as well as the
SO ORDERED. Code of Commerce provides for
relief to petitioner for its unpaid
claim;
5. The arbitration clause in the
On August 19, 1996, respondents Vessel and SCI contract was not rigid or inflexible
appealed to the Court of Appeals. They attached copies of the but expressly allowed petitioner to
charter parties between respondent SCI and Halla, between enforce its maritime lien in
Halla and Transmar, and between Transmar and Portserv. Philippine courts provided the
They pointed out that Portserv was a time charterer and that vessel was in the Philippines;
there is a clause in the time charters between respondent SCI 6. The law of the state of New York is
and Halla, and between Halla and Transmar, which states that inapplicable to the present
the Charterers shall provide and pay for all the fuel except as controversy as the same has not
otherwise agreed. They submitted a copy of Part II of the been properly pleaded and
Bunker Fuel Agreement between petitioner Crescent and proved;
Portserv containing a stipulation that New York law governs 7. Petitioner has legal capacity to sue
the construction, validity and performance of the contract. before Philippine courts as it is
They likewise submitted certified copies of the Commercial suing upon an isolated business
Instruments and Maritime Lien Act of the United States (U.S.), transaction;
some U.S. cases, and some Canadian cases to support their 8. Respondents were duly served
defense. summons although service of
summons upon respondents is not
a jurisdictional requirement, the
On November 28, 2001, the Court of Appeals issued
action being a suit quasi in rem;
its assailed Decision, which reversed that of the trial court, viz:
9. The trial courts decision has factual
and legal bases; and,
WHEREFORE, premises 10. The respondents should be held
considered, the Decision dated July 25, jointly and solidarily liable.
1996, issued by the Regional Trial Court of
Cebu City, Branch 10, is hereby
 In a nutshell, this case is for the satisfaction of unpaid
supplies furnished by a foreign supplier in a foreign port to a
vessel of foreign registry that is owned, chartered and sub-
chartered by foreign entities.
Under Batas Pambansa Bilang 129, as amended by
Republic Act No. 7691, RTCs exercise exclusive original
jurisdiction (i)n all actions in admiralty and maritime where the
demand or claim exceeds two hundred thousand pesos
(P200,000) or in Metro Manila, where such demand or claim
exceeds four hundred thousand pesos (P400,000). Two (2)
tests have been used to determine whether a case involving a
contract comes within the admiralty and maritime jurisdiction of
a court - the locational test and the subject matter test. The
English rule follows the locational test wherein maritime and
admiralty jurisdiction, with a few exceptions, is exercised only
on contracts made upon the sea and to be executed thereon.
This is totally rejected under the American rule where the
criterion in determining whether a contract is maritime depends
on the nature and subject matter of the contract, having
reference to maritime service and transactions. In
International Harvester Company of the Philippines v.
Aragon, we adopted the American rule and held that (w)hether
or not a contract is maritime depends not on the place where
the contract is made and is to be executed, making the locality
the test, but on the subject matter of the contract, making the
true criterion a maritime service or a maritime transaction.
A contract for furnishing supplies like the one involved
in this case is maritime and within the jurisdiction of admiralty.
It may be invoked before our courts through an action in rem or
quasi in rem or an action in personam. Thus:
xxx
Articles 579 and 584 [of the Code
of Commerce] provide a method of
collecting or enforcing not only the liens
created under Section 580 but also for the
collection of any kind of lien whatsoever. In
the Philippines, we have a complete
legislation, both substantive and adjective,
under which to bring an action in rem
against a vessel for the purpose of
enforcing liens. The substantive law is found
in Article 580 of the Code of Commerce.
The procedural law is to be found in Article
584 of the same Code. The result is,
therefore, that in the Philippines any vessel
even though it be a foreign vessel found in
any port of this Archipelago may be
attached and sold under the substantive law
which defines the right, and the procedural
law contained in the Code of Commerce by
which this right is to be enforced. x x x. But
where neither the law nor the contract
between the parties creates any lien or
charge upon the vessel, the only way in
which it can be seized before judgment is by
pursuing the remedy relating to attachment
under Rule 59 [now Rule 57] of the Rules of
Court.
But, is petitioner Crescent entitled to a maritime lien
under our laws? Petitioner Crescent bases its claim of a
maritime lien on Sections 21, 22 and 23 of Presidential
Decree No. 1521 (P.D. No. 1521), also known as the Ship
Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for
Necessaries; persons entitled to such lien. -
Any person furnishing repairs, supplies,
towage, use of dry dock or maritime
railway, or other necessaries, to any vessel,
whether foreign or domestic, upon the order
of the owner of such vessel, or of a person
authorized by the owner, shall have a
maritime lien on the vessel, which may be
enforced by suit in rem, and it shall be
necessary to allege or prove that credit was
given to the vessel.
Sec. 22. Persons Authorized to
Procure Repairs, Supplies and
Necessaries. - The following persons shall
be presumed to have authority from the
owner to procure repairs, supplies, towage,
use of dry dock or marine railway, and other
necessaries for the vessel: The managing
owner, ships husband, master or any
person to whom the management of the
vessel at the port of supply is entrusted. No
person tortuously or unlawfully in
possession or charge of a vessel shall have
authority to bind the vessel.
Sec. 23. Notice to Person
Furnishing Repairs, Supplies and
Necessaries. - The officers and agents of a
vessel specified in Section 22 of this
Decree shall be taken to include such
officers and agents when appointed by a
charterer, by an owner pro hac vice, or by
an agreed purchaser in possession of the
vessel; but nothing in this Decree shall be
construed to confer a lien when the
furnisher knew, or by exercise of
reasonable diligence could have
ascertained, that because of the terms of a
charter party, agreement for sale of the
vessel, or for any other reason, the person
ordering the repairs, supplies, or other
necessaries was without authority to bind
the vessel therefor.
Petitioner Crescent submits that these provisions
apply to both domestic and foreign vessels, as well as
domestic and foreign suppliers of necessaries. It contends that
the use of the term any person in Section 21 implies that the
law is not restricted to domestic suppliers but also includes all
persons who supply provisions and necessaries to a vessel,
whether foreign or domestic. It points out further that the law
does not indicate that the supplies or necessaries must be
furnished in the Philippines in order to give petitioner the right
to seek enforcement of the lien with a Philippine court.
Respondents Vessel and SCI, on the other hand,
maintain that Section 21 of the P.D. No. 1521 or the Ship
Mortgage Decree of 1978 does not apply to a foreign supplier
like petitioner Crescent as the provision refers only to a
situation where the person furnishing the supplies is situated
inside the territory of the Philippines and not where the
necessaries were furnished in a foreign jurisdiction like
Canada.
We find against petitioner Crescent.
I.
P.D. No. 1521 or the Ship Mortgage Decree of 1978
was enacted to accelerate the growth and development of the
shipping industry and to extend the benefits accorded to
overseas shipping under Presidential Decree No. 214 to
domestic shipping. It is patterned closely from the U.S. Ship
Mortgage Act of 1920 and the Liberian Maritime Law relating to
preferred mortgages. Notably, Sections 21, 22 and 23 of P.D.
No. 1521 or the Ship Mortgage Decree of 1978 are identical to
Subsections P, Q, and R, respectively, of the U.S. Ship
Mortgage Act of 1920, which is part of the Federal Maritime
Lien Act. Hence, U.S. jurisprudence finds relevance to
determining whether P.D. No. 1521 or the Ship Mortgage
Decree of 1978 applies in the present case.
The various tests used in the U.S. to determine
whether a maritime lien exists are the following:
One. In a suit to establish and enforce a maritime lien
for supplies furnished to a vessel in a foreign port, whether
such lien exists, or whether the court has or will exercise
jurisdiction, depends on the law of the country where the
supplies were furnished, which must be pleaded and proved.
This principle was laid down in the 1888 case of The Scotia,
reiterated in The Kaiser Wilhelm II (1916), in The
Woudrichem (1921) and in The City of Atlanta (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of
cases, which replaced such single-factor methodologies as the
law of the place of supply.
In Lauritzen v. Larsen, a Danish seaman, while temporarily in
New York, joined the crew of a ship of Danish flag and registry
that is owned by a Danish citizen. He signed the ships articles
providing that the rights of the crew members would be
governed by Danish law and by the employers contract with
the Danish Seamens Union, of which he was a member. While
in Havana and in the course of his employment, he was
negligently injured. He sued the shipowner in a federal district
court in New York for damages under the Jones Act. In holding
that Danish law and not the Jones Act was applicable, the
Supreme Court adopted a multiple-contact test to determine,
in the absence of a specific Congressional directive as to the
statutes reach, which jurisdictions law should be applied. The
following factors were considered: (1) place of the wrongful
act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5)
place of contract; (6) inaccessibility of foreign forum; and
(7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court
in the case of Romero v. International Terminal Operating
Co. again considered a foreign seamans personal injury claim
under both the Jones Act and the general maritime law. The
Court held that the factors first announced in the case of
Lauritzen were applicable not only to personal injury claims
arising under the Jones Act but to all matters arising
under maritime law in general.
Hellenic Lines, Ltd. v. Rhoditis was also a suit
under the Jones Act by a Greek seaman injured aboard a ship
of Greek registry while in American waters. The ship was
operated by a Greek corporation which has its largest office in
New York and another office in New Orleans and whose stock
is more than 95% owned by a U.S. domiciliary who is also a
Greek citizen. The ship was engaged in regularly scheduled
runs between various ports of the U.S. and the Middle East,
Pakistan, and India, with its entire income coming from either
originating or terminating in the U.S. The contract of
employment provided that Greek law and a Greek collective
bargaining agreement would apply between the employer and
the seaman and that all claims arising out of the employment
contract were to be adjudicated by a Greek court. The U.S.
Supreme Court observed that of the seven factors listed in
the Lauritzen test, four were in favor of the shipowner and
against jurisdiction. In arriving at the conclusion that the
Jones Act applies, it ruled that the application of the Lauritzen
test is not a mechanical one. It stated thus: [t]he significance of
one or more factors must be considered in light of the national
interest served by the assertion of Jones Act jurisdiction.
(footnote omitted) Moreover, the list of seven factors in
Lauritzen was not intended to be exhaustive. x x x [T]he
shipowners base of operations is another factor of importance
in determining whether the Jones Act is applicable; and there
well may be others.
The principles enunciated in these maritime tort cases
have been extended to cases involving unpaid supplies and
necessaries such as the cases of Forsythe International
U.K., Ltd. v. M/V Ruth Venture, and Comoco Marine
Services v. M/V El Centroamericano.
Three. The factors provided in Restatement
(Second) of Conflicts of Law have also been applied,
especially in resolving cases brought under the Federal
Maritime Lien Act. Their application suggests that in the
absence of an effective choice of law by the parties, the forum
contacts to be considered include: (a) the place of contracting;
(b) the place of negotiation of the contract; (c) the place of
performance; (d) the location of the subject matter of the
contract; and (e) the domicile, residence, nationality, place of
incorporation and place of business of the parties.
In Gulf Trading and Transportation Co. v. The
Vessel Hoegh Shield, an admiralty action in rem was brought
by an American supplier against a vessel of Norwegian flag
owned by a Norwegian Company and chartered by a London
time charterer for unpaid fuel oil and marine diesel oil delivered
while the vessel was in U.S. territory. The contract was
executed in London. It was held that because the bunker fuel
was delivered to a foreign flag vessel within the jurisdiction of
the U.S., and because the invoice specified payment in the
U.S., the admiralty and maritime law of the U.S. applied. The
U.S. Court of Appeals recognized the modern approach to
maritime conflict of law problems introduced in the Lauritzen
case. However, it observed that Lauritzen involved a torts claim
under the Jones Act while the present claim involves an
alleged maritime lien arising from unpaid supplies. It made a
disclaimer that its conclusion is limited to the unique
circumstances surrounding a maritime lien as well as the
statutory directives found in the Maritime Lien Statute and that
the initial choice of law determination is significantly
affected by the statutory policies surrounding a maritime
lien. It ruled that the facts in the case call for the application of
the Restatement (Second) of Conflicts of Law. The U.S. Court
gave much significance to the congressional intent in enacting
the Maritime Lien Statute to protect the interests of American
supplier of goods, services or necessaries by making maritime
liens available where traditional services are routinely
rendered. It concluded that the Maritime Lien Statute
represents a relevant policy of the forum that serves the needs
of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance
to the predictability of result and protection of justified
expectations in a particular field of law. In the maritime realm, it
is expected that when necessaries are furnished to a vessel in
an American port by an American supplier, the American Lien
Statute will apply to protect that supplier regardless of the
place where the contract was formed or the nationality of the
vessel.
The same principle was applied in the case of
Swedish Telecom Radio v. M/V Discovery I where the
American court refused to apply the Federal Maritime Lien Act
to create a maritime lien for goods and services supplied by
foreign companies in foreign ports. In this case, a Swedish
company supplied radio equipment in a Spanish port to
refurbish a Panamanian vessel damaged by fire. Some of the
contract negotiations occurred in Spain and the agreement for
supplies between the parties indicated Swedish companys
willingness to submit to Swedish law. The ship was later sold
under a contract of purchase providing for the application of
New York law and was arrested in the U.S. The U.S. Court of
Appeals also held that while the contacts-based framework set
forth in Lauritzen was useful in the analysis of all maritime
choice of law situations, the factors were geared towards a
seamans injury claim. As in Gulf Trading, the lien arose by
operation of law because the ships owner was not a party to
the contract under which the goods were supplied. As a result,
the court found it more appropriate to consider the factors
contained in Section 6 of the Restatement (Second) of
Conflicts of Law. The U.S. Court held that the primary concern
of the Federal Maritime Lien Act is the protection of American
suppliers of goods and services.
The same factors were applied in the case of Ocean
Ship Supply, Ltd. v. M/V Leah.
II.
Finding guidance from the foregoing decisions, the
Court cannot sustain petitioner Crescents insistence on the
application of P.D. No. 1521 or the Ship Mortgage Decree of
1978 and hold that a maritime lien exists.
First. Out of the seven basic factors listed in the case of
Lauritzen, Philippine law only falls under one the law of the
forum. All other elements are foreign Canada is the place of
the wrongful act, of the allegiance or domicile of the injured and
the place of contract; India is the law of the flag and the
allegiance of the defendant shipowner. Balancing these basic
interests, it is inconceivable that the Philippine court has any
interest in the case that outweighs the interests of Canada or
India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree
of 1978 is inapplicable following the factors under Restatement
(Second) of Conflict of Laws. Like the Federal Maritime Lien
Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of
1978 was enacted primarily to protect Filipino suppliers and
was not intended to create a lien from a contract for supplies
between foreign entities delivered in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage
Decree of 1978 and rule that a maritime lien exists would not
promote the public policy behind the enactment of the law to
develop the domestic shipping industry. Opening up our courts
to foreign suppliers by granting them a maritime lien under our
laws even if they are not entitled to a maritime lien under their
laws will encourage forum shopping.
Finally. The submission of petitioner is not in keeping
with the reasonable expectation of the parties to the contract.
Indeed, when the parties entered into a contract for supplies in
Canada, they could not have intended the laws of a remote
country like the Philippines to determine the creation of a lien
by the mere accident of the Vessels being in Philippine
territory.
III.
But under which law should petitioner Crescent prove the
existence of its maritime lien?
In light of the interests of the various foreign elements involved,
it is clear that Canada has the most significant interest in this
dispute. The injured party is a Canadian corporation, the sub-
charterer which placed the orders for the supplies is also
Canadian, the entity which physically delivered the bunker
fuels is in Canada, the place of contracting and negotiation is in
Canada, and the supplies were delivered in Canada.
The arbitration clause contained in the Bunker Fuel
Agreement which states that New York law governs the
construction, validity and performance of the contract is only a
factor that may be considered in the choice-of-law analysis but
is not conclusive. As in the cases of Gulf Trading and
Swedish Telecom, the lien that is the subject matter of this
case arose by operation of law and not by contract because
the shipowner was not a party to the contract under which the
goods were supplied.
It is worthy to note that petitioner Crescent never
alleged and proved Canadian law as basis for the existence of
a maritime lien. To the end, it insisted on its theory that
Philippine law applies. Petitioner contends that even if foreign
law applies, since the same was not properly pleaded and
proved, such foreign law must be presumed to be the same as
Philippine law pursuant to the doctrine of processual
presumption.
Thus, we are left with two choices: (1) dismiss the
case for petitioners failure to establish a cause of action or (2)
presume that Canadian law is the same as Philippine law. In
either case, the case has to be dismissed.
It is well-settled that a party whose cause of action or
defense depends upon a foreign law has the burden of proving
the foreign law. Such foreign law is treated as a question of
fact to be properly pleaded and proved. Petitioner Crescents
insistence on enforcing a maritime lien before our courts
depended on the existence of a maritime lien under the proper
law. By erroneously claiming a maritime lien under Philippine
law instead of proving that a maritime lien exists under
Canadian law, petitioner Crescent failed to establish a cause of
action.
Even if we apply the doctrine of processual
presumption, the result will still be the same. Under P.D. No.
1521 or the Ship Mortgage Decree of 1978, the following are
the requisites for maritime liens on necessaries to exist: (1) the
necessaries must have been furnished to and for the benefit of
the vessel; (2) the necessaries must have been necessary for
the continuation of the voyage of the vessel; (3) the credit must
have been extended to the vessel; (4) there must be necessity
for the extension of the credit; and (5) the necessaries must be
ordered by persons authorized to contract on behalf of the
vessel. These do not avail in the instant case.
First. It was not established that benefit was extended
to the vessel. While this is presumed when the master of the
ship is the one who placed the order, it is not disputed that in
this case it was the sub-charterer Portserv which placed the
orders to petitioner Crescent. Hence, the presumption does not
arise and it is incumbent upon petitioner Crescent to prove that
benefit was extended to the vessel. Petitioner did not.
Second. Petitioner Crescent did not show any proof that the
marine products were necessary for the continuation of the
vessel.
Third. It was not established that credit was extended to the
vessel. It is presumed that in the absence of fraud or collusion,
where advances are made to a captain in a foreign port, upon
his request, to pay for necessary repairs or supplies to enable
his vessel to prosecute her voyage, or to pay harbor dues, or
for pilotage, towage and like services rendered to the vessel,
that they are made upon the credit of the vessel as well as
upon that of her owners. In this case, it was the sub-charterer
Portserv which requested for the delivery of the bunker fuels.
The issuance of two checks amounting to US$300,000 in favor
of petitioner Crescent prior to the delivery of the bunkers as
security for the payment of the obligation weakens petitioner
Crescents contention that credit was extended to the Vessel.
We also note that when copies of the charter parties were
submitted by respondents in the Court of Appeals, the time
charters between respondent SCI and Halla and between
Halla and Transmar were shown to contain a clause which
states that the Charterers shall provide and pay for all the fuel
except as otherwise agreed. This militates against petitioner
Crescents position that Portserv is authorized by the
shipowner to contract for supplies upon the credit of the
vessel.
Fourth. There was no proof of necessity of credit. A necessity
of credit will be presumed where it appears that the repairs
and supplies were necessary for the ship and that they were
ordered by the master. This presumption does not arise in this
case since the fuels were not ordered by the master and there
was no proof of necessity for the supplies.
Finally. The necessaries were not ordered by persons
authorized to contract in behalf of the vessel as provided
under Section 22 of P.D. No. 1521 or the Ship Mortgage
Decree of 1978 - the managing owner, the ships husband,
master or any person with whom the management of the
vessel at the port of supply is entrusted. Clearly, Portserv, a
sub-charterer under a time charter, is not someone to whom
the management of the vessel has been entrusted. A time
charter is a contract for the use of a vessel for a specified
period of time or for the duration of one or more specified
voyages wherein the owner of the time-chartered vessel
retains possession and control through the master and crew
who remain his employees. Not enjoying the presumption of
authority, petitioner Crescent should have proved that Portserv
was authorized by the shipowner to contract for supplies.
Petitioner failed.
A discussion on the principle of forum non conveniens is
unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in
CA-G.R. No. CV 54920, dated November 28, 2001, and its
subsequent Resolution of September 3, 2002 are AFFIRMED.
The instant petition for review on certiorari is DENIED for lack
of merit. Cost against petitioner. SO ORDERED.
LWV CONSTRUCTION CORPORATION - versus -
MARCELO B. DUPO; G.R. No. 172342; July 13, 2009;;
QUISUMBING, J.:
Petitioner LWV Construction Corporation appeals the
Decision dated December 6, 2005 of the Court of Appeals in
CA-G.R. SP No. 76843 and its Resolution dated April 12, 2006,
denying the motion for reconsideration. The Court of Appeals
had ruled that under Article 87 of the Saudi Labor and
Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is
entitled to a service award or longevity pay amounting to
US$12,640.33.
The antecedent facts are as follows:
Petitioner, a domestic corporation which recruits
Filipino workers, hired respondent as Civil Structural
Superintendent to work in Saudi Arabia for its principal,
Mohammad Al-Mojil Group/Establishment (MMG). On February
26, 1992, respondent signed his first overseas employment
contract, renewable after one year. It was renewed five times on
the following dates: May 10, 1993, November 16, 1994, January
22, 1996, April 14, 1997, and March 26, 1998. All were fixed-
period contracts for one year. The sixth and last contract stated
that respondents employment starts upon reporting to work and
ends when he leaves the work site. Respondent left Saudi
Arabia on April 30, 1999 and arrived in the Philippines on May 1,
1999.
On May 28, 1999, respondent informed MMG,
through the petitioner, that he needs to extend his vacation
because his son was hospitalized. He also sought a promotion
with salary adjustment. In reply, MMG informed respondent
that his promotion is subject to managements review; that his
services are still needed; that he was issued a plane ticket for
his return flight to Saudi Arabia on May 31, 1999; and that his
decision regarding his employment must be made within seven
days, otherwise, MMG will be compelled to cancel [his] slot.
On July 6, 1999, respondent resigned. In his letter to
MMG, he also stated:
xxxx
I am aware that I still have to do a
final settlement with the company
and hope that during my more than
seven (7) [years] services, as the
Saudi Law stated, I am entitled for a
long service award. (Emphasis
supplied.)
xxxx
According to respondent, when he followed up his
claim for long service award on December 7, 2000, petitioner
informed him that MMG did not respond.
On December 11, 2000, respondent filed a complaint
for payment of service award against petitioner before the
National Labor Relations Commission (NLRC), Regional
Arbitration Branch, Cordillera Administrative Region, Baguio
City. In support of his claim, respondent averred in his position
paper that:
xxxx
Under the Law of Saudi Arabia, an
employee who rendered at least five (5)
years in a company within the jurisdiction of
Saudi Arabia, is entitled to the so-called long
service award which is known to others as
longevity pay of at least one half month pay
for every year of service. In excess of five
years an employee is entitled to one month
pay for every year of service. In both cases
inclusive of all benefits and allowances.
This benefit was offered to
complainant before he went on vacation,
hence, this was engrained in his mind. He
reconstructed the computation of his long
service award or longevity pay and he
arrived at the following computation exactly
the same with the amount he was previously
offered [which is US$12,640.33]. (Emphasis
supplied.)
xxxx
Respondent said that he did not grab the offer for he
intended to return after his vacation.
For its part, petitioner offered payment and
prescription as defenses. Petitioner maintained that MMG pays
its workers their Service Award or Severance Pay every
conclusion of their Labor Contracts pursuant to Article 87 of the
[Saudi Labor Law]. Under Article 87, payment of the award is
at the end or termination of the Labor Contract concluded for a
specific period. Based on the payroll, respondent was already
paid his service award or severance pay for his latest (sixth)
employment contract.
Petitioner added that under Article 13 of the Saudi
Labor Law, the action to enforce payment of the service award
must be filed within one year from the termination of a labor
contract for a specific period. Respondents six contracts ended
when he left Saudi Arabia on the following dates: April 15,
1993, June 8, 1994, December 18, 1995, March 21, 1997,
March 16, 1998 and April 30, 1999. Petitioner concluded that
the one-year prescriptive period had lapsed because
respondent filed his complaint on December 11, 2000 or one
year and seven months after his sixth contract ended.
In his June 18, 2001 Decision, the Labor Arbiter
ordered petitioner to pay respondent longevity pay of
US$12,640.33 or P648,562.69 and attorneys fees
P64,856.27 or a total of P713,418.96.
The Labor Arbiter ruled that respondents seven-year
employment with MMG had sufficiently oriented him on the
benefits given to workers; that petitioner was unable to
convincingly refute respondents claim that MMG offered him
longevity pay before he went on vacation on May 1, 1999; and
that respondents claim was not barred by prescription since his
claim on July 6, 1999, made a month after his cause of action
accrued, interrupted the prescriptive period under the Saudi
Labor Law until his claim was categorically denied.
Petitioner appealed. However, the NLRC dismissed
the appeal and affirmed the Labor Arbiters decision. The NLRC
ruled that respondent is entitled to longevity pay which is
different from severance pay.
Aggrieved, petitioner brought the case to the Court of
Appeals through a petition for certiorari under Rule 65 of the
Rules of Court. The Court of Appeals denied the petition and
affirmed the NLRC. The Court of Appeals ruled that service
award is the same as longevity pay, and that the severance
pay received by respondent cannot be equated with service
award. The dispositive portion of the Court of Appeals decision
reads:
WHEREFORE, finding no grave
abuse of discretion amounting to lack or in
(sic) excess of jurisdiction on the part of
public respondent NLRC, the petition is
denied. The NLRC decision dated November
29, 2002 as well as and (sic) its January 31,
2003 Resolution are hereby AFFIRMED in
toto.
SO ORDERED.
After its motion for reconsideration was denied,
petitioner filed the instant petition raising the following issues:
I. WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS ERRED IN FINDING NO
GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR
EXCESS OF JURISDICTION ON
THE PART OF PUBLIC
RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION.
II. WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS ERRED IN FINDING
THAT THE SERVICE AWARD OF
THE RESPONDENT [HAS] NOT
PRESCRIBED WHEN HIS
COMPLAINT WAS FILED ON
DECEMBER 11, 2000.
of III. WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS ERRED IN APPLYING
IN THE CASE AT BAR [ARTICLE
1155 OF THE CIVIL CODE].
IV. WHETHER OR NOT THE
HONORABLE COURT OF
APPEALS ERRED IN APPLYING
ARTICLE NO. 7 OF THE SAUDI
LABOR AND WORKMEN LAW TO
SUPPORT ITS FINDING THAT
THE BASIS OF THE SERVICE
AWARD IS LONGEVITY [PAY] OR
LENGTH OF SERVICE
RENDERED BY AN EMPLOYEE.
Essentially, the issue is whether the Court of
Appeals erred in ruling that respondent is entitled to a
service award or longevity pay of US$12,640.33
under the provisions of the Saudi Labor Law. Related
to this issue are petitioners defenses of payment and
prescription.
Petitioner points out that the Labor Arbiter awarded
longevity pay although the Saudi Labor Law grants no such
benefit, and the NLRC confused longevity pay and service
award. Petitioner maintains that the benefit granted by Article
87 of the Saudi Labor Law is service award which was already
paid by MMG each time respondents contract ended.
Petitioner insists that prescription barred respondents
claim for service award as the complaint was filed one year
and seven months after the sixth contract ended. Petitioner
alleges that the Court of Appeals erred in ruling that
respondents July 6, 1999 claim interrupted the running of the
prescriptive period. Such ruling is contrary to Article 13 of the
Saudi Labor Law which provides that no case or claim relating
to any of the rights provided for under said law shall be heard
after the lapse of 12 months from the date of the termination of
the contract.
Respondent counters that he is entitled to longevity
pay under the provisions of the Saudi Labor Law and quotes
extensively the decision of the Court of Appeals. He points out
that petitioner has not refuted the Labor Arbiters finding that
MMG offered him longevity pay of US$12,640.33 before his
one-month vacation in the Philippines in 1999. Thus, he
submits that such offer indeed exists as he sees no reason for
MMG to offer the benefit if no law grants it.
After a careful study of the case, we are constrained
to reverse the Court of Appeals. We find that respondents
service award under Article 87 of the Saudi Labor Law has
already been paid. Our computation will show that the
severance pay received by respondent was his service award.
Article 87 clearly grants a service award. It reads:
Article 87
 Where the term of a labor
contract concluded for a specified period
comes to an end or where the employer
cancels a contract of unspecified period, the
employer shall pay to the workman an
award for the period of his service to be
computed on the basis of half a months pay
for each of the first five years and one
months pay for each of the subsequent
years. The last rate of pay shall be taken as
basis for the computation of the award. For
fractions of a year, the workman shall be
entitled to an award which is proportionate to
his service period during that year.
Furthermore, the workman shall be entitled
to the service award provided for at the
beginning of this article in the following
cases:
A. If he is called to military
service.
B. If a workman resigns
because of marriage or
childbirth.
C. If the workman is leaving the
work as a result of a force
majeure beyond his control.
(Emphasis supplied.)
Respondent, however, has called the benefit other
names such as long service award and longevity pay. On the
other hand, petitioner claimed that the service award is the
same as severance pay. Notably, the Labor Arbiter was unable
to specify any law to support his award of longevity pay. He
anchored the award on his finding that respondents allegations
were more credible because his seven-year employment at
MMG had sufficiently oriented him on the benefits given to
workers. To the NLRC, respondent is entitled to service award
or longevity pay under Article 87 and that longevity pay is
different from severance pay. The Court of Appeals agreed.
Considering that Article 87 expressly grants a service
award, why is it correct to agree with respondent that service
award is the same as longevity pay, and wrong to agree with
petitioner that service award is the same as severance pay?
And why would it be correct to say that service award is
severance pay, and wrong to call service award as longevity
pay?
We found the answer in the pleadings and evidence
presented. Respondents position paper mentioned how his
long service award or longevity pay is computed: half-months
pay per year of service and one-months pay per year after five
years of service. Article 87 has the same formula to compute
the service award.
The payroll submitted by petitioner showed that
respondent received severance pay of SR2,786 for his sixth
employment contract covering the period April 21, 1998 to April 29,
1999. The computation below shows that respondents severance
pay of SR2,786 was his service award under Article 87.
Service Award = (SR5,438) + (9 days/365
days) x (SR5,438)
Service Award = SR2,786.04
Respondents service award for the sixth contract is
equivalent only to half-months pay plus the proportionate
amount for the additional nine days of service he rendered
after one year. Respondents employment contracts expressly
stated that his employment ended upon his departure from
work. Each year he departed from work and successively new
contracts were executed before he reported for work anew. His
service was not cumulative. Pertinently, in Brent School, Inc. v.
Zamora, we said that a fixed term is an essential and natural
appurtenance of overseas employment contracts, as in this
case. We also said in that case that under American law,
[w]here a contract specifies the period of its duration, it
terminates on the expiration of such period. A contract of
employment for a definite period terminates by its own terms at
the end of such period. As it is, Article 72 of the Saudi Labor
Law is also of similar import. It reads:
A labor contract concluded for a
specified period shall terminate upon the
expiry of its term. If both parties continue to
enforce the contract, thereafter, it shall be
considered renewed for an unspecified
period.
Regarding respondents claim that he was offered
US$12,640.33 as longevity pay before he returned to the
Philippines on May 1, 1999, we find that he was not candid on
this particular point. His categorical assertion about the offer
being engrained in his mind such that he reconstructed the
computation and arrived at the computation exactly the same
with the amount he was previously offered is not only beyond
belief. Such assertion is also a stark departure from his July 6,
1999 letter to MMG where he could only express his hope that
he was entitled to a long service award and where he never
mentioned the supposed previous offer. Moreover,
respondents claim that his monthly compensation is
SR10,248.92 is belied by the payroll which shows that he
receives SR5,438 per month.
We therefore emphasize that such payroll should
have prompted the lower tribunals to examine closely
respondents computation of his supposed longevity pay before
adopting that computation as their own.
On the matter of prescription, however, we cannot
agree with petitioner that respondents action has prescribed
under Article 13 of the Saudi Labor Law. What applies is Article
291 of our Labor Code which reads:
 ART. 291. Money claims. All
money claims arising from employer-
employee relations accruing during the
effectivity of this Code shall be filed within
three (3) years from the time the cause of
action accrued; otherwise they shall be
forever barred.
xxxx
In Cadalin v. POEAs Administrator, we held that
Article 291 covers all money claims from employer-employee
relationship and is broader in scope than claims arising from a
specific law. It is not limited to money claims recoverable under
the Labor Code, but applies also to claims of overseas contract
workers. The following ruling in Cadalin v. POEAs
Administrator is instructive:
First to be determined is whether it
is the Bahrain law on prescription of action
based on the Amiri Decree No. 23 of 1976 or
a Philippine law on prescription that shall be
the governing law.
Article 156 of the Amiri Decree No.
23 of 1976 provides:
A claim arising out of a contract of
employment shall not be actionable after the
lapse of one year from the date of the expiry
of the contract x x x.
As a general rule, a foreign
procedural law will not be applied in the
forum. Procedural matters, such as service
of process, joinder of actions, period and
requisites for appeal, and so forth, are
governed by the laws of the forum. This is
true even if the action is based upon a
foreign substantive law (Restatement of the
Conflict of Laws, Sec. 685; Salonga, Private
International Law, 131 [1979]).
A law on prescription of actions is
sui generis in Conflict of Laws in the sense
that it may be viewed either as procedural or
substantive, depending on the
characterization given such a law.
xxxx
However, the characterization of a
statute into a procedural or substantive law
becomes irrelevant when the country of the
forum has a borrowing statute. Said statute
has the practical effect of treating the foreign
statute of limitation as one of substance
(Goodrich, Conflict of Laws, 152-153 [1938]).
A borrowing statute directs the state of the
forum to apply the foreign statute of
limitations to the pending claims based on a
foreign law (Siegel, Conflicts, 183 [1975]).
While there are several kinds of borrowing
statutes, one form provides that an action
barred by the laws of the place where it
accrued, will not be enforced in the forum
even though the local statute has not run
against it (Goodrich and Scoles, Conflict of
Laws, 152-153 [1938]). Section 48 of our
Code of Civil Procedure is of this kind. Said
Section provides:
If by the laws of the state or country
where the cause of action arose, the action
is barred, it is also barred in the Philippine
Islands.
Section 48 has not been repealed
or amended by the Civil Code of the
Philippines. Article 2270 of said Code
repealed only those provisions of the Code
of Civil Procedure as to which were
inconsistent with it. There is no provision in
the Civil Code of the Philippines, which is
inconsistent with or contradictory to Section
48 of the Code of Civil Procedure (Paras,
Philippine Conflict of Laws, 104 [7th ed.]).
In the light of the 1987 Constitution,
however, Section 48 [of the Code of Civil
Procedure] cannot be enforced ex proprio
vigore insofar as it ordains the application in
this jurisdiction of [Article] 156 of the Amiri
Decree No. 23 of 1976.
The courts of the forum will not
enforce any foreign claim obnoxious to the
forums public policy x x x. To enforce the one-
year prescriptive period of the Amiri Decree
No. 23 of 1976 as regards the claims in
question would contravene the public policy
on the protection to labor.
xxxx
Thus, in our considered view, respondents complaint
was filed well within the three-year prescriptive period under
Article 291 of our Labor Code. This point, however, has already
been mooted by our finding that respondents service award
had been paid, albeit the payroll termed such payment as
severance pay.
WHEREFORE, the petition is GRANTED. The assailed
Decision dated December 6, 2005 and Resolution dated April 12,
2006, of the Court of Appeals in CA-G.R. SP No. 76843, as well as
the Decision dated June 18, 2001 of the Labor Arbiter in NLRC
Case No. RAB-CAR-12-0649-00 and the Decision dated November
29, 2002 and Resolution dated January 31, 2003 of the NLRC in
NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are
REVERSED and SET ASIDE. The Complaint of respondent is
hereby DISMISSED. No pronouncement as to costs. SO
ORDERED.
DEUTSCHE GESELLSCHAFT FR TECHNISCHE
ZUSAMMENARBEIT also known as GERMAN AGENCY FOR
TECHNICAL COOPERATION, (GTZ) HANS PETER
PAULENZ and QUISUMBING, J., ANNE NICOLAY vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE
SANTOS, Labor Arbiter of the Arbitration Branch, National
Labor Relations Commission, and BERNADETTE CARMELLA
MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS,
MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO
RAMILLO, G.R. No. 152318, April 16, 2009; TINGA, J.
On 7 September 1971, the governments of the
Federal Republic of Germany and the Republic of the
Philippines ratified an Agreement concerning Technical Co-
operation (Agreement) in Bonn, capital of what was then West
Germany. The Agreement affirmed the countries common
interest in promoting the technical and economic development
of their States, and recogni[zed] the benefits to be derived by
both States from closer technical co-operation, and allowed for
the conclusion of arrangements concerning individual projects
of technical co-operation. While the Agreement provided for a
limited term of effectivity of five (5) years, it nonetheless was
stated that [t]he Agreement shall be tacitly extended for
successive periods of one year unless either of the two
Contracting Parties denounces it in writing three months prior
to its expiry, and that even upon the Agreements expiry, its
provisions would continue to apply to any projects agreed upon
x x x until their completion.
On 10 December 1999, the Philippine government,
through then Foreign Affairs Secretary Domingo Siazon, and
the German government, agreed to an Arrangement in
furtherance of the 1971 Agreement. This Arrangement affirmed
the common commitment of both governments to promote
jointly a project called, Social Health InsuranceNetworking and
Empowerment (SHINE), which was designed to enable
Philippine familiesespecially poor onesto maintain their health
and secure health care of sustainable quality. It appears that
SHINE had already been in existence even prior to the
effectivity of the Arrangement, though the record does not
indicate when exactly SHINE was constituted. Nonetheless,
the Arrangement stated the various obligations of the Filipino
and German governments. The relevant provisions of the
Arrangement are reproduced as follows:
3. The Government of the Federal Republic
of Germany shall make the following
contributions to the project.
It shall
(a) second
- one expert in health economy,
insurance and health systems for up to
48 expert/months,
- one expert in system development for
up to 10 expert/months
- short-term experts to deal with special
tasks for a total of up to 18
expert/months,
- project assistants/guest students as
required, who shall work on the project as
part of their basic and further training and
assume specific project tasks under the
separately financed junior staff promotion
programme of the Deutsche Gesellschaft
fr Technische Zusammenarbeit (GTZ);
(b) provide in situ
- short-term experts to deal with diverse
special tasks for a total of up to 27
expert/months,
- five local experts in health economy,
health insurance, community health
systems, information technology,
information systems, training and
community mobilization for a total of up to
240 expert/months,
- local and auxiliary personnel for a total
of up to 120 months;
(c) supply inputs, in particular
- two cross-country vehicles,
- ten computers with accessories,
- office furnishings and equipment
up to a total value of DM 310,000 (three
hundred and ten thousand Deutsche Mark);
(c) meet
- the cost of accommodation for the
seconded experts and their families in so
far as this cost is not met by the
seconded experts themselves,
- the cost of official travel by the experts
referred to in sub-paragraph (a) above
within and outside the Republic of the
Philippines,
- the cost of seminars and courses,
- the cost of transport and insurance to the
project site of inputs to be supplied
pursuant to sub-paragraph (c) above,
excluding the charges and storage fees
referred to in paragraph 4(d) below,
- a proportion of the operating and
administrative costs;
xxx
4. The Government of the Republic of the
Philippines shall make the following
contributions to the project:
It shall
(a) provide the necessary Philippine experts
for the project, in particular one project
coordinator in the Philippine Health Insurance
Corporation (Philhealth), at least three further
experts and a sufficient number of
administrative and auxiliary personnel, as well
as health personnel in the pilot provinces and
in the other project partners, in particular one
responsible expert for each pilot province and
for each association representing the various
target groups,
- release suitably qualified experts from their
duties for attendance at the envisaged basic
and further training activities; it shall only
nominate such candidates as have given an
undertaking to work on the project for at least
five years after completing their training and
shall ensure that these Philippine experts
receive appropriate remuneration,
- ensure that the project field offices
have sufficient expendables,
- make available the land and
buildings required for the project;
(b) assume an increasing proportion
of the running and operating costs of the
project;
(c) afford the seconded experts any
assistance they may require in carrying out
the tasks assigned to them and place at their
disposal all necessary records and
documents;
(d) guarantee that
- the project is provided with an
itemized budget of its own in order to ensure
smooth continuation of the project.
- the necessary legal and
administrative framework is created for the
project,
- the project is coordinated in close
cooperation with other national and
international agencies relevant to
implementation,
- the inputs supplied for the project on
behalf of the Government of the Federal
Republic of Germany are exempted from the
cost of licenses, harbour dues, import and
export duties and other public charges and
fees, as well as storage fees, or that any
costs thereof are met, and that they are
cleared by customs without delay. The
aforementioned exemptions shall, at the
request of the implementing agencies also
apply to inputs procured in the Republic of the
Philippines,
- the tasks of the seconded experts
are taken over as soon as possible by
Philippine experts,
- examinations passed by Philippine
nationals pursuant to this Arrangement are
recognized in accordance with their
respective standards and that the persons
concerned are afforded such opportunities
with regard to careers, appointments and
advancement as are commensurate with their
training.
In the arraignment, both governments likewise named
their respective implementing organizations for SHINE. The
Philippines designated the Department of Health (DOH) and
the Philippine Health Insurance Corporation (Philhealth) with
the implementation of SHINE. For their part, the German
government charge[d] the Deustche Gesellschaft fr Technische
Zusammenarbeit[] (GTZ[]) GmbH, Eschborn, with the
implementation of its contributions.
Private respondents were engaged as contract
employees hired by GTZ to work for SHINE on various dates
between December of 1998 to September of 1999. Bernadette
Carmela Magtaas was hired as an information systems
manager and project officer of SHINE; Carolina Dionco as a
Project Assistant of SHINE; Christopher Ramos as a project
assistant and liason personnel of NHI related SHINE activities
by GTZ; Melvin Dela Paz and Randy Tamayo as programmers;
and Edgardo Ramilo as driver, messenger and multipurpose
service man. The employment contracts of all six private
respondents all specified Dr. Rainer Tollkotter, identified as an
adviser of GTZ, as the employer. At the same time, all the
contracts commonly provided that [i]t is mutually agreed and
understood that [Dr. Tollkotter, as employer] is a seconded
GTZ expert who is hiring the Employee on behalf of GTZ and
for a Philippine-German bilateral project named Social Health
InsuranceNetworking and Empowerment (SHINE) which will
end at a given time.
In September of 1999, Anne Nicolay (Nicolay), a
Belgian national, assumed the post of SHINE Project Manager.
Disagreements eventually arose between Nicolay and private
respondents in matters such as proposed salary adjustments,
and the course Nicolay was taking in the implementation of
SHINE different from her predecessors. The dispute
culminated in a letter dated 8 June 2000, signed by the private
respondents, addressed to Nicolay, and copies furnished
officials of the DOH, Philheath, and the director of the Manila
office of GTZ. The letter raised several issues which private
respondents claim had been brought up several times in the
past, but have not been given appropriate response. It was
claimed that SHINE under Nicolay had veered away from its
original purpose to facilitate the development of social health
insurance by shoring up the national health insurance program
and strengthening local initiatives, as Nicolay had refused to
support local partners and new initiatives on the premise that
community and local government unit schemes were not
sustainablea philosophy that supposedly betrayed Nicolays
lack of understanding of the purpose of the project. Private
respondents further alleged that as a result of Nicolays new
thrust, resources have been used inappropriately; that the new
management style was not congruent with the original goals of
the project; that Nicolay herself suffered from cultural
insensitivity that consequently failed to sustain healthy relations
with SHINEs partners and staff.
The letter ended with these ominous words:
The issues that we [the private
respondents] have stated here are very
crucial to us in working for the project. We
could no longer find any reason to stay with
the project unless ALL of these issues be
addressed immediately and appropriately.
In response, Nicolay wrote each of the private
respondents a letter dated 21 June 2000, all similarly worded
except for their respective addressees. She informed private
respondents that the projects orientations and evolution were
decided in consensus with partner institutions, Philhealth and
the DOH, and thus no longer subject to modifications. More
pertinently, she stated:
You have firmly and unequivocally stated in
the last paragraph of your 8th June 2000 letter
that you and the five other staff could no
longer find any reason to stay with the project
unless ALL of these issues be addressed
immediately and appropriately. Under the
foregoing premises and circumstances, it is
now imperative that I am to accept your
resignation, which I expect to receive as soon
as possible.
Taken aback, private respondents replied with a
common letter, clarifying that their earlier letter was not
intended as a resignation letter, but one that merely intended to
raise attention to what they perceived as vital issues.
Negotiations ensued between private respondents and Nicolay,
but for naught. Each of the private respondents received a letter
from Nicolay dated 11 July 2000, informing them of the pre-
termination of their contracts of employment on the grounds of
serious and gross insubordination, among others, resulting to
loss of confidence and trust.
On 21 August 2000, the private respondents filed a
complaint for illegal dismissal with the NLRC. Named as
respondents therein where GTZ, the Director of its Manila office
Hans Peter Paulenz, its Assistant Project Manager Christian
Jahn, and Nicolay
On 25 October 2005, GTZ, through counsel, filed a
Motion to Dismiss, on the ground that the Labor Arbiter had no
jurisdiction over the case, as its acts were undertaken in the
discharge of the governmental functions and sovereign acts of
the Government of the Federal Republic of Germany. This was
opposed by private respondents with the arguments that GTZ
had failed to secure a certification that it was immune from suit
from the Department of Foreign Affairs, and that it was GTZ
and not the German government which had implemented the
SHINE Project and entered into the contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order
denying the Motion to Dismiss. The Order cited, among others,
that GTZ was a private corporation which entered into an
employment contract; and that GTZ had failed to secure from
the DFA a certification as to its diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a
Reiterating Motion to Dismiss, again praying that the Motion to
Dismiss be granted on the jurisdictional ground, and reprising
the arguments for dismissal it had earlier raised. No action was
taken by the Labor Arbiter on this new motion. Instead, on 15
October 2001, the Labor Arbiter rendered a Decision granting
the complaint for illegal dismissal. The Decision concluded that
respondents were dismissed without lawful cause, there being
a total lack of due process both substantive and procedural
[sic]. GTZ was faulted for failing to observe the notice
requirements in the labor law. The Decision likewise proceeded
from the premise that GTZ had treated the letter dated 8 June
2000 as a resignation letter, and devoted some focus in
debunking this theory
The Decision initially offered that it need not discuss
the jurisdictional aspect considering that the same had already
been lengthily discussed in the Order de[n]ying respondents
Motion to Dismiss. Nonetheless, it proceeded to discuss the
jurisdictional aspect, in this wise:
Under pain of being repetitious, the
undersigned Labor Arbiter has jurisdiction to entertain
the complaint on the following grounds:
Firstly, under the employment
contract entered into between complainants
and respondents, specifically Section 10
thereof, it provides that contract partners
agree that his contract shall be subject to the
LAWS of the jurisdiction of the locality in
which the service is performed.
Secondly, respondent having
entered into contract, they can no longer
invoke the sovereignty of the Federal
Republic of Germany.
Lastly, it is imperative to be immune
from suit, respondents should have secured
from the Department of Foreign Affairs a
certification of respondents diplomatic status
and entitlement to diplomatic privileges
including immunity from suits. Having failed in
this regard, respondents cannot escape
 liability from the shelter of sovereign
immunity.[sic]
Notably, GTZ did not file a motion for reconsideration
to the Labor Arbiters Decision or elevate said decision for
appeal to the NLRC. Instead, GTZ opted to assail the decision
by way of a special civil action for certiorari filed with the Court
of Appeals. On 10 December 2001, the Court of Appeals
promulgated a Resolution dismissing GTZs petition, finding that
judicial recourse at this stage of the case is uncalled for[,] [t]he
appropriate remedy of the petitioners [being] an appeal to the
NLRC x x x. A motion for reconsideration to this Resolution
proved fruitless for GTZ.
Thus, the present petition for review under Rule 45,
assailing the decision and resolutions of the Court of Appeals
and of the Labor Arbiter. GTZs arguments center on whether
the Court of Appeals could have entertained its petition for
certiorari despite its not having undertaken an appeal before
the NLRC; and whether the complaint for illegal dismissal
should have been dismissed for lack of jurisdiction on account
of GTZs insistence that it enjoys immunity from suit. No special
arguments are directed with respect to petitioners Hans Peter
Paulenz and Anne Nicolay, respectively the then Director and
the then Project Manager of GTZ in the Philippines; so we have
to presume that the arguments raised in behalf of GTZs alleged
immunity from suit extend to them as well.
The Court required the Office of the Solicitor General
(OSG) to file a Comment on the petition. In its Comment dated
7 November 2005, the OSG took the side of GTZ, with the
prayer that the petition be granted on the ground that GTZ was
immune from suit, citing in particular its assigned functions in
implementing the SHINE programa joint undertaking of the
Philippine and German governments which was neither
proprietary nor commercial in nature.
The Court of Appeals had premised the dismissal of
GTZs petition on its procedural misstep in bypassing an appeal
to NLRC and challenging the Labor Arbiters Decision directly
with the appellate court by way of a Rule 65 petition. In
dismissing the petition, the Court of Appeals relied on our ruling
in Air Service Cooperative v. Court of Appeals. The central
issue in that case was whether a decision of a Labor Arbiter
rendered without jurisdiction over the subject matter may be
annulled in a petition before a Regional Trial Court. That case
may be differentiated from the present case, since the Regional
Trial Court does not have original or appellate jurisdiction to
review a decision rendered by a Labor Arbiter. In contrast, there
is no doubt, as affirmed by jurisprudence, that the Court of
Appeals has jurisdiction to review, by way of its original
certiorari jurisdiction, decisions ruling on complaints for illegal
dismissal.
Nonetheless, the Court of Appeals is correct in
pronouncing the general rule that the proper recourse from the
decision of the Labor Arbiter is to first appeal the same to the
NLRC. Air Services is in fact clearly detrimental to petitioners
position in one regard. The Court therein noted that on account
of the failure to correctly appeal the decision of the Labor
Arbiter to the NLRC, such judgment consequently became final
and executory. GTZ goes as far as to request that the Court re-
examine Air Services, a suggestion that is needlessly
improvident under the circumstances. Air Services affirms
doctrines grounded in sound procedural rules that have allowed
for the considered and orderly disposition of labor cases.
The OSG points out, citing Heirs of Mayor Nemencio
Galvez v. Court of Appeals, that even when appeal is available,
the Court has nonetheless allowed a writ of certiorari when the
orders of the lower court were issued either in excess of or
without jurisdiction. Indeed, the Court has ruled before that the
failure to employ available intermediate recourses, such as a
motion for reconsideration, is not a fatal infirmity if the ruling
assailed is a patent nullity. This approach suggested by the
OSG allows the Court to inquire directly into what is the main
issuewhether GTZ enjoys immunity from suit.
The arguments raised by GTZ and the OSG are
rooted in several indisputable facts. The SHINE project was
implemented pursuant to the bilateral agreements between the
Philippine and German governments. GTZ was tasked, under
the 1991 agreement, with the implementation of the
contributions of the German government. The activities
performed by GTZ pertaining to the SHINE project are
governmental in nature, related as they are to the promotion of
health insurance in the Philippines. The fact that GTZ entered
into employment contracts with the private respondents did not
disqualify it from invoking immunity from suit, as held in cases
such as Holy See v. Rosario, Jr., which set forth what remains
valid doctrine:
Certainly, the mere entering into a
contract by a foreign state with a private party
cannot be the ultimate test. Such an act can
only be the start of the inquiry. The logical
question is whether the foreign state is
engaged in the activity in the regular course of
business. If the foreign state is not engaged
regularly in a business or trade, the particular
act or transaction must then be tested by its
nature. If the act is in pursuit of a sovereign
activity, or an incident thereof, then it is an act
jure imperii, especially when it is not
undertaken for gain or profit.
Beyond dispute is the tenability of the comment points
raised by GTZ and the OSG that GTZ was not performing
proprietary functions notwithstanding its entry into the particular
employment contracts. Yet there is an equally fundamental
premise which GTZ and the OSG fail to address, namely: Is
GTZ, by conception, able to enjoy the Federal Republics
immunity from suit?
The principle of state immunity from suit, whether a
local state or a foreign state, is reflected in Section 9, Article
XVI of the Constitution, which states that the State may not be
sued without its consent. Who or what consists of the State?
For one, the doctrine is available to foreign States insofar as
they are sought to be sued in the courts of the local State,
necessary as it is to avoid unduly vexing the peace of nations.
 If the instant suit had been brought directly against
the Federal Republic of Germany, there would be no doubt that
it is a suit brought against a State, and the only necessary
inquiry is whether said State had consented to be sued.
However, the present suit was brought against GTZ. It is
necessary for us to understand what precisely are the
parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as the
implementing agency of the Government of the Federal
Republic of Germany, a depiction similarly adopted by the
OSG. Assuming that characterization is correct, it does not
automatically invest GTZ with the ability to invoke State
immunity from suit. The distinction lies in whether the agency is
incorporated or unincorporated. The following lucid discussion
from Justice Isagani Cruz is pertinent:
Where suit is filed not against the
government itself or its officials but against
one of its entities, it must be ascertained
whether or not the State, as the principal that
may ultimately be held liable, has given its
consent to be sued. This ascertainment will
depend in the first instance on whether the
government agency impleaded is
incorporated or unincorporated.
An incorporated agency has a
charter of its own that invests it with a
separate juridical personality, like the
Social Security System, the University of the
Philippines, and the City of Manila. By
contrast, the unincorporated agency is so
called because it has no separate juridical
personality but is merged in the general
machinery of the government, like the
Department of Justice, the Bureau of Mines
and the Government Printing Office.
If the agency is incorporated, the
test of its suability is found in its charter.
The simple rule is that it is suable if its
charter says so, and this is true regardless
of the functions it is performing. Municipal
corporations, for example, like provinces
and cities, are agencies of the State when
they are engaged in governmental
functions and therefore should enjoy the
sovereign immunity from suit.
Nevertheless, they are subject to suit even
in the performance of such functions
because their charter provides that they
can sue and be sued.
State immunity from suit may be waived by general or
special law. The special law can take the form of the original
charter of the incorporated government agency. Jurisprudence
is replete with examples of incorporated government agencies
which were ruled not entitled to invoke immunity from suit,
owing to provisions in their charters manifesting their consent to
be sued. These include the National Irrigation Administration,
the former Central Bank, and the National Power Corporation.
In SSS v. Court of Appeals, the Court through Justice Melencio-
Herrera explained that by virtue of an express provision in its
charter allowing it to sue and be sued, the Social Security
System did not enjoy immunity from suit:
We come now to the amendability of
the SSS to judicial action and legal
responsibility for its acts. To our minds, there
should be no question on this score
considering that the SSS is a juridical entity
with a personality of its own. It has corporate
powers separate and distinct from the
Government. SSS' own organic act
specifically provides that it can sue and be
sued in Court. These words "sue and be
sued" embrace all civil process incident to a
legal action. So that, even assuming that the
SSS, as it claims, enjoys immunity from suit
as an entity performing governmental
functions, by virtue of the explicit provision of
the aforecited enabling law, the Government
must be deemed to have waived immunity in
respect of the SSS, although it does not
thereby concede its liability. That statutory law
has given to the private citizen a remedy for
the enforcement and protection of his rights.
The SSS thereby has been required to submit
to the jurisdiction of the Courts, subject to its
right to interpose any lawful defense. Whether
the SSS performs governmental or proprietary
functions thus becomes unnecessary to
belabor. For by that waiver, a private citizen
may bring a suit against it for varied
objectives, such as, in this case, to obtain
compensation in damages arising from
contract, and even for tort.
A recent case squarely in point anent
the principle, involving the National Power
Corporation, is that of Rayo v. Court of First
Instance of Bulacan, 110 SCRA 457 (1981),
wherein this Court, speaking through Mr.
Justice Vicente Abad Santos, ruled:
"It is not necessary to write an
extended dissertation on whether
or not the NPC performs a
governmental function with respect
to the management and operation
of the Angat Dam. It is sufficient to
say that the government has
organized a private corporation, put
money in it and has allowed it to
sue and be sued in any court under
its charter. (R.A. No. 6395, Sec.
3[d]). As a government, owned and
controlled corporation, it has a
personality of its own, distinct and
separate from that of the
 Government. Moreover, the charter
provision that the NPC can 'sue
and be sued in any court' is without
qualification on the cause of action
and accordingly it can include a tort
claim such as the one instituted by
the petitioners."
It is useful to note that on the part of the Philippine
government, it had designated two entities, the Department of
Health and the Philippine Health Insurance Corporation (PHIC),
as the implementing agencies in behalf of the Philippines. The
PHIC was established under Republic Act No. 7875, Section
16(g) of which grants the corporation the power to sue and be
sued in court. Applying the previously cited jurisprudence, PHIC
would not enjoy immunity from suit even in the performance of
its functions connected with SHINE, however, governmental in
nature as they may be.
Is GTZ an incorporated agency of the German
government? There is some mystery surrounding that question.
Neither GTZ nor the OSG go beyond the claim that petitioner is
the implementing agency of the Government of the Federal
Republic of Germany. On the other hand, private respondents
asserted before the Labor Arbiter that GTZ was a private
corporation engaged in the implementation of development
projects. The Labor Arbiter accepted that claim in his Order
denying the Motion to Dismiss, though he was silent on that
point in his Decision. Nevertheless, private respondents argue
in their Comment that the finding that GTZ was a private
corporation was never controverted, and is therefore deemed
admitted. In its Reply, GTZ controverts that finding, saying that
it is a matter of public knowledge that the status of petitioner
GTZ is that of the implementing agency, and not that of a
private corporation.
In truth, private respondents were unable to adduce
any evidence to substantiate their claim that GTZ was a private
corporation, and the Labor Arbiter acted rashly in accepting
such claim without explanation. But neither has GTZ supplied
any evidence defining its legal nature beyond that of the bare
descriptive implementing agency. There is no doubt that the
1991 Agreement designated GTZ as the implementing agency
in behalf of the German government. Yet the catch is that such
term has no precise definition that is responsive to our
concerns. Inherently, an agent acts in behalf of a principal, and
the GTZ can be said to act in behalf of the German state. But
that is as far as implementing agency could take us. The term
by itself does not supply whether GTZ is incorporated or
unincorporated, whether it is owned by the German state or by
private interests, whether it has juridical personality
independent of the German government or none at all.
GTZ itself provides a more helpful clue, inadvertently,
through its own official Internet website. In the Corporate Profile
section of the English language version of its site, GTZ
describes itself as follows:
As an international cooperation
enterprise for sustainable development with
worldwide operations, the federally owned
Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbH supports the
German Government in achieving its
development-policy objectives. It provides
viable, forward-looking solutions for political,
economic, ecological and social development
in a globalised world. Working under difficult
conditions, GTZ promotes complex reforms
and change processes. Its corporate objective
is to improve peoples living conditions on a
sustainable basis.
GTZ is a federal enterprise based in
Eschborn near Frankfurt am Main. It was
founded in 1975 as a company under private
law. The German Federal Ministry for
Economic Cooperation and Development
(BMZ) is its major client. The company also
operates on behalf of other German
ministries, the governments of other countries
and international clients, such as the
European Commission, the United Nations
and the World Bank, as well as on behalf of
private enterprises. GTZ works on a public-
benefit basis. All surpluses generated are
channeled [sic] back into its own international
cooperation projects for sustainable
development.
GTZs own website elicits that petitioner is federally
owned, a federal enterprise, and founded in 1975 as a
company under private law. GTZ clearly has a very meaningful
relationship with the Federal Republic of Germany, which
apparently owns it. At the same time, it appears that GTZ was
actually organized not through a legislative public charter, but
under private law, in the same way that Philippine corporations
can be organized under the Corporation Code even if fully
owned by the Philippine government.
This self-description of GTZ in its own official website
gives further cause for pause in adopting petitioners argument
that GTZ is entitled to immunity from suit because it is an
implementing agency. The above-quoted statement does not
dispute the characterization of GTZ as an implementing agency
of the Federal Republic of Germany, yet it bolsters the notion
that as a company organized under private law, it has a legal
personality independent of that of the Federal Republic of
Germany.
The Federal Republic of Germany, in its own official
website, also makes reference to GTZ and describes it in this
manner:
x x x Going by the principle of
sustainable development, the German
Technical Cooperation (Deutsche
 Gesellschaft fr Technische Zusammenarbeit
GmbH, GTZ) takes on non-profit projects in
international technical cooperation. The GTZ
is a private company owned by the
Federal Republic of Germany.
Again, we are uncertain of the corresponding legal
implications under German law surrounding a private
company owned by the Federal Republic of Germany.
Yet taking the description on face value, the apparent
equivalent under Philippine law is that of a corporation
organized under the Corporation Code but owned by
the Philippine government, or a government-owned or
controlled corporation without original charter. And it
bears notice that Section 36 of the Corporate Code
states that [e]very corporation incorporated under this
Code has the power and capacity x x x to sue and be
sued in its corporate name.
It is entirely possible that under German law,
an entity such as GTZ or particularly GTZ itself has not
been vested or has been specifically deprived the
power and capacity to sue and/or be sued. Yet in the
proceedings below and before this Court, GTZ has
failed to establish that under German law, it has not
consented to be sued despite it being owned by the
Federal Republic of Germany. We adhere to the rule
that in the absence of evidence to the contrary, foreign
laws on a particular subject are presumed to be the
same as those of the Philippines, and following the
most intelligent assumption we can gather, GTZ is akin
to a governmental owned or controlled corporation
without original charter which, by virtue of the
Corporation Code, has expressly consented to be
sued. At the very least, like the Labor Arbiter and the
Court of Appeals, this Court has no basis in fact to
conclude or presume that GTZ enjoys immunity from
suit.
This absence of basis in fact leads to another
important point, alluded to by the Labor Arbiter in his rulings.
Our ruling in Holy See v. Del Rosario provided a template on
how a foreign entity desiring to invoke State immunity from suit
could duly prove such immunity before our local courts. The
principles enunciated in that case were derived from public
international law. We stated then:
In Public International Law, when a
state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign
court, it requests the Foreign Office of the
state where it is sued to convey to the court
that said defendant is entitled to immunity.
In the United States, the procedure
followed is the process of "suggestion," where
the foreign state or the international
organization sued in an American court
requests the Secretary of State to make a
determination as to whether it is entitled to
immunity. If the Secretary of State finds that
the defendant is immune from suit, he, in turn,
asks the Attorney General to submit to the
court a "suggestion" that the defendant is
entitled to immunity. In England, a similar
procedure is followed, only the Foreign Office
issues a certification to that effect instead of
submitting a "suggestion" (O'Connell, I
International Law 130 [1965]; Note: Immunity
from Suit of Foreign Sovereign
Instrumentalities and Obligations, 50 Yale
Law Journal 1088 [1941]).
In the Philippines, the practice is for
the foreign government or the international
organization to first secure an executive
endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine
Foreign Office conveys its endorsement to the
courts varies. In International Catholic
Migration Commission v. Calleja, 190 SCRA
130 (1990), the Secretary of Foreign Affairs
just sent a letter directly to the Secretary of
Labor and Employment, informing the latter
that the respondent-employer could not be
sued because it enjoyed diplomatic immunity.
In World Health Organization v. Aquino, 48
SCRA 242 (1972), the Secretary of Foreign
Affairs sent the trial court a telegram to that
effect. In Baer v. Tizon, 57 SCRA 1 (1974),
the U.S. Embassy asked the Secretary of
Foreign Affairs to request the Solicitor
General to make, in behalf of the Commander
of the United States Naval Base at Olongapo
City, Zambales, a "suggestion" to respondent
Judge. The Solicitor General embodied the
"suggestion" in a Manifestation and
Memorandum as amicus curiae.
It is to be recalled that the Labor Arbiter, in both of his
rulings, noted that it was imperative for petitioners to secure
from the Department of Foreign Affairs a certification of
respondents diplomatic status and entitlement to diplomatic
privileges including immunity from suits. The requirement might
not necessarily be imperative. However, had GTZ obtained
such certification from the DFA, it would have provided factual
basis for its claim of immunity that would, at the very least,
establish a disputable evidentiary presumption that the foreign
party is indeed immune which the opposing party will have to
overcome with its own factual evidence. We do not see why
GTZ could not have secured such certification or endorsement
from the DFA for purposes of this case. Certainly, it would have
been highly prudential for GTZ to obtain the same after the
Labor Arbiter had denied the motion to dismiss. Still, even at
this juncture, we do not see any evidence that the DFA, the
office of the executive branch in charge of our diplomatic
relations, has indeed endorsed GTZs claim of immunity. It may
be possible that GTZ tried, but failed to secure such
certification, due to the same concerns that we have discussed
herein.
Would the fact that the Solicitor General has endorsed
GTZs claim of States immunity from suit before this Court
sufficiently substitute for the DFA certification? Note that the
rule in public international law quoted in Holy See referred to
endorsement by the Foreign Office of the State where the suit
is filed, such foreign office in the Philippines being the
Department of Foreign Affairs. Nowhere in the Comment of the
OSG is it manifested that the DFA has endorsed GTZs claim, or
that the OSG had solicited the DFAs views on the issue. The
arguments raised by the OSG are virtually the same as the
arguments raised by GTZ without any indication of any special
and distinct perspective maintained by the Philippine
government on the issue. The Comment filed by the OSG does
not inspire the same degree of confidence as a certification
from the DFA would have elicited.
Holy See made reference to Baer v. Tizon, and that in
the said case, the United States Embassy asked the Secretary
of Foreign Affairs to request the Solicitor General to make a
suggestion to the trial court, accomplished by way of a
Manifestation and Memorandum, that the petitioner therein
enjoyed immunity as the Commander of the Subic Bay Naval
Base. Such circumstance is actually not narrated in the text of
Baer itself and was likely supplied in Holy See because its
author, Justice Camilio Quiason, had appeared as the Solicitor
in behalf of the OSG in Baer. Nonetheless, as narrated in Holy
See, it was the Secretary of Foreign Affairs which directed the
OSG to intervene in behalf of the United States government in
the Baer case, and such fact is manifest enough of the
endorsement by the Foreign Office. We do not find a similar
circumstance that bears here.
The Court is thus holds and so rules that GTZ
consistently has been unable to establish with satisfaction that
it enjoys the immunity from suit generally enjoyed by its parent
country, the Federal Republic of Germany. Consequently, both
the Labor Arbiter and the Court of Appeals acted within proper
bounds when they refused to acknowledge that GTZ is so
immune by dismissing the complaint against it. Our finding has
additional ramifications on the failure of GTZ to properly appeal
the Labor Arbiters decision to the NLRC. As pointed out by the
OSG, the direct recourse to the Court of Appeals while
bypassing the NLRC could have been sanctioned had the
Labor Arbiters decision been a patent nullity. Since the Labor
Arbiter acted properly in deciding the complaint,
notwithstanding GTZs claim of immunity, we cannot see how
the decision could have translated into a patent nullity.
As a result, there was no basis for petitioners in
foregoing the appeal to the NLRC by filing directly with the
Court of Appeals the petition for certiorari. It then follows that
the Court of Appeals acted correctly in dismissing the petition
on that ground. As a further consequence, since petitioners
failed to perfect an appeal from the Labor Arbiters Decision, the
same has long become final and executory. All other questions
related to this case, such as whether or not private respondents
were illegally dismissed, are no longer susceptible to review,
respecting as we do the finality of the Labor Arbiters Decision.
A final note. This decision should not be seen as
deviation from the more common methodology employed in
ascertaining whether a party enjoys State immunity from suit,
one which focuses on the particular functions exercised by the
party and determines whether these are proprietary or
sovereign in nature. The nature of the acts performed by the
entity invoking immunity remains the most important barometer
for testing whether the privilege of State immunity from suit
should apply. At the same time, our Constitution stipulates that
a State immunity from suit is conditional on its withholding of
consent; hence, the laws and circumstances pertaining to the
creation and legal personality of an instrumentality or agency
invoking immunity remain relevant. Consent to be sued, as
exhibited in this decision, is often conferred by the very same
statute or general law creating the instrumentality or agency.
WHEREFORE, the petition is DENIED. No
pronouncement as to costs. SO ORDERED.
ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and
MINISTRY OF PUBLIC HEALTH-KUWAIT vs. MA. JOSEFA
ECHIN; G.R. No. 178551; October 11, 2010; CARPIO
MORALES, J.:
Josefina Echin (respondent) was hired by petitioner ATCI
Overseas Corporation in behalf of its principal-co-petitioner, the
Ministry of Public Health of Kuwait (the Ministry), for the
position of medical technologist under a two-year contract,
denominated as a Memorandum of Agreement (MOA), with a
monthly salary of US$1,200.00.
Under the MOA, all newly-hired employees undergo a
probationary period of one (1) year and are covered by
Kuwait’s Civil Service Board Employment Contract No. 2.
Respondent was deployed on February 17, 2000 but was
terminated from employment on February 11, 2001, she not
having allegedly passed the probationary period.
As the Ministry denied respondent’s request for
reconsideration, she returned to the Philippines on March 17,
2001, shouldering her own air fare.
On July 27, 2001, respondent filed with the National Labor
Relations Commission (NLRC) a complaint for illegal dismissal
against petitioner ATCI as the local recruitment agency,
represented by petitioner, Amalia Ikdal (Ikdal), and the Ministry,
as the foreign principal.
By Decision of November 29, 2002, the Labor Arbiter, finding
that petitioners neither showed that there was just cause to
warrant respondent’s dismissal nor that she failed to qualify as
a regular employee, held that respondent was illegally
dismissed and accordingly ordered petitioners to pay her
US$3,600.00, representing her salary for the three months
unexpired portion of her contract.
On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the
Labor Arbiter’s decision by Resolution4 of January 26, 2004.
Petitioners’ motion for reconsideration having been denied by
Resolution5 of April 22, 2004, they appealed to the Court of
Appeals, contending that their principal, the Ministry, being a
foreign government agency, is immune from suit and, as such,
the immunity extended to them; and that respondent was
validly dismissed for her failure to meet the performance rating
within the one-year period as required under Kuwait’s Civil
Service Laws. Petitioners further contended that Ikdal should
not be liable as an officer of petitioner ATCI.
By Decision of March 30, 2007, the appellate court affirmed the
NLRC Resolution.
In brushing aside petitioners’ contention that they only acted as
agent of the Ministry and that they cannot be held jointly and
solidarily liable with it, the appellate court noted that under the
law, a private employment agency shall assume all
responsibilities for the implementation of the contract of
employment of an overseas worker, hence, it can be sued
jointly and severally with the foreign principal for any violation
of the recruitment agreement or contract of employment.
As to Ikdal’s liability, the appellate court held that under Sec.
10 of Republic Act No. 8042, the "Migrant and Overseas
Filipinos’ Act of 1995," corporate officers, directors and
partners of a recruitment agency may themselves be jointly
and solidarily liable with the recruitment agency for money
claims and damages awarded to overseas workers.
Petitioners’ motion for reconsideration having been denied by
the appellate court by Resolution7 of June 27, 2007, the
present petition for review on certiorari was filed.
Petitioners maintain that they should not be held liable because
respondent’s employment contract specifically stipulates that
her employment shall be governed by the Civil Service Law
and Regulations of Kuwait. They thus conclude that it was
patent error for the labor tribunals and the appellate court to
apply the Labor Code provisions governing probationary
employment in deciding the present case.
Further, petitioners argue that even the Philippine Overseas
Employment Act (POEA) Rules relative to master employment
contracts (Part III, Sec. 2 of the POEA Rules and Regulations)
accord respect to the "customs, practices, company policies
and labor laws and legislation of the host country."
Finally, petitioners posit that assuming arguendo that Philippine
labor laws are applicable, given that the foreign principal is a
government agency which is immune from suit, as in fact it did
not sign any document agreeing to be held jointly and solidarily
liable, petitioner ATCI cannot likewise be held liable, more so
since the Ministry’s liability had not been judicially determined
as jurisdiction was not acquired over it.
The petition fails.
Petitioner ATCI, as a private recruitment agency, cannot evade
responsibility for the money claims of Overseas Filipino
workers (OFWs) which it deploys abroad by the mere
expediency of claiming that its foreign principal is a
government agency clothed with immunity from suit, or that
such foreign principal’s liability must first be established before
it, as agent, can be held jointly and solidarily liable.
In providing for the joint and solidary liability of private
recruitment agencies with their foreign principals, Republic Act
No. 8042 precisely affords the OFWs with a recourse and
assures them of immediate and sufficient payment of what is
due them. Skippers United Pacific v. Maguad8 explains:
. . . [T]he obligations covenanted in the recruitment
agreement entered into by and between the local agent
and its foreign principal are not coterminous with the term
of such agreement so that if either or both of the parties
decide to end the agreement, the responsibilities of such
parties towards the contracted employees under the
agreement do not at all end, but the same extends up to and
until the expiration of the employment contracts of the
employees recruited and employed pursuant to the said
recruitment agreement. Otherwise, this will render nugatory
the very purpose for which the law governing the
employment of workers for foreign jobs abroad was
enacted. (emphasis supplied)
The imposition of joint and solidary liability is in line with the
policy of the state to protect and alleviate the plight of the
working class. Verily, to allow petitioners to simply invoke the
immunity from suit of its foreign principal or to wait for the
judicial determination of the foreign principal’s liability before
petitioner can be held liable renders the law on joint and
solidary liability inutile.
As to petitioners’ contentions that Philippine labor laws on
probationary employment are not applicable since it was
expressly provided in respondent’s employment contract,
which she voluntarily entered into, that the terms of her
engagement shall be governed by prevailing Kuwaiti Civil
Service Laws and Regulations as in fact POEA Rules accord
respect to such rules, customs and practices of the host
country, the same was not substantiated.
Indeed, a contract freely entered into is considered the law
between the parties who can establish stipulations, clauses,
terms and conditions as they may deem convenient, including
the laws which they wish to govern their respective obligations,
as long as they are not contrary to law, morals, good customs,
public order or public policy.
It is hornbook principle, however, that the party invoking the
application of a foreign law has the burden of proving the law,
under the doctrine of processual presumption which, in this
case, petitioners failed to discharge. The Court’s ruling in EDI-
Staffbuilders Int’l., v. NLRC illuminates:
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters
not provided for in the contract (e.g. specific causes for
termination, termination procedures, etc.). Being the law
intended by the parties (lex loci intentiones) to apply to the
contract, Saudi Labor Laws should govern all matters relating
to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the
foreign law. The foreign law is treated as a question of fact to
be properly pleaded and proved as the judge or labor arbiter
cannot take judicial notice of a foreign law. He is presumed to
know only domestic or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi
laws on the matter; thus, the International Law doctrine of
presumed-identity approach or processual presumption comes
into play. Where a foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that foreign law is
the same as ours. Thus, we apply Philippine labor laws in
determining the issues presented before us. (emphasis and
underscoring supplied)
The Philippines does not take judicial notice of foreign laws,
hence, they must not only be alleged; they must be proven. To
prove a foreign law, the party invoking it must present a copy
thereof and comply with Sections 24 and 25 of Rule 132 of the
Revised Rules of Court which reads:
SEC. 24. Proof of official record. — The record of public
documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official
publication thereof or by a copy attested by the officer having
the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate
may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by
any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and
authenticated by the seal of his office. (emphasis supplied)
SEC. 25. What attestation of copy must state. — Whenever a
copy of a document or record is attested for the purpose of the
evidence, the attestation must state, in substance, that the
copy is a correct copy of the original, or a specific part thereof,
as the case may be. The attestation must be under the official
seal of the attesting officer, if there be any, or if he be the clerk
of a court having a seal, under the seal of such court.
To prove the Kuwaiti law, petitioners submitted the following:
MOA between respondent and the Ministry, as represented by
ATCI, which provides that the employee is subject to a
probationary period of one (1) year and that the host country’s
Civil Service Laws and Regulations apply; a translated copy
(Arabic to English) of the termination letter to respondent
stating that she did not pass the probation terms, without
specifying the grounds therefor, and a translated copy of the
certificate of termination, both of which documents were
certified by Mr. Mustapha Alawi, Head of the Department of
Foreign Affairs-Office of Consular Affairs Inslamic Certification
and Translation Unit; and respondent’s letter of reconsideration
to the Ministry, wherein she noted that in her first eight (8)
months of employment, she was given a rating of "Excellent"
albeit it changed due to changes in her shift of work schedule.
These documents, whether taken singly or as a whole, do not
sufficiently prove that respondent was validly terminated as a
probationary employee under Kuwaiti civil service laws.
Instead of submitting a copy of the pertinent Kuwaiti labor
laws duly authenticated and translated by Embassy
officials thereat, as required under the Rules, what
petitioners submitted were mere certifications attesting
only to the correctness of the translations of the MOA and
the termination letter which does not prove at all that
Kuwaiti civil service laws differ from Philippine laws and
that under such Kuwaiti laws, respondent was validly
terminated. Thus the subject certifications read:
xxxx
This is to certify that the herein attached translation/s from
Arabic to English/Tagalog and or vice versa was/were
presented to this Office for review and certification and the
same was/were found to be in order. This Office, however,
assumes no responsibility as to the contents of the
document/s.
This certification is being issued upon request of the interested
party for whatever legal purpose it may serve. (emphasis
supplied)
Respecting Ikdal’s joint and solidary liability as a corporate
officer, the same is in order too following the express provision
of R.A. 8042 on money claims, viz:
SEC. 10. Money Claims.—Notwithstanding any provision of
law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas
deployment including claims for actual moral, exemplary and
other forms of damages.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall
be a condition precedent for its approval. The performance
bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or
damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and
damages. (emphasis and underscoring supplied)
WHEREFORE, the petition is DENIED. SO ORDERED.
WILLAMETTE IRON & STEEL WORKS vs. A.H. MUZZAL;
G.R. No. L-42538; May 21, 1935; GODDARD, J.:
This is an appeal from a decision of the Court of First Instance
of Zamboanga, the dispositive part of which reads:
In view of the considerations above stated, judgment
is hereby entered in favor of the plaintiff, ordering the
defendant, for the first cause of action, to pay to
plaintiff the sum of P2,837.34, with interest thereon at
the rate of 6 per cent per annum from March 11,
1929, until paid, and to pay also the amount of
P1,590.63, for the second cause of action, with
interest thereon at 7 per cent per annum from April 8,
1929, until paid. The defendant is further ordered to
pay the amount of P500 as reasonable attorney's fees
in prosecuting this action, and to pay the costs of
these proceedings.
This case involves the liability of the defendant, a former
resident of the State of California, now residing in the
Philippine Islands, for obligations contracted by a California
corporation of which he was a stockholder at the time said
obligations were contracted with the plaintiff-appellee in this
case.
The section of the Civil Code of California under which the
plaintiff seeks to recover reads:
SEC. 322. Each stockholder of a corporation is
individually and personally liable for such proportion of
all its debts and liabilities contracted or incurred
during the time he was a stockholder as the amount of
stock or shares owned by him bears to the whole of
the subscribed capital stock or shares of the
corporation. Any creditor of the corporation may
institute joint or several actions against any of its
stockholders, for the proportion of his claim payable
by each, and in such action the court must (1)
ascertain the proportion of the claim or debt for which
each defendant is liable, and (2) a several judgment
must be rendered against each, in conformity
therewith. If any stockholder pays his proportion of
any debt due from the corporation, incurred while he
was such stockholder, he is relieved from any further
personal liability for such debt, and if an action has
been brought against him upon such debt, it must be
dismissed, as to him, upon his paying the costs, or
such proportion thereof as may be properly
chargeable against him. The liability of each
stockholder is determined by the amount of stock or
shares owned by him at the time the debt or liability
was incurred; and such liability is not released by any
subsequent transfer of stock.
The defendant-appellant makes the following assignments of
error:
I. The lower court erred in holding that the defendant
was the holder of 1,432 shares of the capital stock of
the Meyer-Muzzal Company.
II. The lower court erred in finding that plaintiff has
proven the existence of the foreign law involved in this
action.
III. The lower court erred in enforcing the law of
California.
IV. The lower court erred in rendering judgment
against the defendant.
As to the first assignment of error the witness Stanley H.
Hermann, a certified public accountant, testified that he knows
that the Meyer-Muzzal Company is a corporation and further
testified as follows:
I became acquainted with the corporation by reason
of being employed by it in October, November and
December of 1929 as a certified public accountant
and auditor to personally examine the company's
books of account, stock and other records of the
company for the purpose of certifying, if possible, to
the correctness of a statement of the financial
condition of the company on March 31, 1929.
xxx xxx xxx
8. Please state, if you know, whether or not one A.H.
Muzzal was a stockholder of Meyer-Muzzal Company
on November 5, 1928 and December 22, 1928, and if
he was, please state the number and value of the
shares of capital stock of Meyer-Muzzal Company
subscribed and owned by said A.H. Muzzal on
November 5, 1928 and December 22, 1928?
A. Yes, Mr. A.H. Muzzal was a stockholder of the
Meyer-Muzzal Company on the dates specified.
Fourteen hundred thirty-three shares of the capital
stock of Meyer-Muzzal Company of the par value of
$10 each were subscribed and owned by said A.H.
Muzzal on November 5th, 1928 and on December
22nd, 1928, and said shares were issued to and
standing in the name of A. H. Muzzal on the books of
said company at said times.
9. If, by reason of the loss, destruction and/or
disappearance of the stock and other corporate
records of the Meyer-Muzzal Company since the time
you had occasion to examine them, you have been
 unable to make reference thereto in answering the
questions asked of you in this deposition, please
answer each and all of said questions by reference to
any documents or working sheets which you may be
prepared upon the occasion of your examining and/or
auditing the books of account, stock and other records
of the Meyer-Muzzal Company.
A. By reference to my working papers which I made at
the time I examined the books of account and stock
records of Meyer-Muzzal Company in October,
November, December, 1929, and which working
papers are in my possession, I find and can state
accordingly that these working papers show what the
stock and other records of said Meyer-Muzzal
Company recorded in regard to the matters contained
in questions No. 6, No. 7 and No. 8 and I can state
accordingly from my examination of said records and
by reference to my working papers that I know who
the stockholders of Meyer-Muzzal company were; that
the amount of the subscribed capital stock of said
Meyer-Muzzal Company on said dates was 5,000
shares of the par value of $10 each, and that A.H.
Muzzal was a stockholder of the Meyer-Muzzal
Company on the dates specified and that fourteen
hundred thirty-three shares of the capital stock of
Meyer-Muzzal Company of the par value of $10 each
were subscribed and owned by A.H. Muzzal on
November 5, 1928 and on December 22nd, 1928 and
said shares were issued to and standing in the name
of A.H. Muzzal on the books of said company at said
times.
The above sufficiently establishes the fact that the defendant
was the owner of 1,433 shares of stock of the corporation
Meyer-Muzzal Company when it contracted the obligations
alleged in the complaint.
As to the second assignment of error Mr. Arthur W. Bolton, an
attorney-at-law of San Francisco, California, since the year
1918, under oath, quoted verbatim section 322 of the California
Civil Code and stated that said section was in force at the time
the obligations of the defendant to the plaintiff were incurred, i.
e., on November 5, 1928 and December 22, 1928. This
evidence sufficiently established the fact that the section in
question was the law of the State of California on the above
dates. A reading of sections 300 and 301 of our Code of Civil
Procedure will convince one that these sections do not exclude
the presentation of other competent evidence to prove the
existence of a foreign law.
"The foreign law is a matter of fact ... You ask the witness what
the law is; he may from his recollection, or on producing and
referring to books, say what it is." (Lord Campbell concurring in
an opinion of Lord Chief Justice Denman in a well known
English case where a witness was called upon to prove the
Roman laws of marriage and was permitted to testify, though
he referred to a book containing the decrees of the Council of
Trent as controlling, Jones on Evidence, Second Edition,
Volume 4, pages 3148-3152.) Aside from the testimony of
Attorney Bolton Ragland's Annotated Civil Code of California
was presented as evidence. This book contains that State's
Civil Code as adopted March 21, 1872, with the subsequent
official statute amendments to and including the year 1929.
In the third and fourth assignments of error the appellant
argues that since the law of California, as to the liability of
stockholders of a corporation, is different from and inconsistent
with the Philippine Corporation Law the courts here should not
impose liability provided in that law upon a resident of these
Islands who is a stockholder of a California corporation. The
herein defendant is chargeable with notice of the law of
California as to the liability of stockholders for debt of a
corporation proportionate to their stock holdings, in view of the
fact that he was one of the incorporators of the Meyer-Muzzal
Company in the year 1924 and was still a stockholder in that
company in the year 1928. Exhibit 10 of the plaintiff is a
certified company of the articles of incorporation of Meyer-
Muzzal Company in which it appears that that company was
incorporated on August 22, 1924, and that the incorporators
were A.H. Muzzal, Leo W. Meyer and James Rolph, Jr., "all of
whom are residents and citizens of the State of California." The
defendant cannot now escape liability by alleging that the
California law is unjust and different from the inconsistent with
the Philippine Corporation Law.
The judgment of the trial court is affirmed with costs in both
instances against the defendant-appellant.
THE COLLECTOR OF INTERNAL REVENUE, vs. DOUGLAS
FISHER AND BETTINA FISHER, and the COURT OF TAX
APPEALS; G.R. No. L-11622; January 28, 1961
DOUGLAS FISHER AND BETTINA FISHER
vs. THE COLLECTOR OF INTERNAL REVENUE, and the
COURT OF TAX APPEALS; G.R. No. L-11668; January 28,
1961; BARRERA, J.:
This case relates to the determination and settlement of the
hereditary estate left by the deceased Walter G. Stevenson,
and the laws applicable thereto. Walter G. Stevenson (born in
the Philippines on August 9, 1874 of British parents and
married in the City of Manila on January 23, 1909 to Beatrice
Mauricia Stevenson another British subject) died on February
22, 1951 in San Francisco, California, U.S.A. whereto he and
his wife moved and established their permanent residence
since May 10, 1945. In his will executed in San Francisco on
May 22, 1947, and which was duly probated in the Superior
Court of California on April 11, 1951, Stevenson instituted his
wife Beatrice as his sole heiress to the following real and
personal properties acquired by the spouses while residing in
the Philippines, described and preliminary assessed as follows:
Gross Estate
Real Property — 2 parcels of
land in Baguio, covered by
T.C.T. Nos. 378 and 379 P43,500.00
 Personal Property
(1) 177 shares of stock of
Canacao Estate at P10.00 each 1,770.00
(2) 210,000 shares of stock of
Mindanao Mother Lode Mines,
Inc. at P0.38 per share 79,800.00
(3) Cash credit with Canacao
Estate Inc. 4,870.88
(4) Cash, with the Chartered
Bank of India, Australia & China 851.97
Total Gross Assets P130,792.85
On May 22, 1951, ancillary administration proceedings were
instituted in the Court of First Instance of Manila for the
settlement of the estate in the Philippines. In due time
Stevenson's will was duly admitted to probate by our court and
Ian Murray Statt was appointed ancillary administrator of the
estate, who on July 11, 1951, filed a preliminary estate and
inheritance tax return with the reservation of having the
properties declared therein finally appraised at their values six
months after the death of Stevenson. Preliminary return was
made by the ancillary administrator in order to secure the
waiver of the Collector of Internal Revenue on the inheritance
tax due on the 210,000 shares of stock in the Mindanao Mother
Lode Mines Inc. which the estate then desired to dispose in the
United States. Acting upon said return, the Collector of Internal
Revenue accepted the valuation of the personal properties
declared therein, but increased the appraisal of the two parcels
of land located in Baguio City by fixing their fair market value in
the amount of P52.200.00, instead of P43, 500.00. After
allowing the deductions claimed by the ancillary administrator
for funeral expenses in the amount of P2,000.00 and for
judicial and administration expenses in the sum of P5,500.00,
the Collector assessed the state the amount of P5,147.98 for
estate tax and P10,875,26 or inheritance tax, or a total of
P16,023.23. Both of these assessments were paid by the
estate on June 6, 1952.
On September 27, 1952, the ancillary administrator filed in
amended estate and inheritance tax return in pursuance f his
reservation made at the time of filing of the preliminary return
and for the purpose of availing of the right granted by section
91 of the National Internal Revenue Code.
In this amended return the valuation of the 210,000 shares of
stock in the Mindanao Mother Lode Mines, Inc. was reduced
from 0.38 per share, as originally declared, to P0.20 per share,
or from a total valuation of P79,800.00 to P42,000.00. This
change in price per share of stock was based by the ancillary
administrator on the market notation of the stock obtaining at
the San Francisco California) Stock Exchange six months from
the death of Stevenson, that is, As of August 22, 1931. In
addition, the ancillary administrator made claim for the
following deductions:
Funeral expenses ($1,04326) P2,086.52
Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and 1,400.05
Administration expenses as
of August 9, 1952
8,604.39
Real Estate Tax for 1951 on 652.50
Baguio real properties (O.R.
No. B-1 686836)
Claims against the estate: P10,000.00
($5,000.00) P10,000.00
Plus: 4% int. p.a. from Feb. 22.47 10,022.47
2 to 22, 1951
Sub-Total P21,365.88
In the meantime, on December 1, 1952, Beatrice Mauricia
Stevenson assigned all her rights and interests in the estate to
the spouses, Douglas and Bettina Fisher, respondents herein.
On September 7, 1953, the ancillary administrator filed a
second amended estate and inheritance tax return (Exh. "M-
N"). This return declared the same assets of the estate stated
in the amended return of September 22, 1952, except that it
contained new claims for additional exemption and deduction
to wit: (1) deduction in the amount of P4,000.00 from the gross
estate of the decedent as provided for in Section 861 (4) of the
U.S. Federal Internal Revenue Code which the ancillary
administrator averred was allowable by way of the reciprocity
granted by Section 122 of the National Internal Revenue Code,
as then held by the Board of Tax Appeals in case No. 71
entitled "Housman vs. Collector," August 14, 1952; and (2)
exemption from the imposition of estate and inheritance taxes
on the 210,000 shares of stock in the Mindanao Mother Lode
Mines, Inc. also pursuant to the reciprocity proviso of Section
122 of the National Internal Revenue Code. In this last return,
the estate claimed that it was liable only for the amount of
P525.34 for estate tax and P238.06 for inheritance tax and
that, as a consequence, it had overpaid the government. The
refund of the amount of P15,259.83, allegedly overpaid, was
accordingly requested by the estate. The Collector denied the
claim. For this reason, action was commenced in the Court of
First Instance of Manila by respondents, as assignees of
Beatrice Mauricia Stevenson, for the recovery of said amount.
Pursuant to Republic Act No. 1125, the case was forwarded to
the Court of Tax Appeals which court, after hearing, rendered
decision the dispositive portion of which reads as follows:
In fine, we are of the opinion and so hold that: (a) the
one-half (½) share of the surviving spouse in the
conjugal partnership property as diminished by the
obligations properly chargeable to such property
should be deducted from the net estate of the
deceased Walter G. Stevenson, pursuant to Section
89-C of the National Internal Revenue Code; (b) the
intangible personal property belonging to the estate of
said Stevenson is exempt from inheritance tax,
pursuant to the provision of section 122 of the
National Internal Revenue Code in relation to the
California Inheritance Tax Law but decedent's estate
is not entitled to an exemption of P4,000.00 in the
 computation of the estate tax; (c) for purposes of
estate and inheritance taxation the Baguio real estate
of the spouses should be valued at P52,200.00, and
210,000 shares of stock in the Mindanao Mother Lode
Mines, Inc. should be appraised at P0.38 per share;
and (d) the estate shall be entitled to a deduction of
P2,000.00 for funeral expenses and judicial expenses
of P8,604.39.
From this decision, both parties appealed.
The Collector of Internal Revenue, hereinafter called petitioner
assigned four errors allegedly committed by the trial court,
while the assignees, Douglas and Bettina Fisher hereinafter
called respondents, made six assignments of error. Together,
the assigned errors raise the following main issues for
resolution by this Court:
(1) Whether or not, in determining the taxable net estate of the
decedent, one-half (½) of the net estate should be deducted
therefrom as the share of tile surviving spouse in accordance
with our law on conjugal partnership and in relation to section
89 (c) of the National Internal revenue Code;
(2) Whether or not the estate can avail itself of the reciprocity
proviso embodied in Section 122 of the National Internal
Revenue Code granting exemption from the payment of estate
and inheritance taxes on the 210,000 shares of stock in the
Mindanao Mother Lode Mines Inc.;
(3) Whether or not the estate is entitled to the deduction of
P4,000.00 allowed by Section 861, U.S. Internal Revenue
Code in relation to section 122 of the National Internal
Revenue Code;
(4) Whether or not the real estate properties of the decedent
located in Baguio City and the 210,000 shares of stock in the
Mindanao Mother Lode Mines, Inc., were correctly appraised
by the lower court;
(5) Whether or not the estate is entitled to the following
deductions: P8,604.39 for judicial and administration expenses;
P2,086.52 for funeral expenses; P652.50 for real estate taxes;
and P10,0,22.47 representing the amount of indebtedness
allegedly incurred by the decedent during his lifetime; and
(6) Whether or not the estate is entitled to the payment of
interest on the amount it claims to have overpaid the
government and to be refundable to it.
In deciding the first issue, the lower court applied a well-known
doctrine in our civil law that in the absence of any ante-nuptial
agreement, the contracting parties are presumed to have
adopted the system of conjugal partnership as to the properties
acquired during their marriage. The application of this doctrine
to the instant case is being disputed, however, by petitioner
Collector of Internal Revenue, who contends that pursuant to
Article 124 of the New Civil Code, the property relation of the
spouses Stevensons ought not to be determined by the
Philippine law, but by the national law of the decedent
husband, in this case, the law of England. It is alleged by
petitioner that English laws do not recognize legal partnership
between spouses, and that what obtains in that jurisdiction is
another regime of property relation, wherein all properties
acquired during the marriage pertain and belong Exclusively to
the husband. In further support of his stand, petitioner cites
Article 16 of the New Civil Code (Art. 10 of the old) to the effect
that in testate and intestate proceedings, the amount of
successional rights, among others, is to be determined by the
national law of the decedent.
In this connection, let it be noted that since the mariage of the
Stevensons in the Philippines took place in 1909, the
applicable law is Article 1325 of the old Civil Code and not
Article 124 of the New Civil Code which became effective only
in 1950. It is true that both articles adhere to the so-called
nationality theory of determining the property relation of
spouses where one of them is a foreigner and they have made
no prior agreement as to the administration disposition, and
ownership of their conjugal properties. In such a case, the
national law of the husband becomes the dominant law in
determining the property relation of the spouses. There is,
however, a difference between the two articles in that Article
1241 of the new Civil Code expressly provides that it shall be
applicable regardless of whether the marriage was celebrated
in the Philippines or abroad while Article 13252 of the old Civil
Code is limited to marriages contracted in a foreign land.
It must be noted, however, that what has just been said refers
to mixed marriages between a Filipino citizen and a foreigner.
In the instant case, both spouses are foreigners who married in
the Philippines. Manresa,3 in his Commentaries, has this to say
on this point:
La regla establecida en el art. 1.315, se refiere a las
capitulaciones otorgadas en Espana y entre
espanoles. El 1.325, a las celebradas en el extranjero
cuando alguno de los conyuges es espanol. En
cuanto a la regla procedente cuando dos extranjeros
se casan en Espana, o dos espanoles en el
extranjero hay que atender en el primer caso a la
legislacion de pais a que aquellos pertenezean, y en
el segundo, a las reglas generales consignadas en
los articulos 9 y 10 de nuestro Codigo. (Emphasis
supplied.)
If we adopt the view of Manresa, the law determinative of the
property relation of the Stevensons, married in 1909, would be
the English law even if the marriage was celebrated in the
Philippines, both of them being foreigners. But, as correctly
observed by the Tax Court, the pertinent English law that
allegedly vests in the decedent husband full ownership of the
properties acquired during the marriage has not been proven
by petitioner. Except for a mere allegation in his answer, which
is not sufficient, the record is bereft of any evidence as to what
English law says on the matter. In the absence of proof, the
Court is justified, therefore, in indulging in what Wharton calls
"processual presumption," in presuming that the law of
England on this matter is the same as our law.4
Nor do we believe petitioner can make use of Article 16 of the
New Civil Code (art. 10, old Civil Code) to bolster his stand. A
reading of Article 10 of the old Civil Code, which incidentally is
the one applicable, shows that it does not encompass or
contemplate to govern the question of property relation
between spouses. Said article distinctly speaks of amount of
successional rights and this term, in speaks in our opinion,
properly refers to the extent or amount of property that each
heir is legally entitled to inherit from the estate available for
distribution. It needs to be pointed out that the property relation
of spouses, as distinguished from their successional rights, is
governed differently by the specific and express provisions of
Title VI, Chapter I of our new Civil Code (Title III, Chapter I of
the old Civil Code.) We, therefore, find that the lower court
correctly deducted the half of the conjugal property in
determining the hereditary estate left by the deceased
Stevenson.
On the second issue, petitioner disputes the action of the Tax
Court in the exempting the respondents from paying
inheritance tax on the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc. in virtue of the reciprocity proviso of
Section 122 of the National Internal Revenue Code, in relation
to Section 13851 of the California Revenue and Taxation
Code, on the ground that: (1) the said proviso of the California
Revenue and Taxation Code has not been duly proven by the
respondents; (2) the reciprocity exemptions granted by section
122 of the National Internal Revenue Code can only be availed
of by residents of foreign countries and not of residents of a
state in the United States; and (3) there is no "total" reciprocity
between the Philippines and the state of California in that while
the former exempts payment of both estate and inheritance
taxes on intangible personal properties, the latter only exempts
the payment of inheritance tax..
To prove the pertinent California law, Attorney Allison Gibbs,
counsel for herein respondents, testified that as an active
member of the California Bar since 1931, he is familiar with the
revenue and taxation laws of the State of California. When
asked by the lower court to state the pertinent California law as
regards exemption of intangible personal properties, the
witness cited article 4, section 13851 (a) and (b) of the
California Internal and Revenue Code as published in Derring's
California Code, a publication of the Bancroft-Whitney
Company inc. And as part of his testimony, a full quotation of
the cited section was offered in evidence as Exhibits "V-2" by
the respondents.
It is well-settled that foreign laws do not prove themselves in
our jurisdiction and our courts are not authorized to take
judicial notice of them.5 Like any other fact, they must be
alleged and proved.6
Section 41, Rule 123 of our Rules of Court prescribes the
manner of proving foreign laws before our tribunals. However,
although we believe it desirable that these laws be proved in
accordance with said rule, we held in the case of Willamette
Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of
sections 300 and 301 of our Code of Civil Procedure (now
section 41, Rule 123) will convince one that these sections do
not exclude the presentation of other competent evidence to
prove the existence of a foreign law." In that case, we
considered the testimony of an attorney-at-law of San
Francisco, California who quoted verbatim a section of
California Civil Code and who stated that the same was in
force at the time the obligations were contracted, as sufficient
evidence to establish the existence of said law. In line with this
view, we find no error, therefore, on the part of the Tax Court in
considering the pertinent California law as proved by
respondents' witness.
We now take up the question of reciprocity in exemption from
transfer or death taxes, between the State of California and the
Philippines.F
Section 122 of our National Internal Revenue Code, in
pertinent part, provides:
... And, provided, further, That no tax shall be
collected under this Title in respect of intangible
personal property (a) if the decedent at the time of his
death was a resident of a foreign country which at the
time of his death did not impose a transfer of tax or
death tax of any character in respect of intangible
personal property of citizens of the Philippines not
residing in that foreign country, or (b) if the laws of the
foreign country of which the decedent was a resident
at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in
respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign
country." (Emphasis supplied).
On the other hand, Section 13851 of the California Inheritance
Tax Law, insofar as pertinent, reads:
"SEC. 13851, Intangibles of nonresident: Conditions.
Intangible personal property is exempt from the tax
imposed by this part if the decedent at the time of his
death was a resident of a territory or another State of
the United States or of a foreign state or country
which then imposed a legacy, succession, or death
tax in respect to intangible personal property of its
own residents, but either:.
(a) Did not impose a legacy, succession, or death tax
of any character in respect to intangible personal
property of residents of this State, or
(b) Had in its laws a reciprocal provision under which
intangible personal property of a non-resident was
exempt from legacy, succession, or death taxes of
every character if the Territory or other State of the
United States or foreign state or country in which the
nonresident resided allowed a similar exemption in
 respect to intangible personal property of residents of
the Territory or State of the United States or foreign
state or country of residence of the decedent." (Id.)
It is clear from both these quoted provisions that the reciprocity
must be total, that is, with respect to transfer or death taxes of
any and every character, in the case of the Philippine law, and
to legacy, succession, or death taxes of any and every
character, in the case of the California law. Therefore, if any of
the two states collects or imposes and does not exempt any
transfer, death, legacy, or succession tax of any character, the
reciprocity does not work. This is the underlying principle of the
reciprocity clauses in both laws.
In the Philippines, upon the death of any citizen or resident, or
non-resident with properties therein, there are imposed upon
his estate and its settlement, both an estate and an inheritance
tax. Under the laws of California, only inheritance tax is
imposed. On the other hand, the Federal Internal Revenue
Code imposes an estate tax on non-residents not citizens of
the United States,7 but does not provide for any exemption on
the basis of reciprocity. Applying these laws in the manner the
Court of Tax Appeals did in the instant case, we will have a
situation where a Californian, who is non-resident in the
Philippines but has intangible personal properties here, will the
subject to the payment of an estate tax, although exempt from
the payment of the inheritance tax. This being the case, will a
Filipino, non-resident of California, but with intangible personal
properties there, be entitled to the exemption clause of the
California law, since the Californian has not been exempted
from every character of legacy, succession, or death tax
because he is, under our law, under obligation to pay an estate
tax? Upon the other hand, if we exempt the Californian from
paying the estate tax, we do not thereby entitle a Filipino to be
exempt from a similar estate tax in California because under
the Federal Law, which is equally enforceable in California he
is bound to pay the same, there being no reciprocity
recognized in respect thereto. In both instances, the Filipino
citizen is always at a disadvantage. We do not believe that our
legislature has intended such an unfair situation to the
detriment of our own government and people. We, therefore,
find and declare that the lower court erred in exempting the
estate in question from payment of the inheritance tax.
We are not unaware of our ruling in the case of Collector of
Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom.
January 6, 1958, 54 O.G. 2881) exempting the estate of the
deceased Hugo H. Miller from payment of the inheritance tax
imposed by the Collector of Internal Revenue. It will be noted,
however, that the issue of reciprocity between the pertinent
provisions of our tax law and that of the State of California was
not there squarely raised, and the ruling therein cannot control
the determination of the case at bar. Be that as it may, we now
declare that in view of the express provisions of both the
Philippine and California laws that the exemption would apply
only if the law of the other grants an exemption from legacy,
succession, or death taxes of every character, there could not
be partial reciprocity. It would have to be total or none at all.
With respect to the question of deduction or reduction in the
amount of P4,000.00 based on the U.S. Federal Estate Tax
Law which is also being claimed by respondents, we uphold
and adhere to our ruling in the Lara case (supra) that the
amount of $2,000.00 allowed under the Federal Estate Tax
Law is in the nature of a deduction and not of an exemption
regarding which reciprocity cannot be claimed under the
provision of Section 122 of our National Internal Revenue
Code. Nor is reciprocity authorized under the Federal Law. .
On the issue of the correctness of the appraisal of the two
parcels of land situated in Baguio City, it is contended that their
assessed values, as appearing in the tax rolls 6 months after
the death of Stevenson, ought to have been considered by
petitioner as their fair market value, pursuant to section 91 of
the National Internal Revenue Code. It should be pointed out,
however, that in accordance with said proviso the properties
are required to be appraised at their fair market value and the
assessed value thereof shall be considered as the fair market
value only when evidence to the contrary has not been shown.
After all review of the record, we are satisfied that such
evidence exists to justify the valuation made by petitioner
which was sustained by the tax court, for as the tax court aptly
observed:
"The two parcels of land containing 36,264 square
meters were valued by the administrator of the estate
in the Estate and Inheritance tax returns filed by him
at P43,500.00 which is the assessed value of said
properties. On the other hand, defendant appraised
the same at P52,200.00. It is of common knowledge,
and this Court can take judicial notice of it, that
assessments for real estate taxation purposes are
very much lower than the true and fair market value of
the properties at a given time and place. In fact one
year after decedent's death or in 1952 the said
properties were sold for a price of P72,000.00 and
there is no showing that special or extraordinary
circumstances caused the sudden increase from the
price of P43,500.00, if we were to accept this value as
a fair and reasonable one as of 1951. Even more, the
counsel for plaintiffs himself admitted in open court
that he was willing to purchase the said properties at
P2.00 per square meter. In the light of these facts we
believe and therefore hold that the valuation of
P52,200.00 of the real estate in Baguio made by
defendant is fair, reasonable and justified in the
premises." (Decision, p. 19).
In respect to the valuation of the 210,000 shares of stock in the
Mindanao Mother Lode Mines, Inc., (a domestic corporation),
respondents contend that their value should be fixed on the
basis of the market quotation obtaining at the San Francisco
(California) Stock Exchange, on the theory that the certificates
of stocks were then held in that place and registered with the
said stock exchange. We cannot agree with respondents'
argument. The situs of the shares of stock, for purposes of
taxation, being located here in the Philippines, as respondents
themselves concede and considering that they are sought to
be taxed in this jurisdiction, consistent with the exercise of our
government's taxing authority, their fair market value should be
taxed on the basis of the price prevailing in our country.
Upon the other hand, we find merit in respondents' other
contention that the said shares of stock commanded a lesser
value at the Manila Stock Exchange six months after the death
of Stevenson. Through Atty. Allison Gibbs, respondents have
shown that at that time a share of said stock was bid for at only
P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs
in this respect has never been questioned nor refuted by
petitioner either before this court or in the court below. In the
absence of evidence to the contrary, we are, therefore,
constrained to reverse the Tax Court on this point and to hold
that the value of a share in the said mining company on August
22, 1951 in the Philippine market was P.325 as claimed by
respondents..
It should be noted that the petitioner and the Tax Court valued
each share of stock of P.38 on the basis of the declaration
made by the estate in its preliminary return. Patently, this
should not have been the case, in view of the fact that the
ancillary administrator had reserved and availed of his legal
right to have the properties of the estate declared at their fair
market value as of six months from the time the decedent
died..
On the fifth issue, we shall consider the various deductions,
from the allowance or disallowance of which by the Tax Court,
both petitioner and respondents have appealed..
Petitioner, in this regard, contends that no evidence of record
exists to support the allowance of the sum of P8,604.39 for the
following expenses:.
1) Administrator's fee P1,204.34
2) Attorney's fee 6,000.00
3) Judicial and Administrative 2,052.55
expenses
Total Deductions P8,604.39
An examination of the record discloses, however, that the
foregoing items were considered deductible by the Tax Court
on the basis of their approval by the probate court to which
said expenses, we may presume, had also been presented for
consideration. It is to be supposed that the probate court would
not have approved said items were they not supported by
evidence presented by the estate. In allowing the items in
question, the Tax Court had before it the pertinent order of the
probate court which was submitted in evidence by
respondents. (Exh. "AA-2", p. 100, record). As the Tax Court
said, it found no basis for departing from the findings of the
probate court, as it must have been satisfied that those
expenses were actually incurred. Under the circumstances, we
see no ground to reverse this finding of fact which, under
Republic Act of California National Association, which it would
appear, that while still living, Walter G. Stevenson obtained we
are not inclined to pass upon the claim of respondents in
respect to the additional amount of P86.52 for funeral
expenses which was disapproved by the court a quo for lack of
evidence.
In connection with the deduction of P652.50 representing the
amount of realty taxes paid in 1951 on the decedent's two
parcels of land in Baguio City, which respondents claim was
disallowed by the Tax Court, we find that this claim has in fact
been allowed. What happened here, which a careful review of
the record will reveal, was that the Tax Court, in itemizing the
liabilities of the estate, viz:
1) Administrator's fee P1,204.34
2) Attorney's fee 6,000.00
3) Judicial and Administration
expenses as of August 9, 1952 2,052.55
Total P9,256.89
added the P652.50 for realty taxes as a liability of the estate, to
the P1,400.05 for judicial and administration expenses
approved by the court, making a total of P2,052.55, exactly the
same figure which was arrived at by the Tax Court for judicial
and administration expenses. Hence, the difference between
the total of P9,256.98 allowed by the Tax Court as deductions,
and the P8,604.39 as found by the probate court, which is
P652.50, the same amount allowed for realty taxes. An evident
oversight has involuntarily been made in omitting the
P2,000.00 for funeral expenses in the final computation. This
amount has been expressly allowed by the lower court and
there is no reason why it should not be. .
We come now to the other claim of respondents that pursuant
to section 89(b) (1) in relation to section 89(a) (1) (E) and
section 89(d), National Internal Revenue Code, the amount of
P10,022.47 should have been allowed the estate as a
deduction, because it represented an indebtedness of the
decedent incurred during his lifetime. In support thereof, they
offered in evidence a duly certified claim, presented to the
probate court in California by the Bank of California National
Association, which it would appear, that while still living, Walter
G. Stevenson obtained a loan of $5,000.00 secured by pledge
on 140,000 of his shares of stock in the Mindanao Mother Lode
Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court
disallowed this item on the ground that the local probate court
had not approved the same as a valid claim against the estate
and because it constituted an indebtedness in respect to
intangible personal property which the Tax Court held to be
exempt from inheritance tax.
For two reasons, we uphold the action of the lower court in
disallowing the deduction.
Firstly, we believe that the approval of the Philippine probate
court of this particular indebtedness of the decedent is
necessary. This is so although the same, it is averred has been
already admitted and approved by the corresponding probate
court in California, situs of the principal or domiciliary
administration. It is true that we have here in the Philippines
only an ancillary administration in this case, but, it has been
held, the distinction between domiciliary or principal
administration and ancillary administration serves only to
distinguish one administration from the other, for the two
proceedings are separate and independent. 8 The reason for
the ancillary administration is that, a grant of administration
does not ex proprio vigore, have any effect beyond the limits of
the country in which it was granted. Hence, we have the
requirement that before a will duly probated outside of the
Philippines can have effect here, it must first be proved and
allowed before our courts, in much the same manner as wills
originally presented for allowance therein.9 And the estate shall
be administered under letters testamentary, or letters of
administration granted by the court, and disposed of according
to the will as probated, after payment of just debts and
expenses of administration.10 In other words, there is a regular
administration under the control of the court, where claims
must be presented and approved, and expenses of
administration allowed before deductions from the estate can
be authorized. Otherwise, we would have the actuations of our
own probate court, in the settlement and distribution of the
estate situated here, subject to the proceedings before the
foreign court over which our courts have no control. We do not
believe such a procedure is countenanced or contemplated in
the Rules of Court.
Another reason for the disallowance of this indebtedness as a
deduction, springs from the provisions of Section 89, letter (d),
number (1), of the National Internal Revenue Code which
reads:
(d) Miscellaneous provisions — (1) No deductions
shall be allowed in the case of a non-resident not a
citizen of the Philippines unless the executor,
administrator or anyone of the heirs, as the case may
be, includes in the return required to be filed under
section ninety-three the value at the time of his death
of that part of the gross estate of the non-resident not
situated in the Philippines."
In the case at bar, no such statement of the gross estate of the
non-resident Stevenson not situated in the Philippines appears
in the three returns submitted to the court or to the office of the
petitioner Collector of Internal Revenue. The purpose of this
requirement is to enable the revenue officer to determine how
much of the indebtedness may be allowed to be deducted,
pursuant to (b), number (1) of the same section 89 of the
Internal Revenue Code which provides:
(b) Deductions allowed to non-resident estates. — In
the case of a non-resident not a citizen of the
Philippines, by deducting from the value of that part of
his gross estate which at the time of his death is
situated in the Philippines —
(1) Expenses, losses, indebtedness, and taxes. —
That proportion of the deductions specified in
paragraph (1) of subjection (a) of this section 11 which
the value of such part bears the value of his entire
gross estate wherever situated;"
In other words, the allowable deduction is only to the extent of
the portion of the indebtedness which is equivalent to the
proportion that the estate in the Philippines bears to the total
estate wherever situated. Stated differently, if the properties in
the Philippines constitute but 1/5 of the entire assets wherever
situated, then only 1/5 of the indebtedness may be deducted.
But since, as heretofore adverted to, there is no statement of
the value of the estate situated outside the Philippines, no part
of the indebtedness can be allowed to be deducted, pursuant
to Section 89, letter (d), number (1) of the Internal Revenue
Code.
For the reasons thus stated, we affirm the ruling of the lower
court disallowing the deduction of the alleged indebtedness in
the sum of P10,022.47.
In recapitulation, we hold and declare that:
(a) only the one-half (1/2) share of the decedent
Stevenson in the conjugal partnership property
constitutes his hereditary estate subject to the estate
and inheritance taxes;
(b) the intangible personal property is not exempt from
inheritance tax, there existing no complete total
reciprocity as required in section 122 of the National
Internal Revenue Code, nor is the decedent's estate
entitled to an exemption of P4,000.00 in the
computation of the estate tax;
(c) for the purpose of the estate and inheritance taxes,
the 210,000 shares of stock in the Mindanao Mother
Lode Mines, Inc. are to be appraised at P0.325 per
share; and
(d) the P2,000.00 for funeral expenses should be
deducted in the determination of the net asset of the
deceased Stevenson.
In all other respects, the decision of the Court of Tax Appeals
is affirmed.
Respondent's claim for interest on the amount allegedly
overpaid, if any actually results after a recomputation on the
basis of this decision is hereby denied in line with our recent
decision in Collector of Internal Revenue v. St. Paul's Hospital
(G.R. No. L-12127, May 29, 1959) wherein we held that, "in the
absence of a statutory provision clearly or expressly directing
or authorizing such payment, and none has been cited by
respondents, the National Government cannot be required to
pay interest."
WHEREFORE, as modified in the manner heretofore indicated,
the judgment of the lower court is hereby affirmed in all other
respects not inconsistent herewith. No costs. So ordered.
G.R. Nos. L-27860 and L-27896 March 29, 1974
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK,
Administrator of the Testate Estate of Charles Newton
Hodges (Sp. Proc. No. 1672 of the Court of First Instance
of Iloilo), petitioner,
vs. THE HONORABLE VENICIO ESCOLIN, Presiding Judge
of the Court of First Instance of Iloilo, Branch II, and
AVELINA A. MAGNO, respondents.
G.R. Nos. L-27936 & L-27937 March 29, 1974
TESTATE ESTATE OF THE LATE LINNIE JANE HODGES
(Sp. Proc. No. 1307). TESTATE ESTATE OF THE LATE
CHARLES NEWTON HODGES (Sp. Proc. No. 1672).
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK,
administrator-appellant,
vs.
LORENZO CARLES, JOSE PABLICO, ALFREDO
CATEDRAL, SALVADOR GUZMAN, BELCESAR CAUSING,
FLORENIA BARRIDO, PURIFICACION CORONADO,
GRACIANO LUCERO, ARITEO THOMAS JAMIR,
MELQUIADES BATISANAN, PEPITO IYULORES,
ESPERIDION PARTISALA, WINIFREDO ESPADA,
ROSARIO ALINGASA, ADELFA PREMAYLON, SANTIAGO
PACAONSIS, and AVELINA A. MAGNO, the last as
Administratrix in Sp. Proc. No. 1307, appellees, WESTERN
INSTITUTE OF TECHNOLOGY, INC., movant-appellee.
BARREDO, J.:p
Certiorari and prohibition with preliminary injunction; certiorari
to "declare all acts of the respondent court in the Testate
Estate of Linnie Jane Hodges (Sp. Proc. No. 1307 of the Court
of First Instance of Iloilo) subsequent to the order of December
14, 1957 as null and void for having been issued without
jurisdiction"; prohibition to enjoin the respondent court from
allowing, tolerating, sanctioning, or abetting private respondent
Avelina A. Magno to perform or do any acts of administration,
such as those enumerated in the petition, and from exercising
any authority or power as Regular Administratrix of above-
named Testate Estate, by entertaining manifestations, motion
and pleadings filed by her and acting on them, and also to
enjoin said court from allowing said private respondent to
interfere, meddle or take part in any manner in the
administration of the Testate Estate of Charles Newton Hodges
(Sp. Proc. No. 1672 of the same court and branch); with prayer
for preliminary injunction, which was issued by this Court on
August 8, 1967 upon a bond of P5,000; the petition being
particularly directed against the orders of the respondent court
of October 12, 1966 denying petitioner's motion of April 22,
1966 and its order of July 18, 1967 denying the motion for
reconsideration of said order.
Related to and involving basically the same main issue as the
foregoing petition, thirty-three (33) appeals from different
orders of the same respondent court approving or otherwise
sanctioning the acts of administration of the respondent Magno
on behalf of the testate Estate of Mrs. Hodges.
THE FACTS
On May 23, 1957, Linnie Jane Hodges died in Iloilo City
leaving a will executed on November 22, 1952 pertinently
providing as follows:
FIRST: I direct that all my just debts and
funeral expenses be first paid out of my
estate.
SECOND: I give, devise and bequeath all of
the rest, residue and remainder of my estate,
both personal and real, wherever situated, or
located, to my beloved husband, Charles
Newton Hodges, to have and to hold unto
him, my said husband, during his natural
lifetime.
THIRD: I desire, direct and provide that my
husband, Charles Newton Hodges, shall
have the right to manage, control, use and
enjoy said estate during his lifetime, and he
is hereby given the right to make any
changes in the physical properties of said
estate, by sale or any part thereof which he
may think best, and the purchase of any
other or additional property as he may think
best; to execute conveyances with or without
general or special warranty, conveying in fee
simple or for any other term or time, any
property which he may deem proper to
dispose of; to lease any of the real property
for oil, gas and/or other minerals, and all
such deeds or leases shall pass the absolute
fee simple title to the interest so conveyed in
such property as he may elect to sell. All
rents, emoluments and income from said
estate shall belong to him, and he is further
authorized to use any part of the principal of
said estate as he may need or desire. It is
provided herein, however, that he shall not
sell or otherwise dispose of any of the
improved property now owned by us located
at, in or near the City of Lubbock, Texas, but
he shall have the full right to lease, manage
and enjoy the same during his lifetime,
above provided. He shall have the right to
subdivide any farm land and sell lots therein.
and may sell unimproved town lots.
FOURTH: At the death of my said husband,
Charles Newton Hodges, I give, devise and
bequeath all of the rest, residue and
remainder of my estate, both real and
personal, wherever situated or located, to be
equally divided among my brothers and
sisters, share and share alike, namely:
Esta Higdon, Emma Howell, Leonard
Higdon, Roy Higdon, Saddie Rascoe, Era
Roman and Nimroy Higdon.
 FIFTH: In case of the death of any of my
brothers and/or sisters named in item Fourth,
above, prior to the death of my husband,
Charles Newton Hodges, then it is my will
and bequest that the heirs of such deceased
brother or sister shall take jointly the share
which would have gone to such brother or
sister had she or he survived.
SIXTH: I nominate and appoint my said
husband, Charles Newton Hodges, to be
executor of this, my last will and testament,
and direct that no bond or other security be
required of him as such executor.
SEVENTH: It is my will and bequest that no
action be had in the probate court, in the
administration of my estate, other than that
necessary to prove and record this will and
to return an inventory and appraisement of
my estate and list of claims. (Pp. 2-4,
Petition.)
This will was subsequently probated in aforementioned Special
Proceedings No. 1307 of respondent court on June 28, 1957,
with the widower Charles Newton Hodges being appointed as
Executor, pursuant to the provisions thereof.
Previously, on May 27, 1957, the said widower (hereafter to be
referred to as Hodges) had been appointed Special
Administrator, in which capacity he filed a motion on the same
date as follows:
URGENT EX-PARTE MOTION TO ALLOW
OR AUTHORIZE PETITIONER TO
CONTINUE THE BUSINESS IN WHICH HE
WAS ENGAGED AND TO PERFORM ACTS
WHICH HE HAD BEEN DOING WHILE
DECEASED WAS LIVING
Come petitioner in the above-entitled special proceedings, thru
his undersigned attorneys, to the Hon. Court, most respectfully
states:
1. — That Linnie Jane Hodges died leaving
her last will and testament, a copy of which is
attached to the petition for probate of the
same.
2. — That in said last will and testament
herein petitioner Charles Newton Hodges is
directed to have the right to manage, control
use and enjoy the estate of deceased Linnie
Jane Hodges, in the same way, a provision
was placed in paragraph two, the following: "I
give, devise and bequeath all of the rest,
residue and remainder of my estate, to my
beloved husband, Charles Newton Hodges,
to have and (to) hold unto him, my said
husband, during his natural lifetime."
3. — That during the lifetime of Linnie Jane
Hodges, herein petitioner was engaged in
the business of buying and selling personal
and real properties, and do such acts which
petitioner may think best.
4. — That deceased Linnie Jane Hodges
died leaving no descendants or ascendants,
except brothers and sisters and herein
petitioner as executor surviving spouse, to
inherit the properties of the decedent.
5. — That the present motion is submitted in
order not to paralyze the business of
petitioner and the deceased, especially in the
purchase and sale of properties. That proper
accounting will be had also in all these
transactions.
WHEREFORE, it is most respectfully prayed
that, petitioner C. N. Hodges (Charles
Newton Hodges) be allowed or authorized to
continue the business in which he was
engaged and to perform acts which he had
been doing while deceased Linnie Jane
Hodges was living.
City of Iloilo, May 27, 1957. (Annex "D",
Petition.)
which the respondent court immediately granted in the
following order:
It appearing in the urgent ex-parte motion
filed by petitioner C. N. Hodges, that the
business in which said petitioner and the
deceased were engaged will be paralyzed,
unless and until the Executor is named and
appointed by the Court, the said petitioner is
allowed or authorized to continue the
business in which he was engaged and to
perform acts which he had been doing while
the deceased was living.
SO ORDERED.
City of Iloilo May 27, 1957. (Annex "E",
Petition.)
Under date of December 11, 1957, Hodges filed as such
Executor another motion thus:
MOTION TO APPROVE ALL SALES,
CONVEYANCES, LEASES, MORTGAGES
THAT THE EXECUTOR HAD MADE
FURTHER AND SUBSEQUENT
TRANSACTIONS WHICH THE EXECUTOR
MAY DO IN ACCORDANCE WITH THE
LAST WISH OF THE DECEASED LINNIE
JANE HODGES.
Comes the Executor in the above-entitled
proceedings, thru his undersigned attorney,
to the Hon. Court, most respectfully states:
1. — That according to the last will and
testament of the deceased Linnie Jane
Hodges, the executor as the surviving
spouse and legatee named in the will of the
deceased; has the right to dispose of all the
properties left by the deceased, portion of
which is quoted as follows:
Second: I give, devise and bequeath all of
the rest, residue and remainder of my estate,
both personal and real, wherever situated, or
located, to my beloved husband, Charles
Newton Hodges, to have and to hold unto
him, my said husband, during his natural
lifetime.
Third: I desire, direct and provide that my
husband, Charles Newton Hodges, shall
have the right to manage, control, use and
enjoy said estate during his lifetime, and he
is hereby given the right to make any
changes in the physical properties of said
estate, by sale or any part thereof which he
may think best, and the purchase of any
other or additional property as he may think
best; to execute conveyances with or without
general or special warranty, conveying in fee
simple or for any other term or time, any
property which he may deem proper to
dispose of; to lease any of the real property
for oil, gas and/or other minerals, and all
such deeds or leases shall pass the absolute
fee simple title to the interest so conveyed in
such property as he may elect to sell. All
rents, emoluments and income from said
estate shall belong to him, and he is further
authorized to use any part of the principal of
said estate as he may need or desire. ...
which again was promptly granted by the respondent court on
December 14, 1957 as follows:
2. — That herein Executor, is not only part
owner of the properties left as conjugal, but
also, the successor to all the properties left
by the deceased Linnie Jane Hodges. That
during the lifetime of herein Executor, as
Legatee has the right to sell, convey, lease
or dispose of the properties in the
Philippines. That inasmuch as C.N. Hodges
was and is engaged in the buy and sell of
real and personal properties, even before the
death of Linnie Jane Hodges, a motion to
authorize said C.N. Hodges was filed in
Court, to allow him to continue in the
business of buy and sell, which motion was
favorably granted by the Honorable Court.
3. — That since the death of Linnie Jane
Hodges, Mr. C.N. Hodges had been buying
and selling real and personal properties, in
accordance with the wishes of the late Linnie
Jane Hodges.
4. — That the Register of Deeds for Iloilo,
had required of late the herein Executor to
have all the sales, leases, conveyances or
mortgages made by him, approved by the
Hon. Court.
5. — That it is respectfully requested, all the
sales, conveyances leases and mortgages
executed by the Executor, be approved by
the Hon. Court. and subsequent sales
conveyances, leases and mortgages in
compliances with the wishes of the late
Linnie Jane Hodges, and within the scope of
the terms of the last will and testament, also
be approved;
6. — That the Executor is under obligation to
submit his yearly accounts, and the
properties conveyed can also be accounted
for, especially the amounts received.
WHEREFORE, it is most respectfully prayed
that, all the sales, conveyances, leases, and
mortgages executed by the Executor, be
approved by the Hon. Court, and also the
subsequent sales, conveyances, leases, and
mortgages in consonance with the wishes of
the deceased contained in her last will and
testament, be with authorization and
approval of the Hon. Court.
City of Iloilo, December 11, 1967.
(Annex "G", Petition.)
ORDER
As prayed for by Attorney Gellada, counsel
for the Executor for the reasons stated in his
motion dated December 11, 1957, which the
Court considers well taken all the sales,
conveyances, leases and mortgages of all
properties left by the deceased Linnie Jane
 Hodges executed by the Executor Charles N.
Hodges are hereby APPROVED. The said
Executor is further authorized to execute
subsequent sales, conveyances, leases and
mortgages of the properties left by the said
deceased Linnie Jane Hodges in
consonance with the wishes conveyed in the
last will and testament of the latter.
So ordered.
Iloilo City. December 14, 1957.
(Annex "H", Petition.)
On April 14, 1959, in submitting his first statement of account
as Executor for approval, Hodges alleged:
Pursuant to the provisions of the Rules of
Court, herein executor of the deceased,
renders the following account of his
administration covering the period from
January 1, 1958 to December 31, 1958,
which account may be found in detail in the
individual income tax return filed for the
estate of deceased Linnie Jane Hodges, to
wit:
That a certified public accountant has
examined the statement of net worth of the
estate of Linnie Jane Hodges, the assets and
liabilities, as well as the income and
expenses, copy of which is hereto attached
and made integral part of this statement of
account as Annex "A".
IN VIEW OF THE FOREGOING, it is most
respectfully prayed that, the statement of net
worth of the estate of Linnie Jane Hodges,
the assets and liabilities, income and
expenses as shown in the individual income
tax return for the estate of the deceased and
marked as Annex "A", be approved by the
Honorable Court, as substantial compliance
with the requirements of the Rules of Court.
That no person interested in the Philippines
of the time and place of examining the herein
accounts be given notice, as herein executor
is the only devisee or legatee of the
deceased, in accordance with the last will
and testament already probated by the
Honorable court.
City of Iloilo April 14, 1959.
(Annex "I", Petition.)
The respondent court approved this statement of account on
April 21, 1959 in its order worded thus:
Upon petition of Atty. Gellada, in
representation of the Executor, the statement
of net worth of the estate of Linnie Jane
Hodges, assets and liabilities, income and
expenses as shown in the individual income
tax return for the estate of the deceased and
marked as Annex "A" is approved.
SO ORDERED.
City of Iloilo April 21, 1959.
(Annex "J", Petition.)
His accounts for the periods January 1, 1959 to December 31,
1959 and January 1, 1960 to December 31, 1960 were
submitted likewise accompanied by allegations identical
mutatis mutandis to those of April 14, 1959, quoted above; and
the respective orders approving the same, dated July 30, 1960
and May 2, 1961, were substantially identical to the above-
quoted order of April 21, 1959. In connection with the
statements of account just mentioned, the following assertions
related thereto made by respondent-appellee Magno in her
brief do not appear from all indications discernible in the record
to be disputable:
Under date of April 14, 1959, C.N. Hodges
filed his first "Account by the Executor" of the
estate of Linnie Jane Hodges. In the
"Statement of Networth of Mr. C.N. Hodges
and the Estate of Linnie Jane Hodges" as of
December 31, 1958 annexed thereto, C.N.
Hodges reported that the combined conjugal
estate earned a net income of P328,402.62,
divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he
filed an "individual income tax return" for
calendar year 1958 on the estate of Linnie
Jane Hodges reporting, under oath, the said
estate as having earned income of
P164,201.31, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (p.
91, Appellee's Brief.)
xxx xxx xxx
Under date of July 21, 1960, C.N. Hodges
filed his second "Annual Statement of
Account by the Executor" of the estate of
Linnie Jane Hodges. In the "Statement of
Networth of Mr. C.N. Hodges and the Estate
of Linnie Jane Hodges" as of December 31,
1959 annexed thereto, C.N. Hodges reported
that the combined conjugal estate earned a
net income of P270,623.32, divided evenly
 between him and the estate of Linnie Jane
Hodges. Pursuant to this, he filed an
"individual income tax return" for calendar
year 1959 on the estate of Linnie Jane
Hodges reporting, under oath, the said
estate as having earned income of
P135,311.66, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (pp.
91-92. Appellee's Brief.)
xxx xxx xxx
Under date of April 20, 1961, C.N. Hodges
filed his third "Annual Statement of Account
by the Executor for the Year 1960" of the
estate of Linnie Jane Hodges. In the
"Statement of Net Worth of Mr. C.N. Hodges
and the Estate of Linnie Jane Hodges" as of
December 31, 1960 annexed thereto, C.N.
Hodges reported that the combined conjugal
estate earned a net income of P314,857.94,
divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he
filed an "individual income tax return" for
calendar year 1960 on the estate of Linnie
Jane Hodges reporting, under oath, the said
estate as having earned income of
P157,428.97, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges.
(Pp. 92-93, Appellee's Brief.)
Likewise the following:
In the petition for probate that he (Hodges)
filed, he listed the seven brothers and sisters
of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the
will to probate unfortunately omitted one of
the heirs, Roy Higdon (see p. 14, Green
ROA). Immediately, C.N. Hodges filed a
verified motion to have Roy Higdon's name
included as an heir, stating that he wanted to
straighten the records "in order the heirs of
deceased Roy Higdon may not think or
believe they were omitted, and that they
were really and are interested in the estate of
deceased Linnie Jane Hodges. .
As an executor, he was bound to file tax
returns for the estate he was administering
under American law. He did file such as
estate tax return on August 8, 1958. In
Schedule "M" of such return, he answered
"Yes" to the question as to whether he was
contemplating "renouncing the will". On the
question as to what property interests
passed to him as the surviving spouse, he
answered:
"None, except for purposes of
administering the Estate, paying
debts, taxes and other legal
charges. It is the intention of the
surviving husband of deceased to
distribute the remaining property
and interests of the deceased in
their Community estate to the
devisees and legatees named in
the will when the debts, liabilities,
taxes and expenses of
administration are finally
determined and paid."
Again, on August 9, 1962, barely four
months before his death, he executed an
"affidavit" wherein he ratified and confirmed
all that he stated in Schedule "M" of his
estate tax returns as to his having renounced
what was given him by his wife's will.1
As appointed executor, C.N. Hodges filed an
"Inventory" dated May 12, 1958. He listed all
the assets of his conjugal partnership with
Linnie Jane Hodges on a separate balance
sheet and then stated expressly that her
estate which has come into his possession
as executor was "one-half of all the items"
listed in said balance sheet. (Pp. 89-90,
Appellee's Brief.)
Parenthetically, it may be stated, at this juncture, that We are
taking pains to quote wholly or at least, extensively from some
of the pleadings and orders whenever We feel that it is
necessary to do so for a more comprehensive and clearer view
of the important and decisive issues raised by the parties and a
more accurate appraisal of their respective positions in regard
thereto.
The records of these cases do not show that anything else was
done in the above-mentioned Special Proceedings No. 1307
until December 26, 1962, when on account of the death of
Hodges the day before, the same lawyer, Atty. Leon P.
Gellada, who had been previously acting as counsel for
Hodges in his capacity as Executor of his wife's estate, and as
such had filed the aforequoted motions and manifestations,
filed the following:
URGENT EX-PARTE MOTION FOR THE
APPOINTMENT OF A
SPECIAL ADMINISTRATRIX
COMES the undersigned attorney for the
Executor in the above-entitled proceedings,
to the Honorable Court, most respectfully
states:
1. That in accordance with the Last Will and
Testament of Linnie Jane Hodges
(deceased), her husband, Charles Newton
Hodges was to act as Executor, and in fact,
in an order issued by this Hon. Court dated
June 28, 1957, the said Charles Newton
Hodges was appointed Executor and had
performed the duties as such.
2. That last December 22, 1962, the said
Charles Newton Hodges was stricken ill, and
brought to the Iloilo Mission Hospital for
treatment, but unfortunately, he died on
December 25, 1962, as shown by a copy of
the death certificate hereto attached and
marked as Annex "A".
3. That in accordance with the provisions of
the last will and testament of Linnie Jane
Hodges, whatever real and personal
properties that may remain at the death of
her husband Charles Newton Hodges, the
said properties shall be equally divided
among their heirs. That there are real and
personal properties left by Charles Newton
Hodges, which need to be administered and
taken care of.
4. That the estate of deceased Linnie Jane
Hodges, as well as that of Charles Newton
Hodges, have not as yet been determined or
ascertained, and there is necessity for the
appointment of a general administrator to
liquidate and distribute the residue of the
estate to the heirs and legatees of both
spouses. That in accordance with the
provisions of Section 2 of Rule 75 of the
Rules of Court, the conjugal partnership of
Linnie Jane Hodges and Charles Newton
Hodges shall be liquidated in the testate
proceedings of the wife.
5. That the undersigned counsel, has perfect
personal knowledge of the existence of the
last will and testament of Charles Newton
Hodges, with similar provisions as that
contained in the last will and testament of
Linnie Jane Hodges. However, said last will
and testament of Charles Newton Hodges is
kept inside the vault or iron safe in his office,
and will be presented in due time before this
honorable Court.
6. That in the meantime, it is imperative and
indispensable that, an Administratrix be
appointed for the estate of Linnie Jane
Hodges and a Special Administratrix for the
estate of Charles Newton Hodges, to
perform the duties required by law, to
administer, collect, and take charge of the
goods, chattels, rights, credits, and estate of
both spouses, Charles Newton Hodges and
Linnie Jane Hodges, as provided for in
Section 1 and 2, Rule 81 of the Rules of
Court.
7. That there is delay in granting letters
testamentary or of administration, because
the last will and testament of deceased,
Charles Newton Hodges, is still kept in his
safe or vault, and in the meantime, unless an
administratrix (and,) at the same time, a
Special Administratrix is appointed, the
estate of both spouses are in danger of
being lost, damaged or go to waste.
8. That the most trusted employee of both
spouses Linnie Jane Hodges and C.N.
Hodges, who had been employed for around
thirty (30) years, in the person of Miss
Avelina Magno, (should) be appointed
Administratrix of the estate of Linnie Jane
Hodges and at the same time Special
Administratrix of the estate of Charles
Newton Hodges. That the said Miss Avelina
Magno is of legal age, a resident of the
Philippines, the most fit, competent,
trustworthy and well-qualified person to
serve the duties of Administratrix and Special
Administratrix and is willing to act as such.
9. That Miss Avelina Magno is also willing to
file bond in such sum which the Hon. Court
believes reasonable.
WHEREFORE, in view of all the foregoing, it
is most respectfully prayed that, Miss
AVELINA A. MAGNO be immediately
appointed Administratrix of the estate of
Linnie Jane Hodges and as Special
Administratrix of the estate of Charles
Newton Hodges, with powers and duties
provided for by law. That the Honorable
Court fix the reasonable bond of P1,000.00
to be filed by Avelina A. Magno.
(Annex "O", Petition.)
which respondent court readily acted on in its order of even
date thus: .
For the reasons alleged in the Urgent Ex-
parte Motion filed by counsel for the
Executor dated December 25, 1962, which
the Court finds meritorious, Miss AVELINA
A. MAGNO, is hereby appointed
Administratrix of the estate of Linnie Jane
Hodges and as Special Administratrix of the
 estate of Charles Newton Hodges, in the
latter case, because the last will of said
Charles Newton Hodges is still kept in his
vault or iron safe and that the real and
personal properties of both spouses may be
lost, damaged or go to waste, unless a
Special Administratrix is appointed.
Miss Avelina A. Magno is required to file
bond in the sum of FIVE THOUSAND
PESOS (P5,000.00), and after having done
so, let letters of Administration be issued to
her." (Annex "P", Petition.)
On December 29, 1962, however, upon
urgent ex-parte petition of respondent Magno
herself, thru Atty. Gellada, Harold, R. Davies,
"a representative of the heirs of deceased
Charles Newton Hodges (who had) arrived
from the United States of America to help in
the administration of the estate of said
deceased" was appointed as Co-Special
Administrator of the estate of Hodges, (pp.
29-33, Yellow - Record on Appeal) only to be
replaced as such co-special administrator on
January 22, 1963 by Joe Hodges, who,
according to the motion of the same
attorney, is "the nephew of the deceased
(who had) arrived from the United States
with instructions from the other heirs of the
deceased to administer the properties or
estate of Charles Newton Hodges in the
Philippines, (Pp. 47-50, id.)
Meanwhile, under date of January 9, 1963, the same Atty.
Gellada filed in Special Proceedings 1672 a petition for the
probate of the will of Hodges,2 with a prayer for the issuance of
letters of administration to the same Joe Hodges, albeit the
motion was followed on February 22, 1963 by a separate one
asking that Atty. Fernando Mirasol be appointed as his co-
administrator. On the same date this latter motion was filed, the
court issued the corresponding order of probate and letters of
administration to Joe Hodges and Atty. Mirasol, as prayed for.
At this juncture, again, it may also be explained that just as, in
her will, Mrs. Hodges bequeathed her whole estate to her
husband "to have and to hold unto him, my said husband,
during his natural lifetime", she, at the same time or in like
manner, provided that "at the death of my said husband — I
give devise and bequeath all of the rest, residue and remainder
of my estate, both real and personal, wherever situated or
located, to be equally divided among my brothers and sisters,
share and share alike —". Accordingly, it became incumbent
upon Hodges, as executor of his wife's will, to duly liquidate the
conjugal partnership, half of which constituted her estate, in
order that upon the eventuality of his death, "the rest, residue
and remainder" thereof could be determined and
correspondingly distributed or divided among her brothers and
sisters. And it was precisely because no such liquidation was
done, furthermore, there is the issue of whether the distribution
of her estate should be governed by the laws of the Philippines
or those of Texas, of which State she was a national, and, what
is more, as already stated, Hodges made official and sworn
statements or manifestations indicating that as far as he was
concerned no "property interests passed to him as surviving
spouse — "except for purposes of administering the estate,
paying debts, taxes and other legal charges" and it was the
intention of the surviving husband of the deceased to distribute
the remaining property and interests of the deceased in their
Community Estate to the devisees and legatees named in the
will when the debts, liabilities, taxes and expenses of
administration are finally determined and paid", that the
incidents and controversies now before Us for resolution arose.
As may be observed, the situation that ensued upon the death
of Hodges became rather unusual and so, quite
understandably, the lower court's actuations presently under
review are apparently wanting in consistency and seemingly
lack proper orientation.
Thus, We cannot discern clearly from the record before Us the
precise perspective from which the trial court proceeded in
issuing its questioned orders. And, regretably, none of the
lengthy briefs submitted by the parties is of valuable assistance
in clearing up the matter.
To begin with, We gather from the two records on appeal filed
by petitioner, as appellant in the appealed cases, one with
green cover and the other with a yellow cover, that at the
outset, a sort of modus operandi had been agreed upon by the
parties under which the respective administrators of the two
estates were supposed to act conjointly, but since no copy of
the said agreement can be found in the record before Us, We
have no way of knowing when exactly such agreement was
entered into and under what specific terms. And while
reference is made to said modus operandi in the order of
September 11, 1964, on pages 205-206 of the Green Record
on Appeal, reading thus:
The present incident is to hear the side of
administratrix, Miss Avelina A. Magno, in
answer to the charges contained in the
motion filed by Atty. Cesar Tirol on
September 3, 1964. In answer to the said
charges, Miss Avelina A. Magno, through her
counsel, Atty. Rizal Quimpo, filed a written
manifestation.
After reading the manifestation here of Atty.
Quimpo, for and in behalf of the
administratrix, Miss Avelina A. Magno, the
Court finds that everything that happened
before September 3, 1964, which was
resolved on September 8, 1964, to the
satisfaction of parties, was simply due to a
misunderstanding between the
representative of the Philippine Commercial
and Industrial Bank and Miss Magno and in
order to restore the harmonious relations
 between the parties, the Court ordered the
parties to remain in status quo as to their
modus operandi before September 1, 1964,
until after the Court can have a meeting with
all the parties and their counsels on October
3, as formerly agreed upon between
counsels, Attys. Ozaeta, Gibbs and Ozaeta,
Attys. Tirol and Tirol and Atty. Rizal Quimpo.
In the meantime, the prayers of Atty. Quimpo
as stated in his manifestation shall not be
resolved by this Court until October 3, 1964.
SO ORDERED.
there is nothing in the record indicating whatever happened to
it afterwards, except that again, reference thereto was made in
the appealed order of October 27, 1965, on pages 292-295 of
the Green Record on Appeal, as follows:
On record is an urgent motion to allow PCIB
to open all doors and locks in the Hodges
Office at 206-208 Guanco Street, Iloilo City,
to take immediate and exclusive possession
thereof and to place its own locks and keys
for security purposes of the PCIB dated
October 27, 1965 thru Atty. Cesar Tirol. It is
alleged in said urgent motion that
Administratrix Magno of the testate estate of
Linnie Jane Hodges refused to open the
Hodges Office at 206-208 Guanco Street,
Iloilo City where PCIB holds office and
therefore PCIB is suffering great moral
damage and prejudice as a result of said act.
It is prayed that an order be issued
authorizing it (PCIB) to open all doors and
locks in the said office, to take immediate
and exclusive possession thereof and place
thereon its own locks and keys for security
purposes; instructing the clerk of court or any
available deputy to witness and supervise
the opening of all doors and locks and taking
possession of the PCIB.
A written opposition has been filed by
Administratrix Magno of even date (Oct. 27)
thru counsel Rizal Quimpo stating therein
that she was compelled to close the office for
the reason that the PCIB failed to comply
with the order of this Court signed by Judge
Anacleto I. Bellosillo dated September 11,
1964 to the effect that both estates should
remain in status quo to their modus operandi
as of September 1, 1964.
To arrive at a happy solution of the dispute
and in order not to interrupt the operation of
the office of both estates, the Court aside
from the reasons stated in the urgent motion
and opposition heard the verbal arguments
of Atty. Cesar Tirol for the PCIB and Atty.
Rizal Quimpo for Administratix Magno.
After due consideration, the Court hereby
orders Magno to open all doors and locks in
the Hodges Office at 206-208 Guanco
Street, Iloilo City in the presence of the PCIB
or its duly authorized representative and
deputy clerk of court Albis of this branch not
later than 7:30 tomorrow morning October
28, 1965 in order that the office of said
estates could operate for business.
Pursuant to the order of this Court thru
Judge Bellosillo dated September 11, 1964,
it is hereby ordered:
(a) That all cash collections should be
deposited in the joint account of the estates
of Linnie Jane Hodges and estates of C.N.
Hodges;
(b) That whatever cash collections that had
been deposited in the account of either of the
estates should be withdrawn and since then
deposited in the joint account of the estate of
Linnie Jane Hodges and the estate of C.N.
Hodges;
(c) That the PCIB should countersign the
check in the amount of P250 in favor of
Administratrix Avelina A. Magno as her
compensation as administratrix of the Linnie
Jane Hodges estate chargeable to the
testate estate of Linnie Jane Hodges only;
(d) That Administratrix Magno is hereby
directed to allow the PCIB to inspect
whatever records, documents and papers
she may have in her possession in the same
manner that Administrator PCIB is also
directed to allow Administratrix Magno to
inspect whatever records, documents and
papers it may have in its possession;
(e) That the accountant of the estate of
Linnie Jane Hodges shall have access to all
records of the transactions of both estates
for the protection of the estate of Linnie Jane
Hodges; and in like manner the accountant
or any authorized representative of the
estate of C.N. Hodges shall have access to
the records of transactions of the Linnie Jane
Hodges estate for the protection of the estate
of C.N. Hodges.
Once the estates' office shall have been
opened by Administratrix Magno in the
 presence of the PCIB or its duly authorized
representative and deputy clerk Albis or his
duly authorized representative, both estates
or any of the estates should not close it
without previous consent and authority from
this court.
SO ORDERED.
As may be noted, in this order, the respondent court required
that all collections from the properties in the name of Hodges
should be deposited in a joint account of the two estates, which
indicates that seemingly the so-called modus operandi was no
longer operative, but again there is nothing to show when this
situation started.
Likewise, in paragraph 3 of the petitioner's motion of
September 14, 1964, on pages 188-201 of the Green Record
on Appeal, (also found on pp. 83-91 of the Yellow Record on
Appeal) it is alleged that:
3. On January 24, 1964 virtually all of the
heirs of C.N. Hodges, Joe Hodges and
Fernando P. Mirasol acting as the two co-
administrators of the estate of C.N. Hodges,
Avelina A. Magno acting as the administratrix
of the estate of Linnie Jane Hodges and
Messrs. William Brown and Ardell Young
acting for all of the Higdon family who claim
to be the sole beneficiaries of the estate of
Linnie Jane Hodges and various legal
counsel representing the aforementioned
parties entered into an amicable agreement,
which was approved by this Honorable
Court, wherein the parties thereto agreed
that certain sums of money were to be paid
in settlement of different claims against the
two estates and that the assets (to the extent
they existed) of both estates would be
administered jointly by the PCIB as
administrator of the estate of C.N. Hodges
and Avelina A. Magno as administratrix of
the estate of Linnie Jane Hodges, subject,
however, to the aforesaid October 5, 1963
Motion, namely, the PCIB's claim to
exclusive possession and ownership of one
hundred percent (100%) (or, in the
alternative, seventy-five percent (75%) of all
assets owned by C.N. Hodges or Linnie Jane
Hodges situated in the Philippines. On
February 1, 1964 (pp. 934-935, CFI Rec.,
S.P. No. 1672) this Honorable Court
amended its order of January 24, 1964 but in
no way changed its recognition of the afore-
described basic demand by the PCIB as
administrator of the estate of C.N. Hodges to
one hundred percent (100%) of the assets
claimed by both estates.
but no copy of the mentioned agreement of joint administration
of the two estates exists in the record, and so, We are not
informed as to what exactly are the terms of the same which
could be relevant in the resolution of the issues herein.
On the other hand, the appealed order of November 3, 1965,
on pages 313-320 of the Green Record on Appeal, authorized
payment by respondent Magno of, inter alia, her own fees as
administratrix, the attorney's fees of her lawyers, etc., as
follows:
Administratrix Magno thru Attys. Raul S.
Manglapus and Rizal. R. Quimpo filed a
Manifestation and Urgent Motion dated June
10, 1964 asking for the approval of the
Agreement dated June 6, 1964 which
Agreement is for the purpose of retaining
their services to protect and defend the
interest of the said Administratrix in these
proceedings and the same has been signed
by and bears the express conformity of the
attorney-in-fact of the late Linnie Jane
Hodges, Mr. James L. Sullivan. It is further
prayed that the Administratrix of the Testate
Estate of Linnie Jane Hodges be directed to
pay the retailers fee of said lawyers, said
fees made chargeable as expenses for the
administration of the estate of Linnie Jane
Hodges (pp. 1641-1642, Vol. V, Sp. 1307).
An opposition has been filed by the
Administrator PCIB thru Atty. Herminio
Ozaeta dated July 11, 1964, on the ground
that payment of the retainers fee of Attys.
Manglapus and Quimpo as prayed for in said
Manifestation and Urgent Motion is
prejudicial to the 100% claim of the estate of
C. N. Hodges; employment of Attys.
Manglapus and Quimpo is premature and/or
unnecessary; Attys. Quimpo and Manglapus
are representing conflicting interests and the
estate of Linnie Jane Hodges should be
closed and terminated (pp. 1679-1684, Vol,
V, Sp. 1307).
Atty. Leon P. Gellada filed a memorandum
dated July 28, 1964 asking that the
Manifestation and Urgent Motion filed by
Attys. Manglapus and Quimpo be denied
because no evidence has been presented in
support thereof. Atty. Manglapus filed a reply
to the opposition of counsel for the
Administrator of the C. N. Hodges estate
wherein it is claimed that expenses of
administration include reasonable counsel or
attorney's fees for services to the executor or
administrator. As a matter of fact the fee
agreement dated February 27, 1964
between the PCIB and the law firm of
Ozaeta, Gibbs & Ozaeta as its counsel (Pp.
1280-1284, Vol. V, Sp. 1307) which
stipulates the fees for said law firm has been
approved by the Court in its order dated
March 31, 1964. If payment of the fees of the
lawyers for the administratrix of the estate of
Linnie Jane Hodges will cause prejudice to
the estate of C. N. Hodges, in like manner
the very agreement which provides for the
payment of attorney's fees to the counsel for
the PCIB will also be prejudicial to the estate
of Linnie Jane Hodges (pp. 1801-1814, Vol.
V, Sp. 1307).
Atty. Herminio Ozaeta filed a rejoinder dated
August 10, 1964 to the reply to the
opposition to the Manifestation and Urgent
Motion alleging principally that the estates of
Linnie Jane Hodges and C. N. Hodges are
not similarly situated for the reason that C. N.
Hodges is an heir of Linnie Jane Hodges
whereas the latter is not an heir of the former
for the reason that Linnie Jane Hodges
predeceased C. N. Hodges (pp. 1839-1848,
Vol. V, Sp. 1307); that Attys. Manglapus and
Quimpo formally entered their appearance in
behalf of Administratrix of the estate of Linnie
Jane Hodges on June 10, 1964 (pp. 1639-
1640, Vol. V, Sp. 1307).
Atty. Manglapus filed a manifestation dated
December 18, 1964 stating therein that
Judge Bellosillo issued an order requiring the
parties to submit memorandum in support of
their respective contentions. It is prayed in
this manifestation that the Manifestation and
Urgent Motion dated June 10, 1964 be
resolved (pp. 6435-6439, Vol. VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a
counter- manifestation dated January 5,
1965 asking that after the consideration by
the court of all allegations and arguments
and pleadings of the PCIB in connection
therewith (1) said manifestation and urgent
motion of Attys. Manglapus and Quimpo be
denied (pp. 6442-6453, Vol. VII, Sp. 1307).
Judge Querubin issued an order dated
January 4, 1965 approving the motion dated
June 10, 1964 of the attorneys for the
administratrix of the estate of Linnie Jane
Hodges and agreement annexed to said
motion. The said order further states: "The
Administratrix of the estate of Linnie Jane
Hodges is authorized to issue or sign
whatever check or checks may be necessary
for the above purpose and the administrator
of the estate of C. N. Hodges is ordered to
countersign the same. (pp. 6518-6523, Vol
VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a
manifestation and motion dated January 13,
1965 asking that the order of January 4,
1965 which was issued by Judge Querubin
be declared null and void and to enjoin the
clerk of court and the administratrix and
administrator in these special proceedings
from all proceedings and action to enforce or
comply with the provision of the aforesaid
order of January 4, 1965. In support of said
manifestation and motion it is alleged that
the order of January 4, 1965 is null and void
because the said order was never delivered
to the deputy clerk Albis of Branch V (the
sala of Judge Querubin) and the alleged
order was found in the drawer of the late
Judge Querubin in his office when said
drawer was opened on January 13, 1965
after the death of Judge Querubin by
Perfecto Querubin, Jr., the son of the judge
and in the presence of Executive Judge
Rovira and deputy clerk Albis (Sec. 1, Rule
36, New Civil Code) (Pp. 6600-6606, Vol.
VIII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a
motion for reconsideration dated February
23, 1965 asking that the order dated January
4, 1964 be reversed on the ground that:
1. Attorneys retained must render services to
the estate not to the personal heir;
2. If services are rendered to both, fees
should be pro-rated between them;
3. Attorneys retained should not represent
conflicting interests; to the prejudice of the
other heirs not represented by said
attorneys;
4. Fees must be commensurate to the actual
services rendered to the estate;
5. There must be assets in the estate to pay
for said fees (Pp. 6625-6636, Vol. VIII, Sp.
1307).
Atty. Quimpo for Administratrix Magno of the
estate of Linnie Jane Hodges filed a motion
to submit dated July 15, 1965 asking that the
manifestation and urgent motion dated June
10, 1964 filed by Attys. Manglapus and
Quimpo and other incidents directly
appertaining thereto be considered
submitted for consideration and approval
(pp. 6759-6765, Vol. VIII, Sp. 1307).
 Considering the arguments and reasons in
support to the pleadings of both the
Administratrix and the PCIB, and of Atty.
Gellada, hereinbefore mentioned, the Court
believes that the order of January 4, 1965 is
null and void for the reason that the said
order has not been filed with deputy clerk
Albis of this court (Branch V) during the
lifetime of Judge Querubin who signed the
said order. However, the said manifestation
and urgent motion dated June 10, 1964 is
being treated and considered in this instant
order. It is worthy to note that in the motion
dated January 24, 1964 (Pp. 1149- 1163,
Vol. V, Sp. 1307) which has been filed by
Atty. Gellada and his associates and Atty.
Gibbs and other lawyers in addition to the
stipulated fees for actual services rendered.
However, the fee agreement dated February
27, 1964, between the Administrator of the
estate of C. N. Hodges and Atty. Gibbs
which provides for retainer fee of P4,000
monthly in addition to specific fees for actual
appearances, reimbursement for
expenditures and contingent fees has also
been approved by the Court and said
lawyers have already been paid. (pp. 1273-
1279, Vol. V, Sp. Proc. 1307 pp. 1372-1373,
Vol. V, Sp. Proc. 1307).
WHEREFORE, the order dated January 4,
1965 is hereby declared null and void.
The manifestation and motion dated June
10, 1964 which was filed by the attorneys for
the administratrix of the testate estate of
Linnie Jane Hodges is granted and the
agreement annexed thereto is hereby
approved.
The administratrix of the estate of Linnie
Jane Hodges is hereby directed to be
needed to implement the approval of the
agreement annexed to the motion and the
administrator of the estate of C. N. Hodges is
directed to countersign the said check or
checks as the case may be.
SO ORDERED.
thereby implying somehow that the court assumed the
existence of independent but simultaneous administrations.
Be that as it may, again, it appears that on August 6, 1965, the
court, acting on a motion of petitioner for the approval of deeds
of sale executed by it as administrator of the estate of Hodges,
issued the following order, also on appeal herein:
Acting upon the motion for approval of deeds
of sale for registered land of the PCIB,
Administrator of the Testate Estate of C. N.
Hodges in Sp. Proc. 1672 (Vol. VII, pp. 2244-
2245), dated July 16, 1965, filed by Atty.
Cesar T. Tirol in representation of the law
firms of Ozaeta, Gibbs and Ozaeta and Tirol
and Tirol and the opposition thereto of Atty.
Rizal R. Quimpo (Vol. VIII, pp. 6811-6813)
dated July 22, 1965 and considering the
allegations and reasons therein stated, the
court believes that the deeds of sale should
be signed jointly by the PCIB, Administrator
of the Testate Estate of C. N. Hodges and
Avelina A. Magno, Administratrix of the
Testate Estate of Linnie Jane Hodges and to
this effect the PCIB should take the
necessary steps so that Administratrix
Avelina A. Magno could sign the deeds of
sale.
SO ORDERED. (p. 248, Green Record on
Appeal.)
Notably this order required that even the deeds executed by
petitioner, as administrator of the Estate of Hodges, involving
properties registered in his name, should be co-signed by
respondent Magno.3 And this was not an isolated instance.
In her brief as appellee, respondent Magno states:
After the lower court had authorized appellee
Avelina A. Magno to execute final deeds of
sale pursuant to contracts to sell executed by
C. N. Hodges on February 20, 1963 (pp. 45-
46, Green ROA), motions for the approval of
final deeds of sale (signed by appellee
Avelina A. Magno and the administrator of
the estate of C. N. Hodges, first Joe Hodges,
then Atty. Fernando Mirasol and later the
appellant) were approved by the lower court
upon petition of appellee Magno's counsel,
Atty. Leon P. Gellada, on the basis of section
8 of Rule 89 of the Revised Rules of Court.
Subsequently, the appellant, after it had
taken over the bulk of the assets of the two
estates, started presenting these motions
itself. The first such attempt was a "Motion
for Approval of Deeds of Sale for Registered
Land and Cancellations of Mortgages" dated
July 21, 1964 filed by Atty. Cesar T. Tirol,
counsel for the appellant, thereto annexing
two (2) final deeds of sale and two (2)
cancellations of mortgages signed by
appellee Avelina A. Magno and D. R.
Paulino, Assistant Vice-President and
Manager of the appellant (CFI Record, Sp.
Proc. No. 1307, Vol. V, pp. 1694-1701). This
motion was approved by the lower court on
July 27, 1964. It was followed by another "3. There are attached hereto documents
motion dated August 4, 1964 for the approval executed jointly by the Administratrix in Sp.
of one final deed of sale again signed by Proc. No. 1307 and the Administrator in Sp.
appellee Avelina A. Magno and D. R. Paulino Proc. No. 1672, consisting of deeds of sale
(CFI Record, Sp. Proc. No. 1307. Vol. V, pp. in favor —
1825-1828), which was again approved by
the lower court on August 7, 1964. The gates Fernando Cano, Bacolod
having been opened, a flood ensued: the City, Occ. Negros
appellant subsequently filed similar motions Fe Magbanua, Iloilo City
for the approval of a multitude of deeds of Policarpio M. Pareno, La
sales and cancellations of mortgages signed Paz, Iloilo City
by both the appellee Avelina A. Magno and Rosario T. Libre, Jaro,
the appellant. Iloilo City
Federico B. Torres, Iloilo
A random check of the records of Special City
Proceeding No. 1307 alone will show Atty. Reynaldo T. Lataquin, La
Cesar T. Tirol as having presented for court Paz, Iloilo City
approval deeds of sale of real properties Anatolio T. Viray, Iloilo City
signed by both appellee Avelina A. Magno Benjamin Rolando, Jaro,
and D. R. Paulino in the following numbers: Iloilo City
(a) motion dated September 21, 1964 — 6
deeds of sale; (b) motion dated November 4, and cancellations of mortgages in favor of —
1964 — 1 deed of sale; (c) motion dated
December 1, 1964 — 4 deeds of sale; (d) Pablo Manzano, Oton,
motion dated February 3, 1965 — 8 deeds of Iloilo
sale; (f) motion dated May 7, 1965 — 9 Ricardo M. Diana, Dao,
deeds of sale. In view of the very extensive San Jose, Antique
landholdings of the Hodges spouses and the Simplicio Tingson, Iloilo
many motions filed concerning deeds of sale City
of real properties executed by C. N. Hodges Amado Magbanua,
the lower court has had to constitute special Pototan, Iloilo
separate expedientes in Special Proceedings Roselia M. Baes, Bolo,
Nos. 1307 and 1672 to include mere motions Roxas City
for the approval of deeds of sale of the William Bayani, Rizal
conjugal properties of the Hodges spouses. Estanzuela, Iloilo City
Elpidio Villarete, Molo,
As an example, from among the very many, Iloilo City
under date of February 3, 1965, Atty. Cesar Norma T. Ruiz, Jaro, Iloilo
T. Tirol, as counsel for the appellant, filed City
"Motion for Approval of Deeds of Sale for
Registered Land and Cancellations of "4. That the approval of the
Mortgages" (CFI Record, Sp. Proc. No. aforesaid documents will
1307, Vol. VIII, pp. 6570-6596) the not reduce the assets of
allegations of which read: the estates so as to
prevent any creditor from
"1. In his lifetime, the late C. N. Hodges receiving his full debt or
executed "Contracts to Sell" real property, diminish his dividend."
and the prospective buyers under said
contracts have already paid the price and And the prayer of this motion is indeed very
complied with the terms and conditions revealing:
thereof;

"WHEREFORE, it is respectfully prayed that,

"2. In the course of administration of both
estates, mortgage debtors have already paid
their debts secured by chattel mortgages in
favor of the late C. N. Hodges, and are now
entitled to release therefrom;
under Rule 89, Section 8 of the Rules of
Court, this honorable court approve the
aforesaid deeds of sale and cancellations of
mortgages." (Pp. 113-117, Appellee's Brief.)

None of these assertions is denied in Petitioner's reply brief.

Further indicating lack of concrete perspective or orientation on
the part of the respondent court and its hesitancy to clear up
matters promptly, in its other appealed order of November 23,
1965, on pages 334-335 of the Green Record on Appeal, said
respondent court allowed the movant Ricardo Salas, President
of appellee Western Institute of Technology (successor of
Panay Educational Institutions, Inc.), one of the parties with
whom Hodges had contracts that are in question in the appeals
herein, to pay petitioner, as Administrator of the estate of
Hodges and/or respondent Magno, as Administrator of the
estate of Mrs. Hodges, thus:
Considering that in both cases there is as yet
no judicial declaration of heirs nor distribution
of properties to whomsoever are entitled
thereto, the Court believes that payment to
both the administrator of the testate estate of
C. N. Hodges and the administratrix of the
testate estate of Linnie Jane Hodges or to
either one of the two estates is proper and
legal.
WHEREFORE, movant Ricardo T. Salas can
pay to both estates or either of them.
SO ORDERED.
(Pp. 334-335, Green Record on Appeal.)
On the other hand, as stated earlier, there were instances
when respondent Magno was given authority to act alone. For
instance, in the other appealed order of December 19, 1964,
on page 221 of the Green Record on Appeal, the respondent
court approved payments made by her of overtime pay to
some employees of the court who had helped in gathering and
preparing copies of parts of the records in both estates as
follows:
Considering that the expenses subject of the
motion to approve payment of overtime pay
dated December 10, 1964, are reasonable
and are believed by this Court to be a proper
charge of administration chargeable to the
testate estate of the late Linnie Jane
Hodges, the said expenses are hereby
APPROVED and to be charged against the
testate estate of the late Linnie Jane
Hodges. The administrator of the testate
estate of the late Charles Newton Hodges is
hereby ordered to countersign the check or
checks necessary to pay the said overtime
pay as shown by the bills marked Annex "A",
"B" and "C" of the motion.
SO ORDERED.
(Pp. 221-222, Green Record on Appeal.)
Likewise, the respondent court approved deeds of sale
executed by respondent Magno alone, as Administratrix of the
estate of Mrs. Hodges, covering properties in the name of
Hodges, pursuant to "contracts to sell" executed by Hodges,
irrespective of whether they were executed by him before or
after the death of his wife. The orders of this nature which are
also on appeal herein are the following:
1. Order of March 30, 1966, on p. 137 of the Green Record on
Appeal, approving the deed of sale executed by respondent
Magno in favor of appellee Lorenzo Carles on February 24,
1966, pursuant to a "contract to sell" signed by Hodges on
June 17, 1958, after the death of his wife, which contract
petitioner claims was cancelled by it for failure of Carles to pay
the installments due on January 7, 1965.
2. Order of April 5, 1966, on pp. 139-140, id., approving the
deed of sale executed by respondent Magno in favor of
appellee Salvador Guzman on February 28, 1966 pursuant to a
"contract to sell" signed by Hodges on September 13, 1960,
after the death of his wife, which contract petitioner claims it
cancelled on March 3, 1965 in view of failure of said appellee
to pay the installments on time.
3. Order of April 20, 1966, on pp. 167-168, id., approving the
deed of sale executed by respondent Magno in favor of
appellee Purificacion Coronado on March 28, 1966 pursuant to
a "contract to sell" signed by Hodges on August 14, 1961, after
the death of his wife.
4. Order of April 20, 1966, on pp. 168-169, id., approving the
deed of sale executed by respondent Magno in favor of
appellee Florenia Barrido on March 28, 1966, pursuant to a
"contract to sell" signed by Hodges on February 21, 1958, after
the death of his wife.
5. Order of June 7, 1966, on pp. 184-185, id., approving the
deed of sale executed by respondent Magno in favor of
appellee Belcezar Causing on May 2, 1966, pursuant to a
"contract to sell" signed by Hodges on February 10, 1959, after
the death of his wife.
6. Order of June 21, 1966, on pp. 211-212, id., approving the
deed of sale executed by respondent Magno in favor of
appellee Artheo Thomas Jamir on June 3, 1966, pursuant to a
"contract to sell" signed by Hodges on May 26, 1961, after the
death of his wife.
7. Order of June 21, 1966, on pp. 212-213, id., approving the
deed of sale executed by respondent Magno in favor of
appellees Graciano Lucero and Melquiades Batisanan on June
6 and June 3, 1966, respectively, pursuant to "contracts to sell"
signed by Hodges on June 9, 1959 and November 27, 1961,
respectively, after the death of his wife.
8. Order of December 2, 1966, on pp. 303-304, id., approving
the deed of sale executed by respondent Magno in favor of
appellees Espiridion Partisala, Winifredo Espada and Rosario
Alingasa on September 6, 1966, August 17, 1966 and August
3, 1966, respectively, pursuant to "contracts to sell" signed by Now, simultaneously with the foregoing incidents, others of
Hodges on April 20, 1960, April 18, 1960 and August 25, 1958, more fundamental and all embracing significance developed.
respectively, that is, after the death of his wife. On October 5, 1963, over the signature of Atty. Allison J. Gibbs
in representation of the law firm of Ozaeta, Gibbs & Ozaeta, as
9. Order of April 5, 1966, on pp. 137-138, id., approving the counsel for the co-administrators Joe Hodges and Fernando P.
deed of sale executed by respondent Magno in favor of Mirasol, the following self-explanatory motion was filed:
appellee Alfredo Catedral on March 2, 1966, pursuant to a
"contract to sell" signed by Hodges on May 29, 1954, before URGENT MOTION FOR
the death of his wife, which contract petitioner claims it had AN ACCOUNTING AND
cancelled on February 16, 1966 for failure of appellee Catedral DELIVERY TO
to pay the installments due on time. ADMINISTRATION OF
THE ESTATE OF C. N.
10. Order of April 5, 1966, on pp. 138-139, id., approving the HODGES OF ALL OF THE
deed of sale executed by respondent Magno in favor of ASSETS OF THE
appellee Jose Pablico on March 7, 1966, pursuant to a CONJUGAL
"contract to sell" signed by Hodges on March 7, 1950, after the PARTNERSHIP OF THE
death of his wife, which contract petitioner claims it had DECEASED LINNIE JANE
cancelled on June 29, 1960, for failure of appellee Pablico to HODGES AND C N.
pay the installments due on time. HODGES EXISTING AS
OF MAY 23, 1957 PLUS
11. Order of December 2, 1966, on pp. 303-304, id., insofar as ALL THE RENTS,
it approved the deed of sale executed by respondent Magno in EMOLUMENTS AND
favor of appellee Pepito Iyulores on September 6, 1966, INCOME THEREFROM.
pursuant to a "contract to sell" signed by Hodges on February
5, 1951, before the death of his wife. COMES NOW the co-administrator of the
estate of C. N. Hodges, Joe Hodges, through
12. Order of January 3, 1967, on pp. 335-336, id., approving his undersigned attorneys in the above-
three deeds of sale executed by respondent Magno, one in entitled proceedings, and to this Honorable
favor of appellees Santiago Pacaonsis and two in favor of Court respectfully alleges:
appellee Adelfa Premaylon on December 5, 1966 and
November 3, 1966, respectively, pursuant to separate (1) On May 23, 1957 Linnie Jane Hodges
"promises to sell" signed respectively by Hodges on May 26, died in Iloilo City.
1955 and January 30, 1954, before the death of his wife, and
October 31, 1959, after her death. (2) On June 28, 1957 this Honorable Court
admitted to probate the Last Will and
In like manner, there were also instances when respondent Testament of the deceased Linnie Jane
court approved deeds of sale executed by petitioner alone and Hodges executed November 22, 1952 and
without the concurrence of respondent Magno, and such appointed C. N. Hodges as Executor of the
approvals have not been the subject of any appeal. No less estate of Linnie Jane Hodges (pp. 24-25,
than petitioner points this out on pages 149-150 of its brief as Rec. Sp. Proc. 1307).
appellant thus:
(3) On July 1, 1957 this Honorable Court
The points of fact and law pertaining to the issued Letters Testamentary to C. N. Hodges
two abovecited assignments of error have in the Estate of Linnie Jane Hodges (p. 30,
already been discussed previously. In the Rec. Sp. Proc. 1307).
first abovecited error, the order alluded to
was general, and as already explained (4) On December 14, 1957 this Honorable
before, it was, as admitted by the lower court Court, on the basis of the following
itself, superseded by the particular orders allegations in a Motion dated December 11,
approving specific final deeds of sale 1957 filed by Leon P. Gellada as attorney for
executed by the appellee, Avelina A. Magno, the executor C. N. Hodges:
which are subject of this appeal, as well as
the particular orders approving specific final "That herein Executor, (is)
deeds of sale executed by the appellant, not only part owner of the
Philippine Commercial and Industrial Bank, properties left as conjugal,
which were never appealed by the appellee, but also, the successor to
Avelina A. Magno, nor by any party for that all the properties left by the
matter, and which are now therefore final. deceased Linnie Jane
Hodges."
 (p. 44, Rec. Sp. Proc.
1307; emphasis supplied.)
issued the following order:
"As prayed for by Attorney
Gellada, counsel for the
Executory, for the reasons
stated in his motion dated
December 11, 1957 which
the court considers well
taken, all the sales,
conveyances, leases and
mortgages of all properties
left by the deceased Linnie
Jane Hodges are hereby
APPROVED. The said
executor is further
authorized to execute
subsequent sales,
conveyances, leases and
mortgages of the
properties left by the said
deceased Linnie Jane
Hodges in consonance
with the wishes contained
in the last will and
testament of the latter."
(p. 46, Rec. Sp. Proc.
1307; emphasis supplied.)
(5) On April 21, 1959 this Honorable Court
approved the inventory and accounting
submitted by C. N. Hodges through his
counsel Leon P. Gellada on April 14, 1959
wherein he alleged among other things
"That no person interested
in the Philippines of the
time and place of
examining the herein
account, be given notice,
as herein executor is the
only devisee or legatee of
the deceased, in
accordance with the last
will and testament already
probated by the Honorable
Court."
(pp. 77-78, Rec. Sp. Proc.
1307; emphasis supplied.).
(6) On July 30, 1960 this Honorable Court
approved the "Annual Statement of Account"
submitted by C. N. Hodges through his
counsel Leon P. Gellada on July 21, 1960
wherein he alleged among other things:
"That no person interested
in the Philippines of the
time and place of
examining the herein
account, be given notice
as herein executor is the
only devisee or legatee of
the deceased Linnie Jane
Hodges, in accordance
with the last will and
testament of the
deceased, already
probated by this Honorable
Court."
(pp. 81-82. Rec. Sp. Proc.
1307; emphasis supplied.)
(7) On May 2, 1961 this Honorable court
approved the "Annual Statement of Account
By The Executor for the Year 1960"
submitted through Leon P. Gellada on April
20, 1961 wherein he alleged:
That no person interested
in the Philippines be given
notice, of the time and
place of examining the
herein account, as herein
Executor is the only
devisee or legatee of the
deceased Linnie Jane
Hodges, in accordance
with the last will and
testament of the
deceased, already
probated by this Honorable
Court.
(pp. 90-91. Rec. Sp. Proc.
1307; emphasis supplied.)
(8) On December 25, 1962, C.N. Hodges
died.
(9) On December 25, 1962, on the Urgent
Ex-parte Motion of Leon P. Gellada filed only
in Special Proceeding No. 1307, this
Honorable Court appointed Avelina A.
Magno
"Administratrix of the estate of Linnie Jane
Hodges and as Special Administratrix of the
estate of Charles Newton Hodges, in the
latter case, because the last will of said
Charles Newton Hodges is still kept in his
vault or iron safe and that the real and
personal properties of both spouses may be
lost, damaged or go to waste, unless a vida, por el finado Charles
Special Administratrix is appointed." Newton Hodges, cada vez
que el precio estipulado en
(p. 100. Rec. Sp. Proc. 1307) cada contrato este
totalmente pagado. Se
(10) On December 26, 1962 Letters of autoriza igualmente a la
Administration were issued to Avelina Magno misma a firmar escrituras
pursuant to this Honorable Court's aforesaid de cancelacion de
Order of December 25, 1962 hipoteca tanto de bienes
reales como personales
cada vez que la
"With full authority to take
consideracion de cada
possession of all the
hipoteca este totalmente
property of said deceased
pagada.
in any province or
provinces in which it may
be situated and to perform "Cada una de dichas
all other acts necessary for escrituras que se otorguen
the preservation of said debe ser sometida para la
property, said aprobacion de este
Administratrix and/or Juzgado."
Special Administratrix
having filed a bond (p. 117, Sp. Proc. 1307).
satisfactory to the Court."
[Par 1 (c), Reply to Motion
(p. 102, Rec. Sp. Proc. For Removal of Joe
1307) Hodges]

(11) On January 22, 1963 this Honorable (13) On September l6, 1963 Leon P.
Court on petition of Leon P. Gellada of Gellada, acting as attorney for Avelina A.
January 21, 1963 issued Letters of Magno as Administratrix of the estate of
Administration to: Linnie Jane Hodges, alleges:

(a) Avelina A. Magno as Administratrix of the 3. — That since January,

estate of Linnie Jane Hodges; 1963, both estates of
Linnie Jane Hodges and
(b) Avelina A. Magno as Special Charles Newton Hodges
Administratrix of the Estate of Charles have been receiving in full,
Newton Hodges; and payments for those
"contracts to sell" entered
into by C. N. Hodges
(c) Joe Hodges as Co-Special Administrator
during his lifetime, and the
of the Estate of Charles Newton Hodges.
purchasers have been
demanding the execution
(p. 43, Rec. Sp. Proc. 1307) of definite deeds of sale in
their favor.
(12) On February 20, 1963 this Honorable
Court on the basis of a motion filed by Leon 4. — That hereto attached
P. Gellada as legal counsel on February 16, are thirteen (13) copies
1963 for Avelina A. Magno acting as deeds of sale executed by
Administratrix of the Estate of Charles the Administratrix and by
Newton Hodges (pp. 114-116, Sp. Proc. the co-administrator
1307) issued the following order: (Fernando P. Mirasol) of
the estate of Linnie Jane
"... se autoriza a aquella Hodges and Charles
(Avelina A. Magno) a Newton Hodges
firmar escrituras de venta respectively, in compliance
definitiva de propiedades with the terms and
cubiertas por contratos conditions of the
para vender, firmados, en respective "contracts to
 sell" executed by the
parties thereto."
(14) The properties involved in the aforesaid
motion of September 16, 1963 are all
registered in the name of the deceased C. N.
Hodges.
(15) Avelina A. Magno, it is alleged on
information and belief, has been advertising
in the newspaper in Iloilo thusly:
For Sale
Testate Estate of Linnie Jane Hodges and
Charles Newton Hodges.
All Real Estate or Personal Property will be
sold on First Come First Served Basis.
Avelina A. Magno
Administratrix
(16) Avelina A. Magno, it is alleged on
information and belief, has paid and still is
paying sums of money to sundry persons.
(17) Joe Hodges through the undersigned
attorneys manifested during the hearings
before this Honorable Court on September 5
and 6, 1963 that the estate of C. N. Hodges
was claiming all of the assets belonging to
the deceased spouses Linnie Jane Hodges
and C. N. Hodges situated in Philippines
because of the aforesaid election by C. N.
Hodges wherein he claimed and took
possession as sole owner of all of said
assets during the administration of the estate
of Linnie Jane Hodges on the ground that he
was the sole devisee and legatee under her
Last Will and Testament.
(18) Avelina A. Magno has submitted no
inventory and accounting of her
administration as Administratrix of the estate
of Linnie Jane Hodges and Special
Administratrix of the estate of C. N. Hodges.
However, from manifestations made by
Avelina A. Magno and her legal counsel,
Leon P. Gellada, there is no question she will
claim that at least fifty per cent (50%) of the
conjugal assets of the deceased spouses
and the rents, emoluments and income
therefrom belong to the Higdon family who
are named in paragraphs Fourth and Fifth of
the Will of Linnie Jane Hodges (p. 5, Rec.
Sp. Proc. 1307).
WHEREFORE, premises considered,
movant respectfully prays that this Honorable
Court, after due hearing, order:
(1) Avelina A. Magno to submit an inventory
and accounting of all of the funds, properties
and assets of any character belonging to the
deceased Linnie Jane Hodges and C. N.
Hodges which have come into her
possession, with full details of what she has
done with them;
(2) Avelina A. Magno to turn over and deliver
to the Administrator of the estate of C. N.
Hodges all of the funds, properties and
assets of any character remaining in her
possession;
(3) Pending this Honorable Court's
adjudication of the aforesaid issues, Avelina
A. Magno to stop, unless she first secures
the conformity of Joe Hodges (or his duly
authorized representative, such as the
undersigned attorneys) as the Co-
administrator and attorney-in-fact of a
majority of the beneficiaries of the estate of
C. N. Hodges:
(a) Advertising the sale and the sale of the
properties of the estates:
(b) Employing personnel and paying them
any compensation.
(4) Such other relief as this Honorable Court
may deem just and equitable in the
premises. (Annex "T", Petition.)
Almost a year thereafter, or on September 14, 1964, after the
co-administrators Joe Hodges and Fernando P. Mirasol were
replaced by herein petitioner Philippine Commercial and
Industrial Bank as sole administrator, pursuant to an
agreement of all the heirs of Hodges approved by the court,
and because the above motion of October 5, 1963 had not yet
been heard due to the absence from the country of Atty. Gibbs,
petitioner filed the following:
MANIFESTATION AND MOTION,
INCLUDING MOTION TO SET FOR
HEARING AND RESOLVE "URGENT
MOTION FOR AN ACCOUNTING AND
DELIVERY TO ADMINISTRATORS OF
THE ESTATE OF C. N. HODGES OF ALL
THE ASSETS OF THE CONJUGAL
PARTNERSHIP OF THE DECEASED
LINNIE JANE HODGES AND C. N.
HODGES EXISTING AS OF MAY 23,
1957 PLUS ALL OF THE RENTS,
 EMOLUMENTS AND INCOME
THEREFROM OF OCTOBER 5, 1963.
COMES NOW Philippine Commercial and
Industrial Bank (hereinafter referred to as
PCIB), the administrator of the estate of C.
N. Hodges, deceased, in Special
Proceedings No. 1672, through its
undersigned counsel, and to this Honorable
Court respectfully alleges that:
1. On October 5, 1963, Joe Hodges acting
as the co-administrator of the estate of C. N.
Hodges filed, through the undersigned
attorneys, an "Urgent Motion For An
Accounting and Delivery To Administrator of
the Estate of C. N. Hodges of all Of The
Assets Of The Conjugal Partnership of The
Deceased Linnie Jane Hodges and C. N.
Hodges Existing as Of May, 23, 1957 Plus
All Of The Rents, Emoluments and Income
Therefrom" (pp. 536-542, CFI Rec. S. P. No.
1672).
2. On January 24, 1964 this Honorable
Court, on the basis of an amicable
agreement entered into on January 23, 1964
by the two co-administrators of the estate of
C. N. Hodges and virtually all of the heirs of
C. N. Hodges (p. 912, CFI Rec., S. P. No.
1672), resolved the dispute over who should
act as administrator of the estate of C. N.
Hodges by appointing the PCIB as
administrator of the estate of C. N. Hodges
(pp. 905-906, CFI Rec. S. P. No. 1672) and
issuing letters of administration to the PCIB.
3. On January 24, 1964 virtually all of the
heirs of C. N. Hodges, Joe Hodges and
Fernando P. Mirasol acting as the two co-
administrators of the estate of C. N. Hodges,
Avelina A. Magno acting as the administratrix
of the estate of Linnie Jane Hodges, and
Messrs. William Brown and Ardel Young
Acting for all of the Higdon family who claim
to be the sole beneficiaries of the estate of
Linnie Jane Hodges and various legal
counsel representing the aforenamed parties
entered into an amicable agreement, which
was approved by this Honorable Court,
wherein the parties thereto agreed that
certain sums of money were to be paid in
settlement of different claims against the two
estates and that the assets (to the extent
they existed)of both estates would be
administrated jointly by the PCIB as
administrator of the estate of C. N. Hodges
and Avelina A. Magno as administratrix of
the estate of Linnie Jane Hodges, subject,
however, to the aforesaid October 5, 1963
Motion, namely, the PCIB's claim to
exclusive possession and ownership of one-
hundred percent (10017,) (or, in the
alternative, seventy-five percent [75%] of all
assets owned by C. N. Hodges or Linnie
Jane Hodges situated in the Philippines. On
February 1, 1964 (pp. 934-935, CFI Rec., S.
P. No. 1672) this Honorable Court amended
its order of January 24, 1964 but in no way
changes its recognition of the aforedescribed
basic demand by the PCIB as administrator
of the estate of C. N. Hodges to one hundred
percent (100%) of the assets claimed by
both estates.
4. On February 15, 1964 the PCIB filed a
"Motion to Resolve" the aforesaid Motion of
October 5, 1963. This Honorable Court set
for hearing on June 11, 1964 the Motion of
October 5, 1963.
5. On June 11, 1964, because the
undersigned Allison J. Gibbs was absent in
the United States, this Honorable Court
ordered the indefinite postponement of the
hearing of the Motion of October 5, 1963.
6. Since its appointment as administrator of
the estate of C. N. Hodges the PCIB has not
been able to properly carry out its duties and
obligations as administrator of the estate of
C. N. Hodges because of the following acts,
among others, of Avelina A. Magno and
those who claim to act for her as
administratrix of the estate of Linnie Jane
Hodges:
(a) Avelina A. Magno
illegally acts as if she is in
exclusive control of all of
the assets in the
Philippines of both estates
including those claimed by
the estate of C. N. Hodges
as evidenced in part by her
locking the premises at
206-208 Guanco Street,
Iloilo City on August 31,
1964 and refusing to
reopen same until ordered
to do so by this Honorable
Court on September 7,
1964.
(b) Avelina A. Magno
illegally acts as though she
alone may decide how the
assets of the estate of
 C.N. Hodges should be
administered, who the
PCIB shall employ and
how much they may be
paid as evidenced in party
by her refusal to sign
checks issued by the PCIB
payable to the
undersigned counsel
pursuant to their fee
agreement approved by
this Honorable Court in its
order dated March 31,
1964.
(c) Avelina A. Magno
illegally gives access to
and turns over possession
of the records and assets
of the estate of C.N.
Hodges to the attorney-in-
fact of the Higdon Family,
Mr. James L. Sullivan, as
evidenced in part by the
cashing of his personal
checks.
(d) Avelina A. Magno
illegally refuses to execute
checks prepared by the
PCIB drawn to pay
expenses of the estate of
C. N. Hodges as
evidenced in part by the
check drawn to reimburse
the PCIB's advance of
P48,445.50 to pay the
1964 income taxes
reported due and payable
by the estate of C.N.
Hodges.
7. Under and pursuant to the orders of this
Honorable Court, particularly those of
January 24 and February 1, 1964, and the
mandate contained in its Letters of
Administration issued on January 24, 1964 to
the PCIB, it has
"full authority to take
possession of all the
property of the deceased
C. N. Hodges
"and to perform all other
acts necessary for the
preservation of said
property." (p. 914, CFI
Rec., S.P. No. 1672.)
8. As administrator of the estate of C. N.
Hodges, the PCIB claims the right to the
immediate exclusive possession and control
of all of the properties, accounts receivables,
court cases, bank accounts and other
assets, including the documentary records
evidencing same, which existed in the
Philippines on the date of C. N. Hodges'
death, December 25, 1962, and were in his
possession and registered in his name
alone. The PCIB knows of no assets in the
Philippines registered in the name of Linnie
Jane Hodges, the estate of Linnie Jane
Hodges, or, C. N. Hodges, Executor of the
Estate of Linnie Jane Hodges on December
25, 1962. All of the assets of which the PCIB
has knowledge are either registered in the
name of C. N. Hodges, alone or were
derived therefrom since his death on
December 25, 1962.
9. The PCIB as the current administrator of
the estate of C. N. Hodges, deceased,
succeeded to all of the rights of the
previously duly appointed administrators of
the estate of C. N. Hodges, to wit:
(a) On December 25,
1962, date of C. N.
Hodges' death, this
Honorable Court appointed
Miss Avelina A. Magno
simultaneously as:
(i) Administratrix of the
estate of Linnie Jane
Hodges (p. 102, CFI Rec.,
S.P. No. 1307) to replace
the deceased C. N.
Hodges who on May 28,
1957 was appointed
Special Administrator (p.
13. CFI Rec. S.P. No.
1307) and on July 1, 1957
Executor of the estate of
Linnie Jane Hodges (p. 30,
CFI Rec., S. P. No. 1307).
(ii) Special Administratrix
of the estate of C. N.
Hodges (p. 102, CFI Rec.,
S.P. No. 1307).
(b) On December 29, 1962
this Honorable Court
appointed Harold K.
Davies as co-special
administrator of the estate
of C.N. Hodges along with
 Avelina A. Magno (pp.
108-111, CFI Rec., S. P.
No. 1307).
(c) On January 22, 1963,
with the conformity of
Avelina A. Magno, Harold
K. Davies resigned in favor
of Joe Hodges (pp. 35-36,
CFI Rec., S.P. No. 1672)
who thereupon was
appointed on January 22,
1963 by this Honorable
Court as special co-
administrator of the estate
of C.N. Hodges (pp. 38-40
& 43, CFI Rec. S.P. No.
1672) along with Miss
Magno who at that time
was still acting as special
co-administratrix of the
estate of C. N. Hodges.
(d) On February 22, 1963,
without objection on the
part of Avelina A. Magno,
this Honorable Court
appointed Joe Hodges and
Fernando P. Mirasol as co-
administrators of the
estate of C.N. Hodges (pp.
76-78, 81 & 85, CFI Rec.,
S.P. No. 1672).
10. Miss Avelina A. Magno, pursuant to the
orders of this Honorable Court of December
25, 1962, took possession of all Philippine
Assets now claimed by the two estates.
Legally, Miss Magno could take possession
of the assets registered in the name of C. N.
Hodges alone only in her capacity as Special
Administratrix of the Estate of C.N. Hodges.
With the appointment by this Honorable
Court on February 22, 1963 of Joe Hodges
and Fernando P. Mirasol as the co-
administrators of the estate of C.N. Hodges,
they legally were entitled to take over from
Miss Magno the full and exclusive
possession of all of the assets of the estate
of C.N. Hodges. With the appointment on
January 24, 1964 of the PCIB as the sole
administrator of the estate of C.N. Hodges in
substitution of Joe Hodges and Fernando P.
Mirasol, the PCIB legally became the only
party entitled to the sole and exclusive
possession of all of the assets of the estate
of C. N. Hodges.
11. The PCIB's predecessors submitted their
accounting and this Honorable Court
approved same, to wit:
(a) The accounting of
Harold K. Davies dated
January 18, 1963 (pp. 16-
33, CFI Rec. S.P. No.
1672); which shows or its
face the:
(i) Conformity of Avelina A.
Magno acting as
"Administratrix of the
Estate of Linnie Jane
Hodges and Special
Administratrix of the Estate
of C. N. Hodges";
(ii) Conformity of Leslie
Echols, a Texas lawyer
acting for the heirs of C.N.
Hodges; and
(iii) Conformity of William
Brown, a Texas lawyer
acting for the Higdon
family who claim to be the
only heirs of Linnie Jane
Hodges (pp. 18, 25-33,
CFI Rec., S. P. No. 1672).
Note: This accounting was approved by this
Honorable Court on January 22, 1963 (p. 34,
CFI Rec., S. P. No. 1672).
(b) The accounting of Joe
Hodges and Fernando P.
Mirasol as of January 23,
1964, filed February 24,
1964 (pp. 990-1000, CFI
Rec. S.P. No. 1672 and
pp. 1806-1848, CFI Rec.
S.P. No. 1307).
Note: This accounting was approved by this
Honorable Court on March 3, 1964.
(c) The PCIB and its
undersigned lawyers are
aware of no report or
accounting submitted by
Avelina A. Magno of her
acts as administratrix of
the estate of Linnie Jane
Hodges or special
administratrix of the estate
of C.N. Hodges, unless it
is the accounting of Harold
 K. Davies as special co-
administrator of the estate
of C.N. Hodges dated
January 18, 1963 to which
Miss Magno manifested
her conformity (supra).
12. In the aforesaid agreement of January 24, 1964, Miss
Avelina A. Magno agreed to receive P10,000.00
"for her services as
administratrix of the estate
of Linnie Jane Hodges"
and in addition she agreed to be employed,
starting February 1, 1964, at
"a monthly salary of
P500.00 for her services
as an employee of both
estates."
24 ems.
13. Under the aforesaid agreement of
January 24, 1964 and the orders of this
Honorable Court of same date, the PCIB as
administrator of the estate of C. N. Hodges is
entitled to the exclusive possession of all
records, properties and assets in the name
of C. N. Hodges as of the date of his death
on December 25, 1962 which were in the
possession of the deceased C. N. Hodges
on that date and which then passed to the
possession of Miss Magno in her capacity as
Special Co-Administratrix of the estate of C.
N. Hodges or the possession of Joe Hodges
or Fernando P. Mirasol as co-administrators
of the estate of C. N. Hodges.
14. Because of Miss Magno's refusal to
comply with the reasonable request of PCIB
concerning the assets of the estate of C. N.
Hodges, the PCIB dismissed Miss Magno as
an employee of the estate of C. N. Hodges
effective August 31, 1964. On September 1,
1964 Miss Magno locked the premises at
206-208 Guanco Street and denied the PCIB
access thereto. Upon the Urgent Motion of
the PCIB dated September 3, 1964, this
Honorable Court on September 7, 1964
ordered Miss Magno to reopen the aforesaid
premises at 206-208 Guanco Street and
permit the PCIB access thereto no later than
September 8, 1964.
15. The PCIB pursuant to the aforesaid
orders of this Honorable Court is again in
physical possession of all of the assets of the
estate of C. N. Hodges. However, the PCIB
is not in exclusive control of the aforesaid
records, properties and assets because Miss
Magno continues to assert the claims
hereinabove outlined in paragraph 6,
continues to use her own locks to the doors
of the aforesaid premises at 206-208
Guanco Street, Iloilo City and continues to
deny the PCIB its right to know the
combinations to the doors of the vault and
safes situated within the premises at 206-
208 Guanco Street despite the fact that said
combinations were known to only C. N.
Hodges during his lifetime.
16. The Philippine estate and inheritance
taxes assessed the estate of Linnie Jane
Hodges were assessed and paid on the
basis that C. N. Hodges is the sole
beneficiary of the assets of the estate of
Linnie Jane Hodges situated in the
Philippines. Avelina A. Magno and her legal
counsel at no time have questioned the
validity of the aforesaid assessment and the
payment of the corresponding Philippine
death taxes.
17. Nothing further remains to be done in the
estate of Linnie Jane Hodges except to
resolve the aforesaid Motion of October 5,
1963 and grant the PCIB the exclusive
possession and control of all of the records,
properties and assets of the estate of C. N.
Hodges.
18. Such assets as may have existed of the
estate of Linnie Jane Hodges were ordered
by this Honorable Court in special
Proceedings No. 1307 to be turned over and
delivered to C. N. Hodges alone. He in fact
took possession of them before his death
and asserted and exercised the right of
exclusive ownership over the said assets as
the sole beneficiary of the estate of Linnie
Jane Hodges.
WHEREFORE, premises considered, the
PCIB respectfully petitions that this
Honorable court:
(1) Set the Motion of October 5, 1963 for
hearing at the earliest possible date with
notice to all interested parties;
(2) Order Avelina A. Magno to submit an
inventory and accounting as Administratrix of
the Estate of Linnie Jane Hodges and Co-
Administratrix of the Estate of C. N. Hodges
of all of the funds, properties and assets of
 any character belonging to the deceased more than 50 years in Iloilo City and had,
Linnie Jane Hodges and C. N. Hodges which therefore, acquired a domicile of choice in
have come into her possession, with full said city, which they retained until the time of
details of what she has done with them; their respective deaths.

(3) Order Avelina A. Magno to turn over and 3. On November 22, 1952, Linnie Jane
deliver to the PCIB as administrator of the Hodges executed in the City of Iloilo her Last
estate of C. N. Hodges all of the funds, Will and Testament, a copy of which is
properties and assets of any character hereto attached as Annex "A". The bequests
remaining in her possession; in said will pertinent to the present issue are
the second, third, and fourth provisions,
(4) Pending this Honorable Court's which we quote in full hereunder.
adjudication of the aforesaid issues, order
Avelina A. Magno and her representatives to SECOND: I give, devise
stop interferring with the administration of the and bequeath all of the
estate of C. N. Hodges by the PCIB and its rest, residue and
duly authorized representatives; remainder of my estate,
both personal and real,
(5) Enjoin Avelina A. Magno from working in wherever situated, or
the premises at 206-208 Guanco Street, located, to my husband,
Iloilo City as an employee of the estate of C. Charles Newton Hodges,
N. Hodges and approve her dismissal as to have and to hold unto
such by the PCIB effective August 31, 1964; him, my said husband
during his natural lifetime.
(6) Enjoin James L. Sullivan, Attorneys
Manglapus and Quimpo and others allegedly THIRD: I desire, direct and
representing Miss Magno from entering the provide that my husband,
premises at 206-208 Guanco Street, Iloilo Charles Newton Hodges,
City or any other properties of C. N. Hodges shall have the right to
without the express permission of the PCIB; manage, control, use and
enjoy said estate during
(7) Order such other relief as this Honorable his lifetime, and he is
Court finds just and equitable in the hereby given the right to
premises. (Annex "U" Petition.) make any changes in the
physical properties of said
estate by sale of any part
On January 8, 1965, petitioner also filed a motion for "Official
thereof which he think
Declaration of Heirs of Linnie Jane Hodges Estate" alleging:
best, and the purchase of
any other or additional
COMES NOW Philippine Commercial and Industrial Bank property as he may think
(hereinafter referred to as PCIB), as administrator of the estate best; to execute
of the late C. N. Hodges, through the undersigned counsel, and conveyances with or
to this Honorable Court respectfully alleges that: without general or special
warranty, conveying in fee
1. During their marriage, spouses Charles simple or for any other
Newton Hodges and Linnie Jane Hodges, term or time, any property
American citizens originally from the State of which he may deem
Texas, U.S.A., acquired and accumulated proper to dispose of; to
considerable assets and properties in the lease any of the real
Philippines and in the States of Texas and property for oil, gas and/or
Oklahoma, United States of America. All said other minerals, and all
properties constituted their conjugal estate. such deeds or leases shall
pass the absolute fee
2. Although Texas was the domicile of origin simple title to the interest
of the Hodges spouses, this Honorable so conveyed in such
Court, in its orders dated March 31 and property as he may elect
December 12, 1964 (CFI Record, Sp. Proc. to sell. All rents,
No. 1307, pp. ----; Sp. Proc. No. 1672, p. ---- emoluments and income
), conclusively found and categorically ruled from said estate shall
that said spouses had lived and worked for belong to him, and he is
 further authorized to use
any part of the principal of
said estate as he may
need or desire. It is
provided herein, however,
that he shall not sell or
otherwise dispose of any
of the improved property
now owned by us located
at, in or near the City of
Lubbock, Texas, but he
shall have the full right to
lease, manage and enjoy
the same during his
lifetime, as above
provided. He shall have
the right to sub-divide any
farmland and sell lots
therein, and may sell
unimproved town lots.
FOURTH: At the death of
my said husband, Charles
Newton Hodges, I give,
devise and bequeath all of
the rest, residue and
remainder of my estate
both real and personal,
wherever situated or
located, to be equally
divided among my
brothers and sisters, share
and share alike, namely:
"Esta Higdon, Emma
Howell, Leonard Higdon,
Roy Higdon, Sadie
Rascoe, Era Boman and
Nimray Higdon."
4. On November 14, 1953, C. N. Hodges
executed in the City of Iloilo his Last Will and
Testament, a copy of which is hereto
attached as Annex "B ". In said Will, C. N.
Hodges designated his wife, Linnie Jane
Hodges, as his beneficiary using the identical
language she used in the second and third
provisos of her Will, supra.
5. On May 23, 1957 Linnie Jane Hodges
died in Iloilo City, predeceasing her husband
by more than five (5) years. At the time of
her death, she had no forced or compulsory
heir, except her husband, C. N. Hodges. She
was survived also by various brothers and
sisters mentioned in her Will (supra), which,
for convenience, we shall refer to as the
HIGDONS.
6. On June 28, 1957, this Honorable Court
admitted to probate the Last Will and
Testament of the deceased Linnie Jane
Hodges (Annex "A"), and appointed C. N.
Hodges as executor of her estate without
bond. (CFI Record, Sp. Proc. No. 1307, pp.
24-25). On July 1, 1957, this Honorable
Court issued letters testamentary to C. N.
Hodges in the estate of Linnie Jane Hodges.
(CFI Record, Sp. Proc. No. 1307, p. 30.)
7. The Will of Linnie Jane Hodges, with
respect to the order of succession, the
amount of successional rights, and the
intrinsic of its testamentary provisions,
should be governed by Philippine laws
because:
(a) The testatrix, Linnie
Jane Hodges, intended
Philippine laws to govern
her Will;
(b) Article 16 of the Civil
Code provides that "the
national law of the person
whose succession is under
consideration, whatever
may be the nature of the
property and regardless of
the country wherein said
property may be found",
shall prevail. However, the
Conflict of Law of Texas,
which is the "national law"
of the testatrix, Linnie Jane
Hodges, provide that the
domiciliary law (Philippine
law — see paragraph 2,
supra) should govern the
testamentary dispositions
and successional rights
over movables (personal
properties), and the law of
the situs of the property
(also Philippine law as to
properties located in the
Philippines) with regards
immovable (real
properties). Thus applying
the "Renvoi Doctrine", as
approved and applied by
our Supreme Court in the
case of "In The Matter Of
The Testate Estate of
Eduard E. Christensen",
G.R. No.
L-16749, promulgated
January 31, 1963,
Philippine law should apply
 to the Will of Linnie Jane
Hodges and to the
successional rights to her
estate insofar as her
movable and immovable
assets in the Philippines
are concerned. We shall
not, at this stage, discuss
what law should govern
the assets of Linnie Jane
Hodges located in
Oklahoma and Texas,
because the only assets in
issue in this motion are
those within the jurisdiction
of this motion Court in the
two above-captioned
Special Proceedings.
8. Under Philippine and Texas law, the
conjugal or community estate of spouses
shall, upon dissolution, be divided equally
between them. Thus, upon the death of
Linnie Jane Hodges on May 23, 1957, one-
half (1/2) of the entirety of the assets of the
Hodges spouses constituting their conjugal
estate pertained automatically to Charles
Newton Hodges, not by way of inheritance,
but in his own right as partner in the conjugal
partnership. The other one-half (1/2) portion
of the conjugal estate constituted the estate
of Linnie Jane Hodges. This is the only
portion of the conjugal estate capable of
inheritance by her heirs.
9. This one-half (1/2) portion of the conjugal
assets pertaining to Linnie Jane Hodges
cannot, under a clear and specific provision
of her Will, be enhanced or increased by
income, earnings, rents, or emoluments
accruing after her death on May 23, 1957.
Linnie Jane Hodges' Will provides that "all
rents, emoluments and income from said
estate shall belong to him (C. N. Hodges)
and he is further authorized to use any part
of the principal of said estate as he may
need or desire." (Paragraph 3, Annex "A".)
Thus, by specific provision of Linnie Jane
Hodges' Will, "all rents, emoluments and
income" must be credited to the one-half
(1/2) portion of the conjugal estate pertaining
to C. N. Hodges. Clearly, therefore, the
estate of Linnie Jane Hodges, capable of
inheritance by her heirs, consisted
exclusively of no more than one-half (1/2) of
the conjugal estate, computed as of the time
of her death on May 23, 1957.
10. Articles 900, 995 and 1001 of the New
Civil Code provide that the surviving spouse
of a deceased leaving no ascendants or
descendants is entitled, as a matter of right
and by way of irrevocable legitime, to at least
one-half (1/2) of the estate of the deceased,
and no testamentary disposition by the
deceased can legally and validly affect this
right of the surviving spouse. In fact, her
husband is entitled to said one-half (1/2)
portion of her estate by way of legitime.
(Article 886, Civil Code.) Clearly, therefore,
immediately upon the death of Linnie Jane
Hodges, C. N. Hodges was the owner of at
least three-fourths (3/4) or seventy-five
(75%) percent of all of the conjugal assets of
the spouses, (1/2 or 50% by way of conjugal
partnership share and 1/4 or 25% by way of
inheritance and legitime) plus all "rents,
emoluments and income" accruing to said
conjugal estate from the moment of Linnie
Jane Hodges' death (see paragraph 9,
supra).
11. The late Linnie Jane Hodges designated
her husband C.N. Hodges as her sole and
exclusive heir with full authority to do what
he pleased, as exclusive heir and owner of
all the assets constituting her estate, except
only with regards certain properties "owned
by us, located at, in or near the City of
Lubbock, Texas". Thus, even without relying
on our laws of succession and legitime,
which we have cited above, C. N. Hodges,
by specific testamentary designation of his
wife, was entitled to the entirely to his wife's
estate in the Philippines.
12. Article 777 of the New Civil Code
provides that "the rights of the successor are
transmitted from the death of the decedent".
Thus, title to the estate of Linnie Jane
Hodges was transmitted to C. N. Hodges
immediately upon her death on May 23,
1957. For the convenience of this Honorable
Court, we attached hereto as Annex "C" a
graph of how the conjugal estate of the
spouses Hodges should be divided in
accordance with Philippine law and the Will
of Linnie Jane Hodges.
13. In his capacity as sole heir and
successor to the estate of Linnie Jane
Hodges as above-stated, C. N. Hodges,
shortly after the death of Linnie Jane
Hodges, appropriated to himself the entirety
of her estate. He operated all the assets,
engaged in business and performed all acts
in connection with the entirety of the conjugal
estate, in his own name alone, just as he had
been operating, engaging and doing while
the late Linnie Jane Hodges was still alive.
Upon his death on December 25, 1962,
therefore, all said conjugal assets were in his
sole possession and control, and registered
in his name alone, not as executor, but as
exclusive owner of all said assets.
14. All these acts of C. N. Hodges were
authorized and sanctioned expressly and
impliedly by various orders of this Honorable
Court, as follows:
(a) In an Order dated May 27, 1957, this
Honorable Court ruled that C. N. Hodges "is
allowed or authorized to continue the
business in which he was engaged, and to
perform acts which he had been doing while
the deceased was living." (CFI Record, Sp.
Proc. No. 1307, p. 11.)
(b) On December 14, 1957, this Honorable
Court, on the basis of the following fact,
alleged in the verified Motion dated
December 11, 1957 filed by Leon P. Gellada
as attorney for the executor C. N. Hodges:
That herein Executor, (is) not only part owner
of the properties left as conjugal, but also,
the successor to all the properties left by the
deceased Linnie Jane Hodges.' (CFI Record,
Sp. Proc. No. 1307, p. 44; emphasis
supplied.)
issued the following order:
"As prayed for by Attorney Gellada, counsel
for the Executor, for the reasons stated in his
motion dated December 11, 1957, which the
Court considers well taken, all the sales,
conveyances, leases and mortgages of all
the properties left by the deceased Linnie
Jane Hodges executed by the Executor,
Charles Newton Hodges are hereby
APPROVED. The said Executor is further
authorized to execute subsequent sales,
conveyances, leases and mortgages of the
properties left by the said deceased Linnie
Jane Hodges in consonance with the wishes
contained in the last will and testament of the
latter." (CFI Record. Sp. Proc. No. 1307, p.
46; emphasis supplied.)
24 ems
(c) On April 21, 1959, this Honorable Court
approved the verified inventory and
accounting submitted by C. N. Hodges
through his counsel Leon P. Gellada on April
14, 1959 wherein he alleged among other
things,
"That no person interested
in the Philippines of the
time and place of
examining the herein
account, be given notice,
as herein executor is the
only devisee or legatee of
the deceased, in
accordance with the last
will and testament already
probated by the Honorable
Court." (CFI Record, Sp.
Proc. No. 1307, pp. 77-78;
emphasis supplied.)
(d) On July 20, 1960, this Honorable Court
approved the verified "Annual Statement of
Account" submitted by C. N. Hodges through
his counsel Leon P. Gellada on July 21,
1960 wherein he alleged, among other
things.
"That no person interested
in the Philippines of the
time and place of
examining the herein
account, be given notice
as herein executor is the
only devisee or legatee of
the deceased Linnie Jane
Hodges, in accordance
with the last will and
testament ofthe deceased,
already probated by this
Honorable Court." (CFI
Record, Sp. Proc. No.
1307, pp. 81-82; emphasis
supplied.)
(e) On May 2, 1961, this Honorable Court
approved the verified "Annual Statement of
Account By The Executor For the Year 1960"
submitted through Leon P. Gellada on April
20, 1961 wherein he alleged:
"That no person interested in the Philippines
be given notice, ofthe time and place of
examining the herein account, as herein
executor is the only devisee or legatee of the
deceased Linnie Jane Hodges, in
accordance with the last will and testament
ofthe deceased, already probated by this
Honorable Court." (CFI Record, Sp. Proc.
No. 1307, pp. 90-91; emphasis supplied.)
15. Since C. N. Hodges was the sole and
exclusive heir of Linnie Jane Hodges, not
only by law, but in accordance with the
dispositions of her will, there was, in fact, no
need to liquidate the conjugal estate of the Hodges acquired by way of inheritance from
spouses. The entirely of said conjugal estate his wife Linnie Jane Hodges upon her death.
pertained to him exclusively, therefore this
Honorable Court sanctioned and authorized, (a) In spite of the above-
as above-stated, C. N. Hodges to manage, mentioned provision in the
operate and control all the conjugal assets Will of Linnie Jane
as owner. Hodges, C. N. Hodges
acquired, not merely a
16. By expressly authorizing C. N. Hodges to usufructuary right, but
act as he did in connection with the estate of absolute title and
his wife, this Honorable Court has (1) ownership to her estate. In
declared C. N. Hodges as the sole heir of the a recent case involving a
estate of Linnie Jane Hodges, and (2) very similar testamentary
delivered and distributed her estate to C. N. provision, the Supreme
Hodges as sole heir in accordance with the Court held that the heir
terms and conditions of her Will. Thus, first designated acquired
although the "estate of Linnie Jane Hodges" full ownership of the
still exists as a legal and juridical personality, property bequeathed by
it had no assets or properties located in the the will, not mere
Philippines registered in its name usufructuary rights.
whatsoever at the time of the death of C. N. (Consolacion Florentino de
Hodges on December 25, 1962. Crisologo, et al., vs.
Manuel Singson, G. R. No.
17. The Will of Linnie Jane Hodges (Annex L-13876, February 28,
"A"), fourth paragraph, provides as follows: 1962.)

"At the death of my said (b) Article 864, 872 and

husband, Charles Newton 886 of the New Civil Code
Hodges, I give, devise and clearly provide that no
bequeath all of the rest, charge, condition or
residue and remainder of substitution whatsoever
my estate both real and upon the legitime can be
personal, wherever imposed by a testator.
situated or located, to be Thus, under the provisions
equally divided among my of Articles 900, 995 and
brothers and sisters, share 1001 of the New Civil
and share alike, namely: Code, the legitime of a
surviving spouse is 1/2 of
"Esta Higdon, Emma the estate of the deceased
Howell, Leonard Higdon, spouse. Consequently, the
Roy Higdon, Sadie above-mentioned provision
Rascoe, Era Boman and in the Will of Linnie Jane
Nimray Higdon." Hodges is clearly invalid
insofar as the legitime of
C. N. Hodges was
Because of the facts hereinabove set out
concerned, which
there is no "rest, residue and remainder", at
consisted of 1/2 of the 1/2
least to the extent of the Philippine assets,
portion of the conjugal
which remains to vest in the HIGDONS,
estate, or 1/4 of the entire
assuming this proviso in Linnie Jane Hodges'
conjugal estate of the
Will is valid and binding against the estate of
deceased.
C. N. Hodges.

(c) There are generally

18. Any claims by the HIGDONS under the
only two kinds of
above-quoted provision of Linnie Jane
substitution provided for
Hodges' Will is without merit because said
and authorized by our Civil
provision is void and invalid at least as to the
Code (Articles 857-870),
Philippine assets. It should not, in anyway,
namely, (1) simple or
affect the rights of the estate of C. N. Hodges
common substitution,
or his heirs to the properties, which C. N.
sometimes referred to as
vulgar substitution (Article
859), and (2)
fideicommissary
substitution (Article 863).
All other substitutions are
merely variations of these.
The substitution provided
for by paragraph four of
the Will of Linnie Jane
Hodges is not
fideicommissary
substitution, because there
is clearly no obligation on
the part of C. N. Hodges
as the first heir designated,
to preserve the properties
for the substitute heirs.
(Consolacion Florentino de
Crisologo et al. vs. Manuel
Singson, G. R. No.
L-13876.) At most, it is a
vulgar or simple
substitution. However, in
order that a vulgar or
simple substitution can be
valid, three alternative
conditions must be
present, namely, that the
first designated heir (1)
should die before the
testator; or (2) should not
wish to accept the
inheritance; or (3) should
be incapacitated to do so.
None of these conditions
apply to C. N. Hodges,
and, therefore, the
substitution provided for by
the above-quoted
provision of the Will is not
authorized by the Code,
and, therefore, it is void.
Manresa, commenting on
these kisses of
substitution, meaningfully
stated that: "... cuando el
testador instituyeun primer
heredero, y por
fallecimiento de este
nombra otro u otros, ha de
entenderse que estas
segundas designaciones
solo han de llegar a tener
efectividad en el caso de
que el primer instituido
muera antes que el
testador, fuera o no esta
su verdadera intencion.
...". (6 Manresa, 7 a ed.,
pag. 175.) In other words,
when another heir is
designated to inherit upon
the death of a first heir, the
second designation can
have effect only in case
the first instituted heir dies
before the testator,
whether or not that was
the true intention of said
testator. Since C. N.
Hodges did not die before
Linnie Jane Hodges, the
provision for substitution
contained in Linnie Jane
Hodges' Willis void.
(d) In view of the invalidity
of the provision for
substitution in the Will, C.
N. Hodges' inheritance to
the entirety of the Linnie
Jane Hodges estate is
irrevocable and final.
19. Be that as it may, at the time of C. N.
Hodges' death, the entirety of the conjugal
estate appeared and was registered in him
exclusively as owner. Thus, the presumption
is that all said assets constituted his estate.
Therefore —
(a) If the HIGDONS wish to enforce their
dubious rights as substituted heirs to 1/4 of
the conjugal estate (the other 1/4 is covered
by the legitime of C. N. Hodges which can
not be affected by any testamentary
disposition), their remedy, if any, is to file
their claim against the estate of C. N.
Hodges, which should be entitled at the
present time to full custody and control of all
the conjugal estate of the spouses.
(b) The present proceedings, in which two
estates exist under separate administration,
where the administratrix of the Linnie Jane
Hodges estate exercises an officious right to
object and intervene in matters affecting
exclusively the C. N. Hodges estate, is
anomalous.
WHEREFORE, it is most respectfully prayed
that after trial and reception of evidence, this
Honorable Court declare:
1. That the estate of Linnie Jane Hodges
was and is composed exclusively of one-half
(1/2) share in the conjugal estate of the
spouses Hodges, computed as of the date of
her death on May 23, 1957;
 2. That the other half of the conjugal estate
pertained exclusively to C. N. Hodges as his
share as partner in the conjugal partnership;
3. That all "rents, emoluments and income"
of the conjugal estate accruing after Linnie
Jane Hodges' death pertains to C. N.
Hodges;
and appears as Sp. Proc. No. 1307, Folio I,
pp. 17-18);
3. That on May 23, 1957, Linnie Jane
Hodges died at the City of Iloilo at the time
survived by her husband, Charles Newton
Hodges, and several relatives named in her
last will and testament;

4. That C. N. Hodges was the sole and 4. That on June 28, 1957, a petition therefor
exclusive heir of the estate of Linnie Jane having been priorly filed and duly heard, this
Hodges; Honorable Court issued an order admitting to
probate the last will and testament of Linnie
5. That, therefore, the entire conjugal estate Jane Hodges (Sp. Proc. No. 1307, Folio I,
of the spouses located in the Philippines, pp. 24-25, 26-28);
plus all the "rents, emoluments and income"
above-mentioned, now constitutes the estate 5. That the required notice to creditors and to
of C. N. Hodges, capable of distribution to all others who may have any claims against
his heirs upon termination of Special the decedent, Linnie Jane Hodges has
Proceedings No. 1672; already been printed, published and posted
(Sp. Proc. No. 1307, Folio I. pp. 34-40) and
6. That PCIB, as administrator of the estate the reglamentary period for filing such claims
of C. N. Hodges, is entitled to full and has long ago lapsed and expired without any
exclusive custody, control and management claims having been asserted against the
of all said properties; and estate of Linnie Jane Hodges, approved by
the Administrator/Administratrix of the said
7. That Avelina A. Magno, as administratrix estate, nor ratified by this Honorable Court;
of the estate of Linnie Jane Hodges, as well
as the HIGDONS, has no right to intervene 6. That the last will and testament of Linnie
or participate in the administration of the C. Jane Hodges already admitted to probate
N. Hodges estate. contains an institution of heirs in the
following words:
PCIB further prays for such and other relief
as may be deemed just and equitable in the "SECOND: I give, devise
premises." and bequeath all of the
rest, residue and
(Record, pp. 265-277) remainder of my estate,
both personal and real,
wherever situated or
Before all of these motions of petitioner could be resolved,
located, to my beloved
however, on December 21, 1965, private respondent Magno
husband, Charles Newton
filed her own "Motion for the Official Declaration of Heirs of the
Hodges to have and to
Estate of Linnie Jane Hodges" as follows:
hold unto him, my said
husband, during his
COMES NOW the Administratrix of the natural lifetime.
Estate of Linnie Jane Hodges and, through
undersigned counsel, unto this Honorable
THIRD: I desire, direct and
Court most respectfully states and manifests:
provide that my husband,
Charles Newton Hodges,
1. That the spouses Charles Newton Hodges shall have the right to
and Linnie Jane Hodges were American manage, control, use and
citizens who died at the City of Iloilo after enjoy said estate during
having amassed and accumulated extensive his lifetime, and, he is
properties in the Philippines; hereby given the right to
make any changes in the
2. That on November 22, 1952, Linnie Jane physical properties of said
Hodges executed a last will and testament estate, by sale of any part
(the original of this will now forms part of the thereof which he may think
records of these proceedings as Exhibit "C" best, and the purchase of
any other or additional
property as he may think
best; to execute
conveyances with or
without general or special
warranty, conveying in fee
simple or for any other
term or time, any property
which he may deem
proper to dispose of; to
lease any of the real
property for oil, gas and/or
other minerals, and all
such deeds or leases shall
pass the absolute fee
simple title to the interest
so conveyed in such
property as he elect to sell.
All rents, emoluments and
income from said estate
shall belong to him, and he
is further authorized to use
any part of the principal of
said estate as he may
need or desire. It is
provided herein, however,
that he shall not sell or
otherwise dispose of any
of the improved property
now owned by us located
at, in or near the City of
Lubbock Texas, but he
shall have the full right to
lease, manage and enjoy
the same during his
lifetime, above provided.
He shall have the right to
subdivide any farm land
and sell lots therein, and
may sell unimproved town
lots.
FOURTH: At the death of
my said husband, Charles
Newton Hodges, I give,
devise and bequeath all of
the rest, residue and
remainder of my estate,
both real and personal,
wherever situated or
located, to be equally
divided among my
brothers and sisters, share
and share alike, namely:
Esta Higdon, Emma
Howell, Leonard Higdon,
Roy Higdon, Sadie
Rascoe, Era Boman and
Nimroy Higdon.
FIFTH: In case of the
death of any of my
brothers and/or sisters
named in item Fourth,
above, prior to the death of
my husband, Charles
Newton Hodges, then it is
my will and bequest that
the heirs of such deceased
brother or sister shall take
jointly the share which
would have gone to such
brother or sister had she or
he survived."
7. That under the provisions of the last will
and testament already above-quoted, Linnie
Jane Hodges gave a life-estate or a usufruct
over all her estate to her husband, Charles
Newton Hodges, and a vested remainder-
estate or the naked title over the same estate
to her relatives named therein;
8. That after the death of Linnie Jane
Hodges and after the admission to probate of
her last will and testament, but during the
lifetime of Charles Newton Hodges, the said
Charles Newton Hodges with full and
complete knowledge of the life-estate or
usufruct conferred upon him by the will since
he was then acting as Administrator of the
estate and later as Executor of the will of
Linnie Jane Hodges, unequivocably and
clearly through oral and written declarations
and sworn public statements, renounced,
disclaimed and repudiated his life-estate and
usufruct over the estate of Linnie Jane
Hodges;
9. That, accordingly, the only heirs left to
receive the estate of Linnie Jane Hodges
pursuant to her last will and testament, are
her named brothers and sisters, or their
heirs, to wit: Esta Higdon, Emma Howell,
Leonard Higdon, Aline Higdon and David
Higdon, the latter two being the wife and son
respectively of the deceased Roy Higdon,
Sadie Rascoe Era Boman and Nimroy
Higdon, all of legal ages, American citizens,
with residence at the State of Texas, United
States of America;
10. That at the time of the death of Linnie
Jane Hodges on May 23, 1957, she was the
co-owner (together with her husband Charles
Newton Hodges) of an undivided one-half
interest in their conjugal properties existing
as of that date, May 23, 1957, which
properties are now being administered
sometimes jointly and sometimes separately
by the Administratrix of the estate of Linnie
Jane Hodges and/or the Administrator of the
estate of C. N. Hodges but all of which are
under the control and supervision of this
Honorable Court;
11. That because there was no separation or
segregation of the interests of husband and
wife in the combined conjugal estate, as
there has been no such separation or
segregation up to the present, both interests
have continually earned exactly the same
amount of "rents, emoluments and income",
the entire estate having been continually
devoted to the business of the spouses as if
they were alive;
12. That the one-half interest of Linnie Jane
Hodges in the combined conjugal estate was
earning "rents, emoluments and income"
until her death on May 23, 1957, when it
ceased to be saddled with any more charges
or expenditures which are purely personal to
her in nature, and her estate kept on earning
such "rents, emoluments and income" by
virtue of their having been expressly
renounced, disclaimed and repudiated by
Charles Newton Hodges to whom they were
bequeathed for life under the last will and
testament of Linnie Jane Hodges;
13. That, on the other hand, the one-half
interest of Charles Newton Hodges in the
combined conjugal estate existing as of May
23, 1957, while it may have earned exactly
the same amount of "rents, emoluments and
income" as that of the share pertaining to
Linnie Jane Hodges, continued to be
burdened by charges, expenditures, and
other dispositions which are purely personal
to him in nature, until the death of Charles
Newton Hodges himself on December 25,
1962;
14. That of all the assets of the combined
conjugal estate of Linnie Jane Hodges and
Charles Newton Hodges as they exist today,
the estate of Linnie Jane Hodges is clearly
entitled to a portion more than fifty percent
(50%) as compared to the portion to which
the estate of Charles Newton Hodges may
be entitled, which portions can be exactly
determined by the following manner:
a. An inventory must be
made of the assets of the
combined conjugal estate
as they existed on the
death of Linnie Jane
Hodges on May 23, 1957
— one-half of these assets
belong to the estate of
Linnie Jane Hodges;
b. An accounting must be
made of the "rents,
emoluments and income"
of all these assets — again
one-half of these belong to
the estate of Linnie Jane
Hodges;
c. Adjustments must be
made, after making a
deduction of charges,
disbursements and other
dispositions made by
Charles Newton Hodges
personally and for his own
personal account from
May 23, 1957 up to
December 25, 1962, as
well as other charges,
disbursements and other
dispositions made for him
and in his behalf since
December 25, 1962 up to
the present;
15. That there remains no other matter for
disposition now insofar as the estate of
Linnie Jane Hodges is concerned but to
complete the liquidation of her estate,
segregate them from the conjugal estate,
and distribute them to her heirs pursuant to
her last will and testament.
WHEREFORE, premises considered, it is
most respectfully moved and prayed that this
Honorable Court, after a hearing on the
factual matters raised by this motion, issue
an order:
a. Declaring the following persons, to wit:
Esta Higdon, Emma Howell, Leonard
Higdon, Aline Higdon, David Higdon, Sadie
Rascoe, Era Boman and Nimroy Higdon, as
the sole heirs under the last will and
testament of Linnie Jane Hodges and as the
only persons entitled to her estate;
b. Determining the exact value of the estate
of Linnie Jane Hodges in accordance with
the system enunciated in paragraph 14 of
this motion;
 c. After such determination ordering its
segregation from the combined conjugal
estate and its delivery to the Administratrix of
the estate of Linnie Jane Hodges for
distribution to the heirs to whom they
properly belong and appertain.
(Green Record on Appeal, pp. 382-391)
whereupon, instead of further pressing on its motion of January
8, 1965 aforequoted, as it had been doing before, petitioner
withdrew the said motion and in addition to opposing the above
motion of respondent Magno, filed a motion on April 22, 1966
alleging in part that:
1. That it has received from the counsel for
the administratrix of the supposed estate of
Linnie Jane Hodges a notice to set her
"Motion for Official Declaration of Heirs of the
Estate of Linnie Jane Hodges";
2. That before the aforesaid motion could be
heard, there are matters pending before this
Honorable Court, such as:
a. The examination
already ordered by this
Honorable Court of
documents relating to the
allegation of Avelina
Magno that Charles
Newton Hodges "through
... written declarations and
sworn public statements,
renounced, disclaimed and
repudiated life-estate and
usufruct over the estate of
Linnie Jane Hodges';
b. That "Urgent Motion for
An Accounting and
Delivery to the Estate of C.
N. Hodges of All the
Assets of the Conjugal
Partnership of the
Deceased Linnie Jane
Hodges and C. N. Hodges
Existing as of May 23,
1957 Plus All the Rents,
Emoluments and Income
Therefrom";
c. Various motions to
resolve the aforesaid
motion;
d. Manifestation of
September 14, 1964,
detailing acts of
interference of Avelina
Magno under color of title
as administratrix of the
Estate of Linnie Jane
Hodges;
which are all prejudicial, and which involve
no issues of fact, all facts involved therein
being matters of record, and therefore
require only the resolution of questions of
law;
3. That whatever claims any alleged heirs or
other persons may have could be very easily
threshed out in the Testate Estate of Charles
Newton Hodges;
4. That the maintenance of two separate
estate proceedings and two administrators
only results in confusion and is unduly
burdensome upon the Testate Estate of
Charles Newton Hodges, particularly
because the bond filed by Avelina Magno is
grossly insufficient to answer for the funds
and property which she has inofficiously
collected and held, as well as those which
she continues to inofficiously collect and
hold;
5. That it is a matter of record that such state
of affairs affects and inconveniences not only
the estate but also third-parties dealing with
it;" (Annex "V", Petition.)
and then, after further reminding the court, by quoting them, of
the relevant allegations of its earlier motion of September 14,
1964, Annex U, prayed that:
1. Immediately order Avelina Magno to
account for and deliver to the administrator
of the Estate of C. N. Hodges all the assets
of the conjugal partnership of the deceased
Linnie Jane Hodges and C. N. Hodges, plus
all the rents, emoluments and income
therefrom;
2. Pending the consideration of this motion,
immediately order Avelina Magno to turn
over all her collections to the administrator
Philippine Commercial & Industrial Bank;
3. Declare the Testate Estate of Linnie Jane
Hodges (Sp. Proc. No. 1307) closed;
4. Defer the hearing and consideration of the
motion for declaration of heirs in the Testate
Estate of Linnie Jane Hodges until the
matters hereinabove set forth are resolved.
(Prayer, Annex "V" of Petition.)
On October 12, 1966, as already indicated at the outset of this
opinion, the respondent court denied the foregoing motion,
holding thus:
ORDER
On record is a motion (Vol. X, Sp. 1672, pp.
4379-4390) dated April 22, 1966 of
administrator PCIB praying that (1)
Immediately order Avelina Magno to account
for and deliver to the administrator of the
estate of C. N. Hodges all assets of the
conjugal partnership of the deceased Linnie
Jane Hodges and C. N. Hodges, plus all the
rents, emoluments and income therefrom; (2)
Pending the consideration of this motion,
immediately order Avelina Magno to turn
over all her collections to the administrator
PCIB; (3) Declare the Testate Estate of
Linnie Jane Hodges (Sp. Proc. No. 1307)
closed; and (4) Defer the hearing and
consideration of the motion for declaration of
heirs in the Testate Estate of Linnie Jane
Hodges until the matters hereinabove set
forth are resolved.
This motion is predicated on the fact that
there are matters pending before this court
such as (a) the examination already ordered
by this Honorable Court of documents
relating to the allegation of Avelina Magno
that Charles Newton Hodges thru written
declaration and sworn public statements
renounced, disclaimed and repudiated his
life-estate and usufruct over the estate of
Linnie Jane Hodges (b) the urgent motion for
accounting and delivery to the estate of C. N.
Hodges of all the assets of the conjugal
partnership of the deceased Linnie Jane
Hodges and C. N. Hodges existing as of May
23, 1957 plus all the rents, emoluments and
income therefrom; (c) various motions to
resolve the aforesaid motion; and (d)
manifestation of September 14, 1964,
detailing acts of interference of Avelina
Magno under color of title as administratrix of
the estate of Linnie Jane Hodges.
These matters, according to the instant
motion, are all pre-judicial involving no
issues of facts and only require the
resolution of question of law; that in the
motion of October 5, 1963 it is alleged that in
a motion dated December 11, 1957 filed by
Atty. Leon Gellada as attorney for the
executor C. N. Hodges, the said executor C.
N. Hodges is not only part owner of the
properties left as conjugal but also the
successor to all the properties left by the
deceased Linnie Jane Hodges.
Said motion of December 11, 1957 was
approved by the Court in consonance with
the wishes contained in the last will and
testament of Linnie Jane Hodges.
That on April 21, 1959 this Court approved
the inventory and accounting submitted by C.
N. Hodges thru counsel Atty. Leon Gellada in
a motion filed on April 14, 1959 stating
therein that executor C. N. Hodges is the
only devisee or legatee of Linnie Jane
Hodges in accordance with the last will and
testament already probated by the Court.
That on July 13, 1960 the Court approved
the annual statement of accounts submitted
by the executor C. N. Hodges thru his
counsel Atty. Gellada on July 21, 1960
wherein it is stated that the executor, C. N.
Hodges is the only devisee or legatee of the
deceased Linnie Jane Hodges; that on May
2, 1961 the Court approved the annual
statement of accounts submitted by
executor, C. N. Hodges for the year 1960
which was submitted by Atty. Gellada on
April 20, 1961 wherein it is stated that
executor Hodges is the only devisee or
legatee of the deceased Linnie Jane
Hodges;
That during the hearing on September 5 and
6, 1963 the estate of C. N. Hodges claimed
all the assets belonging to the deceased
spouses Linnie Jane Hodges and C. N.
Hodges situated in the Philippines; that
administratrix Magno has executed illegal
acts to the prejudice of the testate estate of
C. N. Hodges.
An opposition (Sp. 1672, Vol. X, pp. 4415-
4421) dated April 27, 1966 of administratrix
Magno has been filed asking that the motion
be denied for lack of merit and that the
motion for the official declaration of heirs of
the estate of Linnie Jane Hodges be set for
presentation and reception of evidence.
It is alleged in the aforesaid opposition that
the examination of documents which are in
the possession of administratrix Magno can
be made prior to the hearing of the motion
for the official declaration of heirs of the
estate of Linnie Jane Hodges, during said
hearing.
That the matters raised in the PCIB's motion
of October 5, 1963 (as well as the other
motion) dated September 14, 1964 have
been consolidated for the purpose of
presentation and reception of evidence with
the hearing on the determination of the heirs
of the estate of Linnie Jane Hodges. It is
further alleged in the opposition that the
motion for the official declaration of heirs of
the estate of Linnie Jane Hodges is the one
that constitutes a prejudicial question to the
motions dated October 5 and September 14,
1964 because if said motion is found
meritorious and granted by the Court, the
PCIB's motions of October 5, 1963 and
September 14, 1964 will become moot and
academic since they are premised on the
assumption and claim that the only heir of
Linnie Jane Hodges was C. N. Hodges.
That the PCIB and counsel are estopped
from further questioning the determination of
heirs in the estate of Linnie Jane Hodges at
this stage since it was PCIB as early as
January 8, 1965 which filed a motion for
official declaration of heirs of Linnie Jane
Hodges that the claim of any heirs of Linnie
Jane Hodges can be determined only in the
administration proceedings over the estate of
Linnie Jane Hodges and not that of C. N.
Hodges, since the heirs of Linnie Jane
Hodges are claiming her estate and not the
estate of C. N. Hodges.
A reply (Sp. 1672, Vol. X, pp. 4436-4444)
dated May 11, 1966 of the PCIB has been
filed alleging that the motion dated April 22,
1966 of the PCIB is not to seek deferment of
the hearing and consideration of the motion
for official declaration of heirs of Linnie Jane
Hodges but to declare the testate estate of
Linnie Jane Hodges closed and for
administratrix Magno to account for and
deliver to the PCIB all assets of the conjugal
partnership of the deceased spouses which
has come to her possession plus all rents
and income.
A rejoinder (Sp. 1672, Vol. X, pp. 4458-4462)
of administratrix Magno dated May 19, 1966
has been filed alleging that the motion dated
December 11, 1957 only sought the approval
of all conveyances made by C. N. Hodges
and requested the Court authority for all
subsequent conveyances that will be
executed by C. N. Hodges; that the order
dated December 14, 1957 only approved the
conveyances made by C. N. Hodges; that C.
N. Hodges represented by counsel never
made any claim in the estate of Linnie Jane
Hodges and never filed a motion to declare
himself as the heir of the said Linnie Jane
Hodges despite the lapse of more than five
(5) years after the death of Linnie Jane
Hodges; that it is further alleged in the
rejoinder that there can be no order of
adjudication of the estate unless there has
been a prior express declaration of heirs and
so far no declaration of heirs in the estate of
Linnie Jane Hodges (Sp. 1307) has been
made.
Considering the allegations and arguments
in the motion and of the PCIB as well as
those in the opposition and rejoinder of
administratrix Magno, the Court finds the
opposition and rejoinder to be well taken for
the reason that so far there has been no
official declaration of heirs in the testate
estate of Linnie Jane Hodges and therefore
no disposition of her estate.
WHEREFORE, the motion of the PCIB dated
April 22, 1966 is hereby DENIED.
(Annex "W", Petition)
In its motion dated November 24, 1966 for the reconsideration
of this order, petitioner alleged inter alia that:
It cannot be over-stressed that the motion of
December 11, 1957 was based on the fact
that:
a. Under the last will and
testament of the
deceased, Linnie Jane
Hodges, the late Charles
Newton Hodges was the
sole heir instituted insofar
as her properties in the
Philippines are concerned;
b. Said last will and
testament vested upon the
said late Charles Newton
Hodges rights over said
properties which, in sum,
spell ownership, absolute
and in fee simple;
c. Said late Charles
Newton Hodges was,
therefore, "not only part
owner of the properties left
as conjugal, but also, the
successor to all the
properties left by the
deceased Linnie Jane
Hodges.
 Likewise, it cannot be over-stressed that the
aforesaid motion was granted by this
Honorable Court "for the reasons stated"
therein.
Again, the motion of December 11, 1957
prayed that not only "all the sales,
conveyances, leases, and mortgages
executed by" the late Charles Newton
Hodges, but also all "the subsequent sales,
conveyances, leases, and mortgages ..." be
approved and authorized. This Honorable
Court, in its order of December 14, 1957, "for
the reasons stated" in the aforesaid motion,
granted the same, and not only approved all
the sales, conveyances, leases and
mortgages of all properties left by the
deceased Linnie Jane Hodges executed by
the late Charles Newton Hodges, but also
authorized "all subsequent sales,
conveyances, leases and mortgages of the
properties left by the said deceased Linnie
Jane Hodges. (Annex "X", Petition)
and reiterated its fundamental pose that the Testate Estate of
Linnie Jane Hodges had already been factually, although not
legally, closed with the virtual declaration of Hodges and
adjudication to him, as sole universal heir of all the properties
of the estate of his wife, in the order of December 14, 1957,
Annex G. Still unpersuaded, on July 18, 1967, respondent
court denied said motion for reconsideration and held that "the
court believes that there is no justification why the order of
October 12, 1966 should be considered or modified", and, on
July 19, 1967, the motion of respondent Magno "for official
declaration of heirs of the estate of Linnie Jane Hodges",
already referred to above, was set for hearing.
In consequence of all these developments, the present petition
was filed on August 1, 1967 (albeit petitioner had to pay
another docketing fee on August 9, 1967, since the orders in
question were issued in two separate testate estate
proceedings, Nos. 1307 and 1672, in the court below).
Together with such petition, there are now pending before Us
for resolution herein, appeals from the following:
1. The order of December 19, 1964
authorizing payment by respondent Magno
of overtime pay, (pp. 221, Green Record on
Appeal) together with the subsequent orders
of January 9, 1965, (pp. 231-232, id.)
October 27, 1965, (pp. 227, id.) and
February 15, 1966 (pp. 455-456, id.)
repeatedly denying motions for
reconsideration thereof.
2. The order of August 6, 1965 (pp. 248, id.)
requiring that deeds executed by petitioner to
be co-signed by respondent Magno, as well
as the order of October 27, 1965 (pp. 276-
277) denying reconsideration.
3. The order of October 27, 1965 (pp. 292-
295, id.) enjoining the deposit of all
collections in a joint account and the same
order of February 15, 1966 mentioned in No.
1 above which included the denial of the
reconsideration of this order of October 27,
1965.
4. The order of November 3, 1965 (pp. 313-
320, id.) directing the payment of attorney's
fees, fees of the respondent administratrix,
etc. and the order of February 16, 1966
denying reconsideration thereof.
5. The order of November 23, 1965 (pp. 334-
335, id.) allowing appellee Western Institute
of Technology to make payments to either
one or both of the administrators of the two
estates as well as the order of March 7, 1966
(p. 462, id.) denying reconsideration.
6. The various orders hereinabove earlier
enumerated approving deeds of sale
executed by respondent Magno in favor of
appellees Carles, Catedral, Pablito, Guzman,
Coronado, Barrido, Causing, Javier, Lucero
and Batisanan, (see pp. 35 to 37 of this
opinion), together with the two separate
orders both dated December 2, 1966 (pp.
306-308, and pp. 308-309, Yellow Record on
Appeal) denying reconsideration of said
approval.
7. The order of January 3, 1967, on pp. 335-
336, Yellow Record on Appeal, approving
similar deeds of sale executed by
respondent Magno, as those in No. 6, in
favor of appellees Pacaonsis and
Premaylon, as to which no motion for
reconsideration was filed.
8. Lastly, the order of December 2, 1966, on
pp. 305-306, Yellow Record on Appeal,
directing petitioner to surrender to appellees
Lucero, Batisanan, Javier, Pablito, Barrido,
Catedral, Causing, Guzman, and Coronado,
the certificates of title covering the lands
involved in the approved sales, as to which
no motion for reconsideration was filed
either.
Strictly speaking, and considering that the above orders deal
with different matters, just as they affect distinctly different
individuals or persons, as outlined by petitioner in its brief as
appellant on pp. 12-20 thereof, there are, therefore, thirty-three
(33) appeals before Us, for which reason, petitioner has to pay (LOT NO. 104), EXECUTED BY THE
also thirty-one (31) more docket fees. APPELLEE, AVELINA A. MAGNO,
COVERING PARCELS OF LAND OWNED
It is as well perhaps to state here as elsewhere in this opinion BY THE DECEASED, CHARLES NEWTON
that in connection with these appeals, petitioner has assigned HODGES, AND THE CONTRACTS TO
a total of seventy-eight (LXXVIII) alleged errors, the respective SELL COVERING WHICH WERE
discussions and arguments under all of them covering also the EXECUTED BY HIM DURING HIS
fundamental issues raised in respect to the petition for LIFETIME.
certiorari and prohibition, thus making it feasible and more
practical for the Court to dispose of all these cases together.4 XVI to XVIII

The assignments of error read thus: THE LOWER COURT ERRED IN

APPROVING THE DEEDS OF SALE IN
I to IV FAVOR OF THE APPELLEES ADELFA
PREMAYLON (LOT NO. 102), SANTIAGO
THE ORDER COURT ERRED IN PACAONSIS, AND ADELFA PREMAYLON
APPROVING THE FINAL DEEDS OF SALE (LOT NO. 104) COVERING PARCELS OF
IN FAVOR OF THE APPELLEES, PEPITO LAND FOR WHICH THEY HAVE NEVER
G. IYULORES, ESPIRIDION PARTISALA, PAID IN FULL IN ACCORDANCE WITH
WINIFREDO C. ESPADA AND ROSARIO THE ORIGINAL CONTRACTS TO SELL.
ALINGASA, EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, XIX to XXI
COVERING PARCELS OF LAND OWNED
BY THE DECEASED, CHARLES NEWTON THE LOWER COURT ERRED IN
HODGES, AND THE CONTRACTS TO DETERMINING THE RIGHTS OF
SELL COVERING WHICH WERE OWNERSHIP OVER REAL PROPERTY OF
EXECUTED BY HIM DURING HIS THE APPELLEES ADELFA PREMAYLON
LIFETIME. (LOT NO. 102), SANTIAGO PACAONSIS,
AND ADELFA PREMAYLON (LOT NO. 104)
V to VIII WHILE ACTING AS A PROBATE COURT.

THE LOWER COURT ERRED IN XXII to XXV

APPROVING THE DEEDS OF SALE IN
FAVOR OF THE APPELLEES, PEPITO G. THE LOWER COURT ERRED IN
IYULORES, ESPIRIDION PARTISALA, APPROVING THE FINAL DEEDS OF SALE
WINIFREDO C. ESPADA AND ROSARIO IN FAVOR OF THE APPELLEES LORENZO
ALINGASA, COVERING PARCELS OF CARLES, JOSE PABLICO, ALFREDO
LAND FOR WHICH THEY HAVE NEVER CATEDRAL AND SALVADOR S. GUZMAN,
PAID IN FULL IN ACCORDANCE WITH EXECUTED BY THE APPELLEE, AVELINA
THE ORIGINAL CONTRACTS TO SELL. A. MAGNO, COVERING PARCELS OF
LAND OWNED BY THE DECEASED,
IX to XII CHARLES NEWTON HODGES, AND THE
CONTRACTS TO SELL COVERING WHICH
THE LOWER COURT ERRED IN WERE EXECUTED BY HIM DURING HIS
DETERMINING THE RIGHTS OF LIFETIME.
OWNERSHIP OVER REAL PROPERTY OF
THE APPELLEES, PEPITO G. IYULORES, XXVI to XXIX
ESPIRIDION PARTISALA, WINIFREDO C.
ESPADA AND ROSARIO ALINGASA, THE LOWER COURT ERRED IN
WHILE ACTING AS A PROBATE COURT. APPROVING THE FINAL DEED OF SALE
EXECUTED IN FAVOR OF THE
XIII to XV APPELLEES, LORENZO CARLES, JOSE
PABLICO, ALFREDO CATEDRAL AND
THE LOWER COURT ERRED IN SALVADOR S. GUZMAN PURSUANT TO
APPROVING THE FINAL DEEDS OF SALE CONTRACTS TO SPELL WHICH WERE
IN FAVOR OF THE APPELLEES ADELFA CANCELLED AND RESCINDED.
PREMAYLON (LOT NO. 102), SANTIAGO
PACAONSIS, AND ADELFA PREMAYLON XXX to XXXIV
 THE LOWER COURT ERRED IN CHARLES NEWTON HODGES, AND THE
DETERMINING THE RIGHTS OF CONTRACTS TO SELL COVERING WHICH
OWNERSHIP OVER REAL PROPERTY OF WERE EXECUTED BY HIM DURING HIS
THE LORENZO CARLES, JOSE PABLICO, LIFETIME.
ALFREDO CATEDRAL AND SALVADOR S.
GUZMAN, WHILE ACTING AS A PROBATE XLIV to XLVI
COURT.
THE LOWER COURT ERRED IN
XXXV to XXXVI APPROVING THE FINAL DEED OF SALE
IN FAVOR OF THE APPELLEES,
THE LOWER COURT ERRED IN GRACIANO LUCERO, ARITEO THOMAS
APPROVING THE FINAL DEEDS OF SALE JAMIR AND MELQUIADES BATISANAN,
IN FAVOR OF THE APPELLEES, PURSUANT TO CONTRACTS TO SELL
FLORENIA BARRIDO AND PURIFICACION EXECUTED BY THEM WITH THE
CORONADO, EXECUTED BY THE DECEASED, CHARLES NEWTON
APPELLEE, AVELINA A. MAGNO, HODGES, THE TERMS AND CONDITIONS
COVERING PARCELS OF LAND OWNED OF WHICH THEY HAVE NEVER
BY THE DECEASED, CHARLES NEWTON COMPLIED WITH.
HODGES, AND THE CONTRACTS TO
SELL COVERING WHICH WERE XLVII to XLIX
EXECUTED BY HIM DURING HIS
LIFETIME. THE LOWER COURT ERRED IN
DEPRIVING THE DECEASED, CHARLES
XXXVII to XXXVIII NEWTON HODGES, OF HIS RIGHT,
EXERCISED THROUGH HIS
THE LOWER COURT ERRED IN ADMINISTRATION, THE INSTANT
APPROVING THE DEEDS OF SALE IN APPELLANT, TO CANCEL THE
FAVOR OF THE APPELLEES, FLORENIA CONTRACTS TO SELL OF THE
BARRIDO AND PURIFICACION APPELLEES, GRACIANO LUCERO,
CORONADO, ALTHOUGH THEY WERE IN ARITEO THOMAS JAMIR AND
ARREARS IN THE PAYMENTS AGREED MELQUIADES BATISANAN, AND IN
UPON IN THE ORIGINAL CONTRACT TO DETERMINING THE RIGHTS OF THE SAID
SELL WHICH THEY EXECUTED WITH THE APPELLEES OVER REAL PROPERTY
DECEASED, CHARLES NEWTON WHILE ACTING AS A PROBATE COURT.
HODGES, IN THE AMOUNT OF P10,680.00
and P4,428.90, RESPECTIVELY. L

XXXIX to XL THE LOWER COURT ERRED IN

APPROVING THE FINAL DEEDS OF SALE
THE LOWER COURT ERRED IN IN FAVOR OF THE APPELLEE, BELCESAR
DEPRIVING THE DECEASED, CHARLES CAUSING, EXECUTED BY THE
NEWTON HODGES, OF THE APPELLEE, AVELINA A. MAGNO,
CONTRACTUAL RIGHT, EXERCISED COVERING PARCELS OF LAND OWNED
THROUGH HIS ADMINISTRATOR, THE BY THE DECEASED, CHARLES NEWTON
INSTANT APPELLANT, TO CANCEL THE HODGES, AND THE CONTRACTS TO
CONTRACTS TO SELL OF THE SELL COVERING WHICH WERE
APPELLEES, FLORENIA BARRIDO AND EXECUTED BY HIM DURING HIS
PURIFICACION CORONADO. LIFETIME.

XLI to XLIII LI

THE LOWER COURT ERRED IN THE LOWER COURT ERRED IN

APPROVING THE FINAL DEEDS OF SALE
IN FAVOR OF THE APPELLEES,
GRACIANO LUCERO, ARITEO THOMAS
JAMIR AND MELQUIADES BATISANAN,
EXECUTED BY THE APPELLEE, AVELINA
A. MAGNO, COVERING PARCELS OF
LAND OWNED BY THE DECEASED,
APPROVING THE DEEDS OF SALE IN
FAVOR OF THE APPELLEE, BELCESAR
CAUSING, ALTHOUGH HE WAS IN
ARREARS IN THE PAYMENTS AGREED
UPON IN THE ORIGINAL CONTRACT TO
SELL WHICH HE EXECUTED WITH THE
 DECEASED, CHARLES NEWTON MOTION, DATED NOVEMBER 3, 1965, IN
HODGES, IN THE AMOUNT OF P2,337.50. THE ABSENCE OF A PRAYER FOR
GENERAL RELIEF CONTAINED THEREIN.
LII
LXV
THE LOWER COURT ERRED IN
APPROVING THE DEED OF SALE IN THE LOWER COURT ERRED IN
FAVOR OF THE APPELLEE, BELCESAR ALLOWING THE APPELLEE, WESTERN
CAUSING, ALTHOUGH THE SAME WAS INSTITUTE OF TECHNOLOGY, TO
NOT EXECUTED IN ACCORDANCE WITH CONTINUE PAYMENTS UPON A
THE RULES OF COURT. CONTRACT TO SELL THE TERMS AND
CONDITIONS OF WHICH IT HAS FAILED
LIII to LXI TO FULFILL.

THE LOWER COURT ERRED IN LXVI

ORDERING THE APPELLANT, PHILIPPINE
COMMERCIAL AND INDUSTRIAL BANK THE LOWER COURT ERRED IN
TO SURRENDER THE OWNER'S DETERMINING THE RIGHTS OF THE
DUPLICATE CERTIFICATES OF TITLE APPELLEE, WESTERN INSTITUTE OF
OVER THE RESPECTIVE LOTS COVERED TECHNOLOGY OVER THE REAL
BY THE DEEDS OF SALE EXECUTED BY PROPERTY SUBJECT MATTER OF THE
THE APPELLEE, AVELINA A. MAGNO, IN CONTRACT TO SELL IT EXECUTED WITH
FAVOR OF THE OTHER APPELLEES, THE DECEASED, CHARLES NEWTON
JOSE PABLICO, ALFREDO CATEDRAL, HODGES, WHILE ACTING AS A PROBATE
SALVADOR S. GUZMAN, FLRENIA COURT.
BARRIDO, PURIFICACION CORONADO,
BELCESAR CAUSING, ARITEO THOMAS LXVII
JAMIR, MAXIMA BATISANAN AND
GRACIANO L. LUCERO. LOWER COURT ERRED IN ALLOWING
THE CONTINUATION OF PAYMENTS BY
LXII THE APPELLEE, WESTERN INSTITUTE
OF TECHNOLOGY, UPON A CONTRACT
THE LOWER COURT ERRED IN TO SELL EXECUTED BY IT AND THE
RESOLVING THE MOTION OF THE DECEASED, CHARLES NEWTON
APPELLEE, WESTERN INSTITUTE OF HODGES, TO A PERSON OTHER THAN
TECHNOLOGY, DATED NOVEMBER 3, HIS LAWFULLY APPOINTED
1965, WITHOUT ANY COPY THEREOF ADMINISTRATOR.
HAVING BEEN SERVED UPON THE
APPELLANT, PHILIPPINE COMMERCIAL & LXVIII
INDUSTRIAL BANK.
THE LOWER COURT ERRED IN
LXIII ORDERING THE PAYMENT OF
RETAINER'S FEES FROM THE
THE LOWER COURT ERRED IN HEARING SUPPOSED ESTATE OF THE DECEASED,
AND CONSIDERING THE MOTION OF THE LINNIE JANE HODGES, WHEN THERE IS
APPELLEE, WESTERN INSTITUTE OF NEITHER SUCH ESTATE NOR ASSETS
TECHNOLOGY, DATED NOVEMBER 3rd, THEREOF.
1965, ON NOVEMBER 23, 1965, WHEN
THE NOTICE FOR THE HEARING LXIX
THEREOF WAS FOR NOVEMBER 20,
1965. THE LOWER COURT ERRED IN
ORDERING THE PAYMENT OF
LXIV RETAINER'S FEES OF LAWYERS OF
ALLEGED HEIRS TO THE SUPPOSED
THE LOWER COURT ERRED IN ESTATE OF THE DECEASED, LINNIE
GRANTING THE APPELLEE, WESTERN JANE HODGES.
INSTITUTE OF TECHNOLOGY A RELIEF
OTHER THAN THAT PRAYED FOR IN ITS LXX
 THE LOWER COURT ERRED IN LXXVI
IMPLEMENTING THE ALLEGED
AGREEMENT BETWEEN THE HEIRS OF THE LOWER COURT ERRED IN
THE SUPPOSED ESTATE OF THE ORDERING THE PAYMENT OF
DECEASED, LINNIE JANE HODGES, AND COMPENSATION TO THE PURPORTED
THEIR LAWYERS. ADMINISTRATRIX OF THE SUPPOSED
ESTATE OF THE DECEASED, LINNIE
LXXI JANE HODGES, THE INSTANT APPELLEE,
AVELINA A. MAGNO, WHEN THERE IS
THE LOWER COURT ERRED IN NEITHER SUCH ESTATE NOR ASSETS
ORDERING THE PREMATURE THEREOF.
DISTRIBUTION OF ESTATE ASSETS TO
ALLEGED HEIRS OR BENEFICIARIES LXXVII
THEREOF, BY WAY OF RETAINER'S
FEES. THE LOWER COURT ERRED IN
ORDERING THAT THE FUNDS OF THE
LXXII TESTATE ESTATE OF THE DECEASED,
CHARLES NEWTON HODGES, BE
THE LOWER COURT ERRED IN PLACED IN A JOINT ACCOUNT OF THE
ORDERING THAT ALL FINAL DEEDS OF APPELLANT, PHILIPPINE COMMERCIAL
SALE EXECUTED PURSUANT TO AND INDUSTRIAL BANK, AND THE
CONTRACTS TO SELL ENTERED INTO BY APPELLEE, AVELINA A. MAGNO, WHO IS
THE DECEASED, CHARLES NEWTON A COMPLETE STRANGER TO THE
HODGES, DURING HIS LIFETIME, BE AFORESAID ESTATE.
SIGNED JOINTLY BY THE APPELLEE,
AVELINA A. MAGNO, AND THE LXXVIII
APPELLANT, PHILIPPINE COMMERCIAL
AND INDUSTRIAL BANK, AND NOT BY THE LOWER COURT ERRED IN
THE LATTER ONLY AS THE LAWFULLY ORDERING THAT THE APPELLEE,
APPOINTED ADMINISTRATOR OF HIS AVELINA A. MAGNO, BE GIVEN EQUAL
ESTATE. ACCESS TO THE RECORDS OF THE
TESTATE ESTATE OF THE DECEASED,
LXXIII CHARLES NEWTON HODGES, WHEN SHE
IS A COMPLETE STRANGER TO THE
THE LOWER COURT ERRED IN AFORESAID ESTATE. (Pp. 73-83,
ORDERING THE PAYMENT OF LEGAL Appellant's Brief.)
EXPENSES FROM THE SUPPOSED
ESTATE OF THE DECEASED, LINNIE To complete this rather elaborate, and unavoidably extended
JANE HODGES, WHEN THERE IS narration of the factual setting of these cases, it may also be
NEITHER SUCH ESTATE NOR ASSETS mentioned that an attempt was made by the heirs of Mrs.
THEREOF. Hodges to have respondent Magno removed as administratrix,
with the proposed appointment of Benito J. Lopez in her place,
LXXIV and that respondent court did actually order such proposed
replacement, but the Court declared the said order of
THE LOWER COURT ERRED IN respondent court violative of its injunction of August 8, 1967,
ORDERING THE PAYMENT OF LEGAL hence without force and effect (see Resolution of September 8,
EXPENSES OF LAWYERS OF ALLEGED 1972 and February 1, 1973). Subsequently, Atty. Efrain B.
HEIRS TO THE SUPPOSED ESTATE OF Trenas, one of the lawyers of said heirs, appeared no longer
THE DECEASED, LINNIE JANE HODGES. for the proposed administrator Lopez but for the heirs
themselves, and in a motion dated October 26, 1972 informed
the Court that a motion had been filed with respondent court for
LXXV
the removal of petitioner PCIB as administrator of the estate of
C. N. Hodges in Special Proceedings 1672, which removal
THE LOWER COURT ERRED IN motion alleged that 22.968149% of the share of C. N. Hodges
ORDERING THE PREMATURE had already been acquired by the heirs of Mrs. Hodges from
DISTRIBUTION OF ESTATE ASSETS TO certain heirs of her husband. Further, in this connection, in the
ALLEGED HEIRS OR BENEFICIARIES answer of PCIB to the motion of respondent Magno to have it
THEREOF, BY WAY OF LEGAL declared in contempt for disregarding the Court's resolution of
EXPENSES. September 8, 1972 modifying the injunction of August 8, 1967,
said petitioner annexed thereto a joint manifestation and
motion, appearing to have been filed with respondent court,
informing said court that in addition to the fact that 22% of the
share of C. N. Hodges had already been bought by the heirs of
Mrs. Hodges, as already stated, certain other heirs of Hodges
representing 17.343750% of his estate were joining cause with
the heirs of Mrs. Hodges as against PCIB, thereby making
somewhat precarious, if not possibly untenable, petitioners'
continuation as administrator of the Hodges estate.
RESOLUTION OF ISSUES IN THE CERTIORARI AND
PROHIBITION CASES
I the petition as well as in its main brief as appellant.
As to the Alleged Tardiness
of the Present Appeals
The priority question raised by respondent Magno relates to
the alleged tardiness of all the aforementioned thirty-three
appeals of PCIB. Considering, however, that these appeals
revolve around practically the same main issues and that it is
admitted that some of them have been timely taken, and,
moreover, their final results hereinbelow to be stated and
explained make it of no consequence whether or not the orders
concerned have become final by the lapsing of the respective
periods to appeal them, We do not deem it necessary to pass
upon the timeliness of any of said appeals.
II
The Propriety Here of Certiorari and
Prohibition instead of Appeal
The other preliminary point of the same respondent is alleged
impropriety of the special civil action of certiorari and
prohibition in view of the existence of the remedy of appeal
which it claims is proven by the very appeals now before Us.
Such contention fails to take into account that there is a
common thread among the basic issues involved in all these
thirty-three appeals which, unless resolved in one single
proceeding, will inevitably cause the proliferation of more or
less similar or closely related incidents and consequent
eventual appeals. If for this consideration alone, and without
taking account anymore of the unnecessary additional effort,
expense and time which would be involved in as many
individual appeals as the number of such incidents, it is logical
and proper to hold, as We do hold, that the remedy of appeal is
not adequate in the present cases. In determining whether or
not a special civil action of certiorari or prohibition may be
resorted to in lieu of appeal, in instances wherein lack or
excess of jurisdiction or grave abuse of discretion is alleged, it
is not enough that the remedy of appeal exists or is possible. It
is indispensable that taking all the relevant circumstances of
the given case, appeal would better serve the interests of
justice. Obviously, the longer delay, augmented expense and
trouble and unnecessary repetition of the same work attendant
to the present multiple appeals, which, after all, deal with
practically the same basic issues that can be more
expeditiously resolved or determined in a single special civil
action, make the remedies of certiorari and prohibition, pursued
by petitioner, preferable, for purposes of resolving the common
basic issues raised in all of them, despite the conceded
availability of appeal. Besides, the settling of such common
fundamental issues would naturally minimize the areas of
conflict between the parties and render more simple the
determination of the secondary issues in each of them.
Accordingly, respondent Magno's objection to the present
remedy of certiorari and prohibition must be overruled.
We come now to the errors assigned by petitioner-appellant,
Philippine Commercial & Industrial Bank, (PCIB, for short) in
III
On Whether or Not There is Still Any Part of the Testate
Estate Mrs. Hodges that may be Adjudicated to her brothers
and sisters as her estate, of which respondent Magno is the
unquestioned Administratrix in special Proceedings 1307.
In the petition, it is the position of PCIB that the respondent
court exceeded its jurisdiction or gravely abused its discretion
in further recognizing after December 14, 1957 the existence of
the Testate Estate of Linnie Jane Hodges and in sanctioning
purported acts of administration therein of respondent Magno.
Main ground for such posture is that by the aforequoted order
of respondent court of said date, Hodges was already allowed
to assert and exercise all his rights as universal heir of his wife
pursuant to the provisions of her will, quoted earlier, hence,
nothing else remains to be done in Special Proceedings 1307
except to formally close it. In other words, the contention of
PCIB is that in view of said order, nothing more than a formal
declaration of Hodges as sole and exclusive heir of his wife
and the consequent formal unqualified adjudication to him of all
her estate remain to be done to completely close Special
Proceedings 1307, hence respondent Magno should be
considered as having ceased to be Administratrix of the
Testate Estate of Mrs. Hodges since then.
After carefully going over the record, We feel constrained to
hold that such pose is patently untenable from whatever angle
it is examined.
To start with, We cannot find anywhere in respondent Order of
December 14, 1957 the sense being read into it by PCIB. The
tenor of said order bears no suggestion at all to such effect.
The declaration of heirs and distribution by the probate court of
the estate of a decedent is its most important function, and this
Court is not disposed to encourage judges of probate
proceedings to be less than definite, plain and specific in
making orders in such regard, if for no other reason than that
all parties concerned, like the heirs, the creditors, and most of
all the government, the devisees and legatees, should know
with certainty what are and when their respective rights and
obligations ensuing from the inheritance or in relation thereto
would begin or cease, as the case may be, thereby avoiding
precisely the legal complications and consequent litigations
similar to those that have developed unnecessarily in the
present cases. While it is true that in instances wherein all the
parties interested in the estate of a deceased person have
already actually distributed among themselves their respective
shares therein to the satisfaction of everyone concerned and
no rights of creditors or third parties are adversely affected, it
would naturally be almost ministerial for the court to issue the
final order of declaration and distribution, still it is inconceivable
that the special proceeding instituted for the purpose may be
considered terminated, the respective rights of all the parties
concerned be deemed definitely settled, and the executor or
administrator thereof be regarded as automatically discharged
and relieved already of all functions and responsibilities without
the corresponding definite orders of the probate court to such
effect.
Indeed, the law on the matter is specific, categorical and
unequivocal. Section 1 of Rule 90 provides:
SECTION 1. When order for distribution of
residue made. — When the debts, funeral
charges, and expenses of administration, the
allowance to the widow and inheritance tax,
if any, chargeable to the estate in
accordance with law have been paid, the
court, on the application of the executor or
administrator, or of a person interested in the
estate, and after hearing upon notice, shall
assign the residue of the estate to the
persons entitled to the same, naming them
and the proportions, or parts, to which each
is entitled, and such persons may demand
and recover their respective shares from the
executor or administrator, or any other
person having the same in his possession. If
there is a controversy before the court as to
who are the lawful heirs of the deceased
person or as to the distributive shares to
which each person is entitled under the law,
the controversy shall be heard and decided
as in ordinary cases.
No distribution shall be allowed until the
payment of the obligations above mentioned
has been made or provided for, unless the
distributees, or any of them give a bond, in a
sum to be fixed by the court, conditioned for
the payment of said obligations within such
time as the court directs.
These provisions cannot mean anything less than that in order
that a proceeding for the settlement of the estate of a
deceased may be deemed ready for final closure, (1) there
should have been issued already an order of distribution or
assignment of the estate of the decedent among or to those
entitled thereto by will or by law, but (2) such order shall not be
issued until after it is shown that the "debts, funeral expenses,
expenses of administration, allowances, taxes, etc. chargeable
to the estate" have been paid, which is but logical and proper.
(3) Besides, such an order is usually issued upon proper and
specific application for the purpose of the interested party or
parties, and not of the court.
... it is only after, and not before, the
payment of all debts, funeral charges,
expenses of administration, allowance to the
widow, and inheritance tax shall have been
effected that the court should make a
declaration of heirs or of such persons as are
entitled by law to the residue. (Moran,
Comments on the Rules of Court, 2nd ed.,
Vol. II, p. 397, citing Capistrano vs.
Nadurata, 49 Phil., 726; Lopez vs. Lopez, 37
Off. Gaz., 3091.) (JIMOGA-ON v.
BELMONTE, 84 Phil. 545, 548) (p. 86,
Appellee's Brief)
xxx xxx xxx
Under Section 753 of the Code of Civil
Procedure, (corresponding to Section 1, Rule
90) what brings an intestate (or testate)
proceeding to a close is the order of
distribution directing delivery of the residue
to the persons entitled thereto after paying
the indebtedness, if any, left by the
deceased. (Santiesteban vs. Santiesteban,
68 Phil. 367, 370.)
In the cases at bar, We cannot discern from the voluminous
and varied facts, pleadings and orders before Us that the
above indispensable prerequisites for the declaration of heirs
and the adjudication of the estate of Mrs. Hodges had already
been complied with when the order of December 14, 1957 was
issued. As already stated, We are not persuaded that the
proceedings leading to the issuance of said order, constituting
barely of the motion of May 27, 1957, Annex D of the petition,
the order of even date, Annex E, and the motion of December
11, 1957, Annex H, all aforequoted, are what the law
contemplates. We cannot see in the order of December 14,
1957, so much relied upon by the petitioner, anything more
than an explicit approval of "all the sales, conveyances, leases
and mortgages of all the properties left by the deceased Linnie
Jane Hodges executed by the Executor Charles N. Hodges"
(after the death of his wife and prior to the date of the motion),
plus a general advance authorization to enable said "Executor
— to execute subsequent sales, conveyances, leases and
mortgages of the properties left the said deceased Linnie Jane
Hodges in consonance with wishes conveyed in the last will
and testament of the latter", which, certainly, cannot amount to
the order of adjudication of the estate of the decedent to
Hodges contemplated in the law. In fact, the motion of
December 11, 1957 on which the court predicated the order in
question did not pray for any such adjudication at all. What is
more, although said motion did allege that "herein Executor
(Hodges) is not only part owner of the properties left as
conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges", it significantly added that
"herein Executor, as Legatee (sic), has the right to sell, convey,
lease or dispose of the properties in the Philippines — during
his lifetime", thereby indicating that what said motion
contemplated was nothing more than either the enjoyment by
Hodges of his rights under the particular portion of the
dispositions of his wife's will which were to be operative only
during his lifetime or the use of his own share of the conjugal
estate, pending the termination of the proceedings. In other
words, the authority referred to in said motions and orders is in
the nature of that contemplated either in Section 2 of Rule 109
which permits, in appropriate cases, advance or partial
implementation of the terms of a duly probated will before final
adjudication or distribution when the rights of third parties
would not be adversely affected thereby or in the established
practice of allowing the surviving spouse to dispose of his own
share of he conjugal estate, pending its final liquidation, when it
appears that no creditors of the conjugal partnership would be
prejudiced thereby, (see the Revised Rules of Court by
Francisco, Vol. V-B, 1970 ed. p. 887) albeit, from the tenor of
said motions, We are more inclined to believe that Hodges
meant to refer to the former. In any event, We are fully
persuaded that the quoted allegations of said motions read
together cannot be construed as a repudiation of the rights
unequivocally established in the will in favor of Mrs. Hodges'
brothers and sisters to whatever have not been disposed of by
him up to his death.
Indeed, nowhere in the record does it appear that the trial court
subsequently acted upon the premise suggested by petitioner.
On the contrary, on November 23, 1965, when the court
resolved the motion of appellee Western Institute of
Technology by its order We have quoted earlier, it categorically
held that as of said date, November 23, 1965, "in both cases
(Special Proceedings 1307 and 1672) there is as yet no judicial
declaration of heirs nor distribution of properties to
whomsoever are entitled thereto." In this connection, it may be
stated further against petitioner, by way of some kind of
estoppel, that in its own motion of January 8, 1965, already
quoted in full on pages 54-67 of this decision, it prayed inter
alia that the court declare that "C. N. Hodges was the sole and
exclusive heir of the estate of Linnie Jane Hodges", which it
would not have done if it were really convinced that the order of
December 14, 1957 was already the order of adjudication and
distribution of her estate. That said motion was later withdrawn
when Magno filed her own motion for determination and
adjudication of what should correspond to the brothers and
sisters of Mrs. Hodges does not alter the indubitable
implication of the prayer of the withdrawn motion.
It must be borne in mind that while it is true that Mrs. Hodges
bequeathed her whole estate to her husband and gave him
what amounts to full powers of dominion over the same during
his lifetime, she imposed at the same time the condition that
whatever should remain thereof upon his death should go to
her brothers and sisters. In effect, therefore, what was
absolutely given to Hodges was only so much of his wife's
estate as he might possibly dispose of during his lifetime;
hence, even assuming that by the allegations in his motion, he
did intend to adjudicate the whole estate to himself, as
suggested by petitioner, such unilateral act could not have
affected or diminished in any degree or manner the right of his
brothers and sisters-in-law over what would remain thereof
upon his death, for surely, no one can rightly contend that the
testamentary provision in question allowed him to so adjudicate
any part of the estate to himself as to prejudice them. In other
words, irrespective of whatever might have been Hodges'
intention in his motions, as Executor, of May 27, 1957 and
December 11, 1957, the trial court's orders granting said
motions, even in the terms in which they have been worded,
could not have had the effect of an absolute and unconditional
adjudication unto Hodges of the whole estate of his wife. None
of them could have deprived his brothers and sisters-in-law of
their rights under said will. And it may be added here that the
fact that no one appeared to oppose the motions in question
may only be attributed, firstly, to the failure of Hodges to send
notices to any of them, as admitted in the motion itself, and,
secondly, to the fact that even if they had been notified, they
could not have taken said motions to be for the final distribution
and adjudication of the estate, but merely for him to be able,
pending such final distribution and adjudication, to either
exercise during his lifetime rights of dominion over his wife's
estate in accordance with the bequest in his favor, which, as
already observed, may be allowed under the broad terms of
Section 2 of Rule 109, or make use of his own share of the
conjugal estate. In any event, We do not believe that the trial
court could have acted in the sense pretended by petitioner,
not only because of the clear language of the will but also
because none of the interested parties had been duly notified
of the motion and hearing thereof. Stated differently, if the
orders of May 27, 1957 and December 4, 1957 were really
intended to be read in the sense contended by petitioner, We
would have no hesitancy in declaring them null and void.
Petitioner cites the case of Austria vs. Ventenilla, G. R. No. L-
10018, September 19, 1956, (unreported but a partial digest
thereof appears in 99 Phil. 1069) in support of its insistence
that with the orders of May 27 and December 14, 1957, the
closure of Mrs. Hodges' estate has become a mere formality,
inasmuch as said orders amounted to the order of adjudication
and distribution ordained by Section 1 of Rule 90. But the
parallel attempted to be drawn between that case and the
present one does not hold. There the trial court had in fact
issued a clear, distinct and express order of adjudication and
distribution more than twenty years before the other heirs of
the deceased filed their motion asking that the administratrix be
removed, etc. As quoted in that decision, the order of the lower
court in that respect read as follows:
En orden a la mocion de la administradora,
el juzgado la encuentra procedente bajo la
condicion de que no se hara entrega ni
adjudicacion de los bienes a los herederos
antes de que estos presten la fianza
correspondiente y de acuerdo con lo
prescrito en el Art. 754 del Codigo de
Procedimientos: pues, en autos no aparece
que hayan sido nombrados comisionados de
avaluo y reclamaciones. Dicha fianza podra
ser por un valor igual al de los bienes que
correspondan a cada heredero segun el
 testamento. Creo que no es obice para la
terminacion del expediente el hecho de que
la administradora no ha presentado hasta
ahora el inventario de los bienes; pues,
segun la ley, estan exentos de esta
formalidad os administradores que son
legatarios del residuo o remanente de los
bienes y hayan prestado fianza para
responder de las gestiones de su cargo, y
aparece en el testamento que la
administradora Alejandra Austria reune dicha
condicion.
POR TODO LO EXPUESTO, el juzgado
declara, 1.o: no haber lugar a la mocion de
Ramon Ventenilla y otros; 2.o, declara
asimismo que los unicos herederos del
finado Antonio Ventenilla son su esposa
Alejandra Austria, Maria Ventenilla, hermana
del testador, y Ramon Ventenilla, Maria
Ventenilla, Ramon Soriano, Eulalio Soriano,
Jose Soriano, Gabriela Ventenilla, Lorenzo
Ventenilla, Felicitas Ventenilla, Eugenio
Ventenilla y Alejandra Ventenilla, en
representacion de los difuntos Juan, Tomas,
Catalino y Froilan, hermanos del testador,
declarando, ademas que la heredera
Alejandra Austria tiene derecho al
remanente de todos los bienes dejados por
el finado, despues de deducir de ellos la
porcion que corresponde a cada uno de sus
coherederos, conforme esta mandado en las
clausulas 8.a, 9.a, 10.a, 11.a, 12.a y 13.a del
testamento; 3.o, se aprueba el pago hecho
por la administradora de los gastos de la
ultima enfermedad y funerales del testador,
de la donacion hecha por el testador a favor
de la Escuela a Publica del Municipio de
Mangatarem, y de las misas en sufragio del
alma del finado; 4.o, que una vez prestada la
fianza mencionada al principio de este auto,
se haga la entrega y adjudicacion de los
bienes, conforme se dispone en el
testamento y se acaba de declarar en este
auto; 5.o, y, finalmente, que verificada la
adjudicacion, se dara por terminada la
administracion, revelandole toda
responsabilidad a la administradora, y
cancelando su fianza.
ASI SE ORDENA.
Undoubtedly, after the issuance of an order of such tenor, the
closure of any proceedings for the settlement of the estate of a
deceased person cannot be but perfunctory.
In the case at bar, as already pointed out above, the two orders
relied upon by petitioner do not appear ex-facie to be of the
same tenor and nature as the order just quoted, and, what is
more, the circumstances attendant to its issuance do not
suggest that such was the intention of the court, for nothing
could have been more violative of the will of Mrs. Hodges.
Indeed, to infer from Hodges' said motions and from his
statements of accounts for the years 1958, 1959 and 1960, A
Annexes I, K and M, respectively, wherein he repeatedly
claimed that "herein executor (being) the only devisee or
legatee of the deceased, in accordance with the last will and
testament already probated," there is "no (other) person
interested in the Philippines of the time and place of examining
herein account to be given notice", an intent to adjudicate unto
himself the whole of his wife's estate in an absolute manner
and without regard to the contingent interests of her brothers
and sisters, is to impute bad faith to him, an imputation which is
not legally permissible, much less warranted by the facts of
record herein. Hodges knew or ought to have known that,
legally speaking, the terms of his wife's will did not give him
such a right. Factually, there are enough circumstances extant
in the records of these cases indicating that he had no such
intention to ignore the rights of his co-heirs. In his very motions
in question, Hodges alleged, thru counsel, that the "deceased
Linnie Jane Hodges died leaving no descendants and
ascendants, except brothers and sisters and herein petitioner,
as surviving spouse, to inherit the properties of the decedent",
and even promised that "proper accounting will be had — in all
these transactions" which he had submitted for approval and
authorization by the court, thereby implying that he was aware
of his responsibilities vis-a-vis his co-heirs. As alleged by
respondent Magno in her brief as appellee:
Under date of April 14, 1959, C. N. Hodges
filed his first "Account by the Executor" of the
estate of Linnie Jane Hodges. In the
"Statement of Networth of Mr. C. N. Hodges
and the Estate of Linnie Jane Hodges" as of
December 31, 1958 annexed thereto, C. N.
Hodges reported that the combined conjugal
estate earned a net income of P328,402.62,
divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he
filed an "individual income tax return" for
calendar year 1958 on the estate of Linnie
Jane Hodges reporting, under oath, the said
estate as having earned income of
P164,201.31, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (p.
91, Appellee's Brief.)
Under date of July 21, 1960, C. N. Hodges
filed his second "Annual Statement of
Account by the Executor" of the estate of
Linnie Jane Hodges. In the "Statement of
Networth of Mr. C. N. Hodges and the Estate
of Linnie Jane Hodges" as of December 31,
1959 annexed thereto, C. N. Hodges
reported that the combined conjugal estate
earned a net income of P270,623.32, divided
evenly between him and the estate of Linnie
 Jane Hodges. Pursuant to this, he filed an
"individual income tax return" for calendar
year 1959 on the estate of Linnie Jane
Hodges reporting, under oath, the said
estate as having earned income of
P135,311.66, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (pp.
91-92, id.)
Under date of April 20, 1961, C. N. Hodges
filed his third "Annual Statement of Account
by the Executor for the year 1960" of the
estate of Linnie Jane Hodges. In the
"Statement of Net Worth of Mr. C. N. Hodges
and the Estate of Linnie Jane Hodges" as of
December 31, 1960 annexed thereto, C. N.
Hodges reported that the combined conjugal
estate earned a net income of P314,857.94,
divided of Linnie Jane Hodges. Pursuant to
this, he filed an "individual evenly between
him and the estate income tax return" for
calendar year 1960 on the estate of Linnie
Jane Hodges reporting, under oath, the said
estate as having earned income of
P157,428.97, exactly one-half of the net
income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (pp.
92-93, id.)
In the petition for probate that he (Hodges)
filed, he listed the seven brothers and sisters
of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the
will to probate unfortunately omitted one of
the heirs, Roy Higdon (see p. 14, Green
ROA). Immediately, C. N. Hodges filed a
verified motion to have Roy Higdon's name
included as an heir, stating that he wanted to
straighten the records "in order (that) the
heirs of deceased Roy Higdon may not think
or believe they were omitted, and that they
were really and are interested in the estate of
deceased Linnie Jane Hodges".
Thus, he recognized, if in his own way, the separate identity of
his wife's estate from his own share of the conjugal partnership
up to the time of his death, more than five years after that of his
wife. He never considered the whole estate as a single one
belonging exclusively to himself. The only conclusion one can
gather from this is that he could have been preparing the basis
for the eventual transmission of his wife's estate, or, at least, so
much thereof as he would not have been able to dispose of
during his lifetime, to her brothers and sisters in accordance
with her expressed desire, as intimated in his tax return in the
United States to be more extensively referred to anon. And
assuming that he did pay the corresponding estate and
inheritance taxes in the Philippines on the basis of his being
sole heir, such payment is not necessarily inconsistent with his
recognition of the rights of his co-heirs. Without purporting to
rule definitely on the matter in these proceedings, We might
say here that We are inclined to the view that under the
peculiar provisions of his wife's will, and for purposes of the
applicable inheritance tax laws, Hodges had to be considered
as her sole heir, pending the actual transmission of the
remaining portion of her estate to her other heirs, upon the
eventuality of his death, and whatever adjustment might be
warranted should there be any such remainder then is a matter
that could well be taken care of by the internal revenue
authorities in due time.
It is to be noted that the lawyer, Atty. Leon P. Gellada, who
signed the motions of May 27, 1957 and December 11, 1957
and the aforementioned statements of account was the very
same one who also subsequently signed and filed the motion
of December 26, 1962 for the appointment of respondent
Magno as "Administratrix of the Estate of Mrs. Linnie Jane
Hodges" wherein it was alleged that "in accordance with the
provisions of the last will and testament of Linnie Jane Hodges,
whatever real properties that may remain at the death of her
husband, Charles Newton Hodges, the said properties shall be
equally divided among their heirs." And it appearing that said
attorney was Hodges' lawyer as Executor of the estate of his
wife, it stands to reason that his understanding of the situation,
implicit in his allegations just quoted, could somehow be
reflective of Hodges' own understanding thereof.
As a matter of fact, the allegations in the motion of the same
Atty. Gellada dated July 1, 1957, a "Request for Inclusion of
the Name of Roy Higdon in the Order of the Court dated July
19, 1957, etc.", reference to which is made in the above
quotation from respondent Magno's brief, are over the oath of
Hodges himself, who verified the motion. Said allegations read:
1. — That the Hon. Court issued orders
dated June 29, 1957, ordering the probate of
the will.
2. — That in said order of the Hon. Court, the
relatives of the deceased Linnie Jane
Hodges were enumerated. However, in the
petition as well as in the testimony of
Executor during the hearing, the name Roy
Higdon was mentioned, but deceased. It was
unintentionally omitted the heirs of said Roy
Higdon who are his wife Aline Higdon and
son David Higdon, all of age, and residents
of Quinlan, Texas, U.S.A.
3. — That to straighten the records, and in
order the heirs of deceased Roy Higdon may
not think or believe they were omitted, and
that they were really and are interested in the
estate of deceased Linnie Jane Hodges, it is
requested of the Hon. Court to insert the
names of Aline Higdon and David Higdon,
wife and son of deceased Roy Higdon in the
said order of the Hon. Court dated June 29,
 1957. (pars. 1 to 3, Annex 2 of Magno's
Answer — Record, p. 260)
As can be seen, these italicized allegations indicate, more or
less, the real attitude of Hodges in regard to the testamentary
dispositions of his wife.
In connection with this point of Hodges' intent, We note that
there are documents, copies of which are annexed to
respondent Magno's answer, which purportedly contain
Hodges' own solemn declarations recognizing the right of his
co-heirs, such as the alleged tax return he filed with the United
States Taxation authorities, identified as Schedule M, (Annex 4
of her answer) and his supposed affidavit of renunciation,
Annex 5. In said Schedule M, Hodges appears to have
answered the pertinent question thus:
2a. Had the surviving spouse the right to
declare an election between (1) the
provisions made in his or her favor by the will
and (11) dower, curtesy or a statutory
interest? (X) Yes ( ) No
2d. Does the surviving spouse contemplate
renouncing the will and electing to take
dower, curtesy, or a statutory interest? (X)
Yes ( ) No
3. According to the information and belief of
the person or persons filing the return, is any
action described under question 1 designed
or contemplated? ( ) Yes (X) No (Annex 4,
Answer — Record, p. 263)
and to have further stated under the item, "Description of
property interests passing to surviving spouse" the following:
None, except for purposes of administering
the Estate, paying debts, taxes and other
legal charges. It is the intention of the
surviving husband of deceased to distribute
the remaining property and interests of the
deceased in their Community Estate to the
devisees and legatees named in the will
when the debts, liabilities, taxes and
expenses of administration are finally
determined and paid. (Annex 4, Answer —
Record, p. 263)
In addition, in the supposed affidavit of Hodges, Annex 5, it is
stated:
I, C. N. Hodges, being duly sworn, on oath
affirm that at the time the United States
Estate Tax Return was filed in the Estate of
Linnie Jane Hodges on August 8, 1958, I
renounced and disclaimed any and all right
to receive the rents, emoluments and income
from said estate, as shown by the statement
contained in Schedule M at page 29 of said
return, a copy of which schedule is attached
to this affidavit and made a part hereof.
The purpose of this affidavit is to ratify and
confirm, and I do hereby ratify and confirm,
the declaration made in Schedule M of said
return and hereby formally disclaim and
renounce any right on my part to receive any
of the said rents, emoluments and income
from the estate of my deceased wife, Linnie
Jane Hodges. This affidavit is made to
absolve me or my estate from any liability for
the payment of income taxes on income
which has accrued to the estate of Linnie
Jane Hodges since the death of the said
Linnie Jane Hodges on May 23, 1957.
(Annex 5, Answer — Record, p. 264)
Although it appears that said documents were not duly
presented as evidence in the court below, and We cannot,
therefore, rely on them for the purpose of the present
proceedings, still, We cannot close our eyes to their existence
in the record nor fail to note that their tenor jibes with Our
conclusion discussed above from the circumstances related to
the orders of May 27 and December 14, 1957. 5 Somehow,
these documents, considering they are supposed to be copies
of their originals found in the official files of the governments of
the United States and of the Philippines, serve to lessen any
possible apprehension that Our conclusion from the other
evidence of Hodges' manifest intent vis-a-vis the rights of his
co-heirs is without basis in fact.
Verily, with such eloquent manifestations of his good intentions
towards the other heirs of his wife, We find it very hard to
believe that Hodges did ask the court and that the latter agreed
that he be declared her sole heir and that her whole estate be
adjudicated to him without so much as just annotating the
contingent interest of her brothers and sisters in what would
remain thereof upon his demise. On the contrary, it seems to
us more factual and fairer to assume that Hodges was well
aware of his position as executor of the will of his wife and, as
such, had in mind the following admonition made by the Court
in Pamittan vs. Lasam, et al., 60 Phil., 908, at pp. 913-914:
Upon the death of Bernarda in September,
1908, said lands continued to be conjugal
property in the hands of the defendant
Lasam. It is provided in article 1418 of the
Civil Code that upon the dissolution of the
conjugal partnership, an inventory shall
immediately be made and this court in
construing this provision in connection with
section 685 of the Code of Civil Procedure
(prior to its amendment by Act No. 3176 of
November 24, 1924) has repeatedly held
that in the event of the death of the wife, the
law imposes upon the husband the duty of
liquidating the affairs of the partnership
without delay (desde luego) (Alfonso vs.
Natividad, 6 Phil., 240; Prado vs. Lagera, 7
Phil., 395; De la Rama vs. De la Rama, 7
Phil., 745; Enriquez vs. Victoria, 10 Phil., 10;
Amancio vs. Pardo, 13 Phil., 297; Rojas vs.
Singson Tongson, 17 Phil., 476; Sochayseng
vs. Trujillo, 31 Phil., 153; Molera vs. Molera,
40 Phil., 566; Nable Jose vs. Nable Jose, 41
Phil., 713.)
In the last mentioned case this court quoted
with approval the case of Leatherwood vs.
Arnold (66 Texas, 414, 416, 417), in which
that court discussed the powers of the
surviving spouse in the administration of the
community property. Attention was called to
the fact that the surviving husband, in the
management of the conjugal property after
the death of the wife, was a trustee of unique
character who is liable for any fraud
committed by him with relation to the
property while he is charged with its
administration. In the liquidation of the
conjugal partnership, he had wide powers
(as the law stood prior to Act No. 3176) and
the high degree of trust reposed in him
stands out more clearly in view of the fact
that he was the owner of a half interest in his
own right of the conjugal estate which he
was charged to administer. He could
therefore no more acquire a title by
prescription against those for whom he was
administering the conjugal estate than could
a guardian against his ward or a judicial
administrator against the heirs of estate.
Section 38 of Chapter III of the Code of Civil
Procedure, with relation to prescription,
provides that "this chapter shall not apply ...
in the case of a continuing and subsisting
trust." The surviving husband in the
administration and liquidation of the conjugal
estate occupies the position of a trustee of
the highest order and is not permitted by the
law to hold that estate or any portion thereof
adversely to those for whose benefit the law
imposes upon him the duty of administration
and liquidation. No liquidation was ever
made by Lasam — hence, the conjugal
property which came into his possession on
the death of his wife in September, 1908, still
remains conjugal property, a continuing and
subsisting trust. He should have made a
liquidation immediately (desde luego). He
cannot now be permitted to take advantage
of his own wrong. One of the conditions of
title by prescription (section 41, Code of Civil
Procedure) is possession "under a claim of
title exclusive of any other right". For a
trustee to make such a claim would be a
manifest fraud.
And knowing thus his responsibilities in the premises, We are
not convinced that Hodges arrogated everything unto himself
leaving nothing at all to be inherited by his wife's brothers and
sisters.
PCIB insists, however, that to read the orders of May 27 and
December 14, 1957, not as adjudicatory, but merely as
approving past and authorizing future dispositions made by
Hodges in a wholesale and general manner, would necessarily
render the said orders void for being violative of the provisions
of Rule 89 governing the manner in which such dispositions
may be made and how the authority therefor and approval
thereof by the probate court may be secured. If We sustained
such a view, the result would only be that the said orders
should be declared ineffective either way they are understood,
considering We have already seen it is legally impossible to
consider them as adjudicatory. As a matter of fact, however,
what surges immediately to the surface, relative to PCIB's
observations based on Rule 89, is that from such point of view,
the supposed irregularity would involve no more than some
non-jurisdictional technicalities of procedure, which have for
their evident fundamental purpose the protection of parties
interested in the estate, such as the heirs, its creditors,
particularly the government on account of the taxes due it; and
since it is apparent here that none of such parties are objecting
to said orders or would be prejudiced by the unobservance by
the trial court of the procedure pointed out by PCIB, We find no
legal inconvenience in nor impediment to Our giving sanction
to the blanket approval and authority contained in said orders.
This solution is definitely preferable in law and in equity, for to
view said orders in the sense suggested by PCIB would result
in the deprivation of substantive rights to the brothers and
sisters of Mrs. Hodges, whereas reading them the other way
will not cause any prejudice to anyone, and, withal, will give
peace of mind and stability of rights to the innocent parties who
relied on them in good faith, in the light of the peculiar pertinent
provisions of the will of said decedent.
Now, the inventory submitted by Hodges on May 12, 1958
referred to the estate of his wife as consisting of "One-half of all
the items designated in the balance sheet, copy of which is
hereto attached and marked as "Annex A"." Although,
regrettably, no copy of said Annex A appears in the records
before Us, We take judicial notice, on the basis of the
undisputed facts in these cases, that the same consists of
considerable real and other personal kinds of properties. And
since, according to her will, her husband was to be the sole
owner thereof during his lifetime, with full power and authority
to dispose of any of them, provided that should there be any
remainder upon his death, such remainder would go to her
brothers and sisters, and furthermore, there is no pretension,
much less any proof that Hodges had in fact disposed of all of
them, and, on the contrary, the indications are rather to the
effect that he had kept them more or less intact, it cannot
truthfully be said that, upon the death of Hodges, there was no
more estate of Mrs. Hodges to speak of. It is Our conclusion,
therefore, that properties do exist which constitute such estate,
hence Special Proceedings 1307 should not yet be closed.
Neither is there basis for holding that respondent Magno has
ceased to be the Administratrix in said proceeding. There is no
showing that she has ever been legally removed as such, the
attempt to replace her with Mr. Benito Lopez without authority
from the Court having been expressly held ineffective by Our
resolution of September 8, 1972. Parenthetically, on this last
point, PCIB itself is very emphatic in stressing that it is not
questioning said respondent's status as such administratrix.
Indeed, it is not clear that PCIB has any standing to raise any
objection thereto, considering it is a complete stranger insofar
as the estate of Mrs. Hodges is concerned.
It is the contention of PCIB, however, that as things actually
stood at the time of Hodges' death, their conjugal partnership
had not yet been liquidated and, inasmuch as the properties
composing the same were thus commingled pro indiviso and,
consequently, the properties pertaining to the estate of each of
the spouses are not yet identifiable, it is PCIB alone, as
administrator of the estate of Hodges, who should administer
everything, and all that respondent Magno can do for the time
being is to wait until the properties constituting the remaining
estate of Mrs. Hodges have been duly segregated and
delivered to her for her own administration. Seemingly, PCIB
would liken the Testate Estate of Linnie Jane Hodges to a party
having a claim of ownership to some properties included in the
inventory of an administrator of the estate of a decedent, (here
that of Hodges) and who normally has no right to take part in
the proceedings pending the establishment of his right or title;
for which as a rule it is required that an ordinary action should
be filed, since the probate court is without jurisdiction to pass
with finality on questions of title between the estate of the
deceased, on the one hand, and a third party or even an heir
claiming adversely against the estate, on the other.
We do not find such contention sufficiently persuasive. As We
see it, the situation obtaining herein cannot be compared with
the claim of a third party the basis of which is alien to the
pending probate proceedings. In the present cases what gave
rise to the claim of PCIB of exclusive ownership by the estate
of Hodges over all the properties of the Hodges spouses,
including the share of Mrs. Hodges in the community
properties, were the orders of the trial court issued in the
course of the very settlement proceedings themselves, more
specifically, the orders of May 27 and December 14, 1957 so
often mentioned above. In other words, the root of the issue of
title between the parties is something that the court itself has
done in the exercise of its probate jurisdiction. And since in the
ultimate analysis, the question of whether or not all the
properties herein involved pertain exclusively to the estate of
Hodges depends on the legal meaning and effect of said
orders, the claim that respondent court has no jurisdiction to
take cognizance of and decide the said issue is incorrect. If it
was within the competence of the court to issue the root
orders, why should it not be within its authority to declare their
true significance and intent, to the end that the parties may
know whether or not the estate of Mrs. Hodges had already
been adjudicated by the court, upon the initiative of Hodges, in
his favor, to the exclusion of the other heirs of his wife
instituted in her will?
At this point, it bears emphasis again that the main cause of all
the present problems confronting the courts and the parties in
these cases was the failure of Hodges to secure, as executor
of his wife's estate, from May, 1957 up to the time of his death
in December, 1962, a period of more than five years, the final
adjudication of her estate and the closure of the proceedings.
The record is bare of any showing that he ever exerted any
effort towards the early settlement of said estate. While, on the
one hand, there are enough indications, as already discuss
that he had intentions of leaving intact her share of the
conjugal properties so that it may pass wholly to his co-heirs
upon his death, pursuant to her will, on the other hand, by not
terminating the proceedings, his interests in his own half of the
conjugal properties remained commingled pro-indiviso with
those of his co-heirs in the other half. Obviously, such a
situation could not be conducive to ready ascertainment of the
portion of the inheritance that should appertain to his co-heirs
upon his death. Having these considerations in mind, it would
be giving a premium for such procrastination and rather unfair
to his co-heirs, if the administrator of his estate were to be
given exclusive administration of all the properties in question,
which would necessarily include the function of promptly
liquidating the conjugal partnership, thereby identifying and
segregating without unnecessary loss of time which properties
should be considered as constituting the estate of Mrs.
Hodges, the remainder of which her brothers and sisters are
supposed to inherit equally among themselves.
To be sure, an administrator is not supposed to represent the
interests of any particular party and his acts are deemed to be
objectively for the protection of the rights of everybody
concerned with the estate of the decedent, and from this point
of view, it maybe said that even if PCIB were to act alone,
there should be no fear of undue disadvantage to anyone. On
the other hand, however, it is evidently implicit in section 6 of
Rule 78 fixing the priority among those to whom letters of
administration should be granted that the criterion in the
selection of the administrator is not his impartiality alone but,
more importantly, the extent of his interest in the estate, so
much so that the one assumed to have greater interest is
preferred to another who has less. Taking both of these
considerations into account, inasmuch as, according to
Hodges' own inventory submitted by him as Executor of the
estate of his wife, practically all their properties were conjugal
which means that the spouses have equal shares therein, it is
but logical that both estates should be administered jointly by
representatives of both, pending their segregation from each
other. Particularly is such an arrangement warranted because
the actuations so far of PCIB evince a determined, albeit
groundless, intent to exclude the other heirs of Mrs. Hodges
from their inheritance. Besides, to allow PCIB, the
administrator of his estate, to perform now what Hodges was
duty bound to do as executor is to violate the spirit, if not the
letter, of Section 2 of Rule 78 which expressly provides that
"The executor of an executor shall not, as such, administer the
estate of the first testator." It goes without saying that this
provision refers also to the administrator of an executor like
PCIB here.
We are not unmindful of the fact that under Section 2 of Rule
73, "When the marriage is dissolved by the death of the
husband or wife, the community property shall be inventoried,
administered, and liquidated, and the debts thereof paid, in the
testate or intestate proceedings of the deceased spouse. If
both spouses have died, the conjugal partnership shall be
liquidated in the testate or intestate proceedings of either."
Indeed, it is true that the last sentence of this provision allows
or permits the conjugal partnership of spouses who are both
deceased to be settled or liquidated in the testate or intestate
proceedings of either, but precisely because said sentence
allows or permits that the liquidation be made in either
proceeding, it is a matter of sound judicial discretion in which
one it should be made. After all, the former rule referring to the
administrator of the husband's estate in respect to such
liquidation was done away with by Act 3176, the pertinent
provisions of which are now embodied in the rule just cited.
Thus, it can be seen that at the time of the death of Hodges,
there was already the pending judicial settlement proceeding of
the estate of Mrs. Hodges, and, more importantly, that the
former was the executor of the latter's will who had, as such,
failed for more than five years to see to it that the same was
terminated earliest, which was not difficult to do, since from
ought that appears in the record, there were no serious
obstacles on the way, the estate not being indebted and there
being no immediate heirs other than Hodges himself. Such
dilatory or indifferent attitude could only spell possible prejudice
of his co-heirs, whose rights to inheritance depend entirely on
the existence of any remainder of Mrs. Hodges' share in the
community properties, and who are now faced with the pose of
PCIB that there is no such remainder. Had Hodges secured as
early as possible the settlement of his wife's estate, this
problem would not arisen. All things considered, We are fully
convinced that the interests of justice will be better served by
not permitting or allowing PCIB or any administrator of the
estate of Hodges exclusive administration of all the properties
in question. We are of the considered opinion and so hold that
what would be just and proper is for both administrators of the
two estates to act conjointly until after said estates have been
segregated from each other.
At this juncture, it may be stated that we are not overlooking
the fact that it is PCIB's contention that, viewed as a
substitution, the testamentary disposition in favor of Mrs.
Hodges' brothers and sisters may not be given effect. To a
certain extent, this contention is correct. Indeed, legally
speaking, Mrs. Hodges' will provides neither for a simple or
vulgar substitution under Article 859 of the Civil Code nor for a
fideicommissary substitution under Article 863 thereof. There is
no vulgar substitution therein because there is no provision for
either (1) predecease of the testator by the designated heir or
(2) refusal or (3) incapacity of the latter to accept the
inheritance, as required by Article 859; and neither is there a
fideicommissary substitution therein because no obligation is
imposed thereby upon Hodges to preserve the estate or any
part thereof for anyone else. But from these premises, it is not
correct to jump to the conclusion, as PCIB does, that the
testamentary dispositions in question are therefore inoperative
and invalid.
The error in PCIB's position lies simply in the fact that it views
the said disposition exclusively in the light of substitutions
covered by the Civil Code section on that subject, (Section 3,
Chapter 2, Title IV, Book III) when it is obvious that substitution
occurs only when another heir is appointed in a will "so that he
may enter into inheritance in default of the heir originally
instituted," (Article 857, id.) and, in the present case, no such
possible default is contemplated. The brothers and sisters of
Mrs. Hodges are not substitutes for Hodges because, under
her will, they are not to inherit what Hodges cannot, would not
or may not inherit, but what he would not dispose of from his
inheritance; rather, therefore, they are also heirs instituted
simultaneously with Hodges, subject, however, to certain
conditions, partially resolutory insofar as Hodges was
concerned and correspondingly suspensive with reference to
his brothers and sisters-in-law. It is partially resolutory, since it
bequeaths unto Hodges the whole of her estate to be owned
and enjoyed by him as universal and sole heir with absolute
dominion over them6 only during his lifetime, which means that
while he could completely and absolutely dispose of any
portion thereof inter vivos to anyone other than himself, he was
not free to do so mortis causa, and all his rights to what might
remain upon his death would cease entirely upon the
occurrence of that contingency, inasmuch as the right of his
brothers and sisters-in-law to the inheritance, although vested
already upon the death of Mrs. Hodges, would automatically
become operative upon the occurrence of the death of Hodges
in the event of actual existence of any remainder of her estate
then.
Contrary to the view of respondent Magno, however, it was not
the usufruct alone of her estate, as contemplated in Article 869
of the Civil Code, that she bequeathed to Hodges during his
lifetime, but the full ownership thereof, although the same was
to last also during his lifetime only, even as there was no
restriction whatsoever against his disposing or conveying the
whole or any portion thereof to anybody other than himself.
The Court sees no legal impediment to this kind of institution,
in this jurisdiction or under Philippine law, except that it cannot
apply to the legitime of Hodges as the surviving spouse,
consisting of one-half of the estate, considering that Mrs.
Hodges had no surviving ascendants nor descendants. (Arts.
872, 900, and 904, New Civil Code.)
But relative precisely to the question of how much of Mrs.
Hodges' share of the conjugal partnership properties may be
considered as her estate, the parties are in disagreement as to
how Article 16 of the Civil Code7 should be applied. On the
one hand, petitioner claims that inasmuch as Mrs. Hodges was
a resident of the Philippines at the time of her death, under
said Article 16, construed in relation to the pertinent laws of
Texas and the principle of renvoi, what should be applied here
should be the rules of succession under the Civil Code of the
Philippines, and, therefore, her estate could consist of no more
than one-fourth of the said conjugal properties, the other fourth
being, as already explained, the legitime of her husband (Art.
900, Civil Code) which she could not have disposed of nor
burdened with any condition (Art. 872, Civil Code). On the
other hand, respondent Magno denies that Mrs. Hodges died a
resident of the Philippines, since allegedly she never changed
nor intended to change her original residence of birth in Texas,
United States of America, and contends that, anyway,
regardless of the question of her residence, she being
indisputably a citizen of Texas, under said Article 16 of the Civil
Code, the distribution of her estate is subject to the laws of said
State which, according to her, do not provide for any legitime,
hence, the brothers and sisters of Mrs. Hodges are entitled to
the remainder of the whole of her share of the conjugal
partnership properties consisting of one-half thereof.
Respondent Magno further maintains that, in any event,
Hodges had renounced his rights under the will in favor of his
co-heirs, as allegedly proven by the documents touching on the
point already mentioned earlier, the genuineness and legal
significance of which petitioner seemingly questions. Besides,
the parties are disagreed as to what the pertinent laws of
Texas provide. In the interest of settling the estates herein
involved soonest, it would be best, indeed, if these conflicting
claims of the parties were determined in these proceedings.
The Court regrets, however, that it cannot do so, for the simple
reason that neither the evidence submitted by the parties in the
court below nor their discussion, in their respective briefs and
memoranda before Us, of their respective contentions on the
pertinent legal issues, of grave importance as they are, appear
to Us to be adequate enough to enable Us to render an
intelligent comprehensive and just resolution. For one thing,
there is no clear and reliable proof of what in fact the possibly
applicable laws of Texas are. 7* Then also, the genuineness of
documents relied upon by respondent Magno is disputed. And
there are a number of still other conceivable related issues
which the parties may wish to raise but which it is not proper to
mention here. In Justice, therefore, to all the parties concerned,
these and all other relevant matters should first be threshed out
fully in the trial court in the proceedings hereafter to be held
therein for the purpose of ascertaining and adjudicating and/or
distributing the estate of Mrs. Hodges to her heirs in
accordance with her duly probated will.
To be more explicit, all that We can and do decide in
connection with the petition for certiorari and prohibition are: (1)
that regardless of which corresponding laws are applied,
whether of the Philippines or of Texas, and taking for granted
either of the respective contentions of the parties as to
provisions of the latter,8 and regardless also of whether or not
it can be proven by competent evidence that Hodges
renounced his inheritance in any degree, it is easily and
definitely discernible from the inventory submitted by Hodges
himself, as Executor of his wife's estate, that there are
properties which should constitute the estate of Mrs. Hodges
and ought to be disposed of or distributed among her heirs
pursuant to her will in said Special Proceedings 1307; (2) that,
more specifically, inasmuch as the question of what are the
pertinent laws of Texas applicable to the situation herein is
basically one of fact, and, considering that the sole difference
in the positions of the parties as to the effect of said laws has
reference to the supposed legitime of Hodges — it being the
stand of PCIB that Hodges had such a legitime whereas
Magno claims the negative - it is now beyond controversy for
all future purposes of these proceedings that whatever be the
provisions actually of the laws of Texas applicable hereto, the
estate of Mrs. Hodges is at least, one-fourth of the conjugal
estate of the spouses; the existence and effects of foreign laws
being questions of fact, and it being the position now of PCIB
that the estate of Mrs. Hodges, pursuant to the laws of Texas,
should only be one-fourth of the conjugal estate, such
contention constitutes an admission of fact, and consequently,
it would be in estoppel in any further proceedings in these
cases to claim that said estate could be less, irrespective of
what might be proven later to be actually the provisions of the
applicable laws of Texas; (3) that Special Proceedings 1307 for
the settlement of the testate estate of Mrs. Hodges cannot be
closed at this stage and should proceed to its logical
conclusion, there having been no proper and legal adjudication
or distribution yet of the estate therein involved; and (4) that
respondent Magno remains and continues to be the
Administratrix therein. Hence, nothing in the foregoing opinion
is intended to resolve the issues which, as already stated, are
not properly before the Court now, namely, (1) whether or not
Hodges had in fact and in law waived or renounced his
inheritance from Mrs. Hodges, in whole or in part, and (2)
assuming there had been no such waiver, whether or not, by
the application of Article 16 of the Civil Code, and in the light of
what might be the applicable laws of Texas on the matter, the
estate of Mrs. Hodges is more than the one-fourth declared
above. As a matter of fact, even our finding above about the
existence of properties constituting the estate of Mrs. Hodges
rests largely on a general appraisal of the size and extent of
the conjugal partnership gathered from reference made thereto
by both parties in their briefs as well as in their pleadings
included in the records on appeal, and it should accordingly
yield, as to which exactly those properties are, to the more
concrete and specific evidence which the parties are supposed
to present in support of their respective positions in regard to
the foregoing main legal and factual issues. In the interest of
justice, the parties should be allowed to present such further
evidence in relation to all these issues in a joint hearing of the
two probate proceedings herein involved. After all, the court a
quo has not yet passed squarely on these issues, and it is best
for all concerned that it should do so in the first instance.
Relative to Our holding above that the estate of Mrs. Hodges
cannot be less than the remainder of one-fourth of the conjugal
partnership properties, it may be mentioned here that during
the deliberations, the point was raised as to whether or not said
holding might be inconsistent with Our other ruling here also
that, since there is no reliable evidence as to what are the
applicable laws of Texas, U.S.A. "with respect to the order of
succession and to the amount of successional rights" that may
be willed by a testator which, under Article 16 of the Civil Code,
are controlling in the instant cases, in view of the undisputed
Texan nationality of the deceased Mrs. Hodges, these cases
should be returned to the court a quo, so that the parties may
prove what said law provides, it is premature for Us to make
any specific ruling now on either the validity of the
testamentary dispositions herein involved or the amount of
inheritance to which the brothers and sisters of Mrs. Hodges
are entitled. After nature reflection, We are of the considered
view that, at this stage and in the state of the records before
Us, the feared inconsistency is more apparent than real.
Withal, it no longer lies in the lips of petitioner PCIB to make
any claim that under the laws of Texas, the estate of Mrs.
Hodges could in any event be less than that We have fixed
above.
It should be borne in mind that as above-indicated, the
question of what are the laws of Texas governing the matters
herein issue is, in the first instance, one of fact, not of law.
Elementary is the rule that foreign laws may not be taken
judicial notice of and have to be proven like any other fact in
dispute between the parties in any proceeding, with the rare
exception in instances when the said laws are already within
the actual knowledge of the court, such as when they are well
and generally known or they have been actually ruled upon in
other cases before it and none of the parties concerned do not
claim otherwise. (5 Moran, Comments on the Rules of Court, p.
41, 1970 ed.) In Fluemer vs. Hix, 54 Phil. 610, it was held:
It is the theory of the petitioner that the alleged will was
executed in Elkins West Virginia, on November 3, 1925, by Hix
who had his residence in that jurisdiction, and that the laws of
West Virginia govern. To this end, there was submitted a copy
of section 3868 of Acts 1882, c. 84 as found in West Virginia
Code, Annotated, by Hogg Charles E., vol. 2, 1914, p. 1960,
and as certified to by the Director of the National Library. But
this was far from a compliance with the law. The laws of a
foreign jurisdiction do not prove themselves in our courts. The
courts of the Philippine Islands are not authorized to take
judicial notice of the laws of the various States of the American
Union. Such laws must be proved as facts. (In re Estate of
Johnson [1918], 39 Phil., 156.) Here the requirements of the
law were not met. There was no showing that the book from
which an extract was taken was printed or published under the
authority of the State of West Virginia, as provided in section
300 of the Code of Civil Procedure. Nor was the extract from
the law attested by the certificate of the officer having charge of
the original, under the seal of the State of West Virginia, as
provided in section 301 of the Code of Civil Procedure. No
evidence was introduced to show that the extract from the laws
of West Virginia was in force at the time the alleged will was
executed."
No evidence of the nature thus suggested by the Court may be
found in the records of the cases at bar. Quite to the contrary,
the parties herein have presented opposing versions in their
respective pleadings and memoranda regarding the matter.
And even if We took into account that in Aznar vs. Garcia, the
Court did make reference to certain provisions regarding
succession in the laws of Texas, the disparity in the material
dates of that case and the present ones would not permit Us to
indulge in the hazardous conjecture that said provisions have
not been amended or changed in the meantime.
On the other hand, in In re Estate of Johnson, 39 Phil. 156, We
held:
Upon the other point — as to whether the will
was executed in conformity with the statutes
of the State of Illinois — we note that it does
not affirmatively appear from the
transcription of the testimony adduced in the
trial court that any witness was examined
with reference to the law of Illinois on the
subject of the execution of will. The trial
judge no doubt was satisfied that the will was
properly executed by examining section
1874 of the Revised Statutes of Illinois, as
exhibited in volume 3 of Starr & Curtis's
Annotated Illinois Statutes, 2nd ed., p. 426;
and he may have assumed that he could
take judicial notice of the laws of Illinois
under section 275 of the Code of Civil
Procedure. If so, he was in our opinion
mistaken. That section authorizes the courts
here to take judicial notice, among other
things, of the acts of the legislative
department of the United States. These
words clearly have reference to Acts of the
Congress of the United States; and we would
hesitate to hold that our courts can, under
this provision, take judicial notice of the
multifarious laws of the various American
States. Nor do we think that any such
authority can be derived from the broader
language, used in the same section, where it
is said that our courts may take judicial
notice of matters of public knowledge
"similar" to those therein enumerated. The
proper rule we think is to require proof of the
statutes of the States of the American Union
whenever their provisions are determinative
of the issues in any action litigated in the
Philippine courts.
Nevertheless, even supposing that the trial
court may have erred in taking judicial notice
of the law of Illinois on the point in question,
such error is not now available to the
petitioner, first, because the petition does not
state any fact from which it would appear
that the law of Illinois is different from what
the court found, and, secondly, because the
assignment of error and argument for the
appellant in this court raises no question
based on such supposed error. Though the
trial court may have acted upon pure
conjecture as to the law prevailing in the
State of Illinois, its judgment could not be set
aside, even upon application made within six
months under section 113 of the Code of
Civil Procedure, unless it should be made to
appear affirmatively that the conjecture was
wrong. The petitioner, it is true, states in
general terms that the will in question is
invalid and inadequate to pass real and
personal property in the State of Illinois, but
this is merely a conclusion of law. The
affidavits by which the petition is
accompanied contain no reference to the
subject, and we are cited to no authority in
the appellant's brief which might tend to raise
 a doubt as to the correctness of the
conclusion of the trial court. It is very clear,
therefore, that this point cannot be urged as
of serious moment.
In its main brief dated February 26, 1968, PCIB asserts:
It is implicit in the above ruling that when, with respect to
certain aspects of the foreign laws concerned, the parties in a
given case do not have any controversy or are more or less in
agreement, the Court may take it for granted for the purposes
of the particular case before it that the said laws are as such
virtual agreement indicates, without the need of requiring the
presentation of what otherwise would be the competent
evidence on the point. Thus, in the instant cases wherein it
results from the respective contentions of both parties that
even if the pertinent laws of Texas were known and to be
applied, the amount of the inheritance pertaining to the heirs of
Mrs. Hodges is as We have fixed above, the absence of
evidence to the effect that, actually and in fact, under said
laws, it could be otherwise is of no longer of any consequence,
unless the purpose is to show that it could be more. In other
words, since PCIB, the petitioner-appellant, concedes that
upon application of Article 16 of the Civil Code and the
pertinent laws of Texas, the amount of the estate in
controversy is just as We have determined it to be, and
respondent-appellee is only claiming, on her part, that it could
be more, PCIB may not now or later pretend differently.
To be more concrete, on pages 20-21 of its petition herein,
dated July 31, 1967, PCIB states categorically:
Inasmuch as Article 16 of the Civil Code
provides that "intestate and testamentary
successions both with respect to the order of
succession and to the amount of
successional rights and to the intrinsic
validity of testamentary provisions, shall be
regulated by the national law of the person
whose succession is under consideration,
whatever may be the nature of the property
and regardless of the country wherein said
property may be found", while the law of
Texas (the Hodges spouses being nationals
of U.S.A., State of Texas), in its conflicts of
law rules, provides that the domiciliary law
(in this case Philippine law) governs the
testamentary dispositions and successional
rights over movables or personal properties,
while the law of the situs (in this case also
Philippine law with respect to all Hodges
properties located in the Philippines),
governs with respect to immovable
properties, and applying therefore the 'renvoi
doctrine' as enunciated and applied by this
Honorable Court in the case of In re Estate
of Christensen (G.R. No. L-16749, Jan. 31,
1963), there can be no question that
Philippine law governs the testamentary
dispositions contained in the Last Will and
Testament of the deceased Linnie Jane
Hodges, as well as the successional rights to
her estate, both with respect to movables, as
well as to immovables situated in the
Philippines.
The law governing successional rights.
As recited above, there is no question that
the deceased, Linnie Jane Hodges, was an
American citizen. There is also no question
that she was a national of the State of Texas,
U.S.A. Again, there is likewise no question
that she had her domicile of choice in the
City of Iloilo, Philippines, as this has already
been pronounced by the above-cited orders
of the lower court, pronouncements which
are by now res adjudicata (par. [a], See. 49,
Rule 39, Rules of Court; In re Estate of
Johnson, 39 Phil. 156).
Article 16 of the Civil Code provides:
"Real property as well as personal property
is subject to the law of the country where it is
situated.
However, intestate and testamentary
successions, both with respect to the order
of succession and to the amount of
successional rights and to the intrinsic
validity of testamentary provisions, shall be
regulated by the national law of the person
whose succession is under consideration,
whatever may be the nature of the property
and regardless of the country wherein said
property may be found."
Thus the aforecited provision of the Civil
Code points towards the national law of the
deceased, Linnie Jane Hodges, which is the
law of Texas, as governing succession "both
with respect to the order of succession and
to the amount of successional rights and to
the intrinsic validity of testamentary
provisions ...". But the law of Texas, in its
conflicts of law rules, provides that the
domiciliary law governs the testamentary
dispositions and successional rights over
movables or personal property, while the law
of the situs governs with respect to
immovable property. Such that with respect
to both movable property, as well as
immovable property situated in the
Philippines, the law of Texas points to the
law of the Philippines.
Applying, therefore, the so-called "renvoi
doctrine", as enunciated and applied by this
 Honorable Court in the case of "In re
Christensen" (G.R. No. L-16749, Jan. 31,
1963), there can be no question that
Philippine law governs the testamentary
provisions in the Last Will and Testament of
the deceased Linnie Jane Hodges, as well
as the successional rights to her estate, both
with respect to movables, as well as
immovables situated in the Philippines.
The subject of successional rights.
Under Philippine law, as it is under the law of
Texas, the conjugal or community property of
the spouses, Charles Newton Hodges and
Linnie Jane Hodges, upon the death of the
latter, is to be divided into two, one-half
pertaining to each of the spouses, as his or
her own property. Thus, upon the death of
Linnie Jane Hodges, one-half of the conjugal
partnership property immediately pertained
to Charles Newton Hodges as his own share,
and not by virtue of any successional rights.
There can be no question about this.
Again, Philippine law, or more specifically,
Article 900 of the Civil Code provides:
If the only survivor is the
widow or widower, she or
he shall be entitled to one-
half of the hereditary
estate of the deceased
spouse, and the testator
may freely dispose of the
other half.
If the marriage between
the surviving spouse and
the testator was
solemnized in articulo
mortis, and the testator
died within three months
from the time of the
marriage, the legitime of
the surviving spouse as
the sole heir shall be one-
third of the hereditary
estate, except when they
have been living as
husband and wife for more
than five years. In the
latter case, the legitime of
the surviving spouse shall
be that specified in the
preceding paragraph.
This legitime of the surviving spouse cannot
be burdened by a fideicommisary
substitution (Art. 864, Civil code), nor by any
charge, condition, or substitution (Art, 872,
Civil code). It is clear, therefore, that in
addition to one-half of the conjugal
partnership property as his own conjugal
share, Charles Newton Hodges was also
immediately entitled to one-half of the half
conjugal share of the deceased, Linnie Jane
Hodges, or one-fourth of the entire conjugal
property, as his legitime.
One-fourth of the conjugal property therefore
remains at issue.
In the summary of its arguments in its memorandum dated
April 30, 1968, the following appears:
Briefly, the position advanced by the
petitioner is:
a. That the Hodges spouses were domiciled
legally in the Philippines (pp. 19-20, petition).
This is now a matter of res adjudicata (p. 20,
petition).
b. That under Philippine law, Texas law, and
the renvoi doctrine, Philippine law governs
the successional rights over the properties
left by the deceased, Linnie Jane Hodges
(pp. 20-21, petition).
c. That under Philippine as well as Texas
law, one-half of the Hodges properties
pertains to the deceased, Charles Newton
Hodges (p. 21, petition). This is not
questioned by the respondents.
d. That under Philippine law, the deceased,
Charles Newton Hodges, automatically
inherited one-half of the remaining one-half
of the Hodges properties as his legitime (p.
21, petition).
e. That the remaining 25% of the Hodges
properties was inherited by the deceased,
Charles Newton Hodges, under the will of his
deceased spouse (pp. 22-23, petition). Upon
the death of Charles Newton Hodges, the
substitution 'provision of the will of the
deceased, Linnie Jane Hodges, did not
operate because the same is void (pp. 23-
25, petition).
f. That the deceased, Charles Newton
Hodges, asserted his sole ownership of the
Hodges properties and the probate court
sanctioned such assertion (pp. 25-29,
petition). He in fact assumed such ownership
 and such was the status of the properties as
of the time of his death (pp. 29-34, petition).
Of similar tenor are the allegations of PCIB in some of its
pleadings quoted in the earlier part of this option.
On her part, it is respondent-appellee Magno's posture that
under the laws of Texas, there is no system of legitime, hence
the estate of Mrs. Hodges should be one-half of all the conjugal
properties.
It is thus unquestionable that as far as PCIB is concerned, the
application to these cases of Article 16 of the Civil Code in
relation to the corresponding laws of Texas would result in that
the Philippine laws on succession should control. On that
basis, as We have already explained above, the estate of Mrs.
Hodges is the remainder of one-fourth of the conjugal
partnership properties, considering that We have found that
there is no legal impediment to the kind of disposition ordered
by Mrs. Hodges in her will in favor of her brothers and sisters
and, further, that the contention of PCIB that the same
constitutes an inoperative testamentary substitution is
untenable. As will be recalled, PCIB's position that there is no
such estate of Mrs. Hodges is predicated exclusively on two
propositions, namely: (1) that the provision in question in Mrs.
Hodges' testament violates the rules on substitution of heirs
under the Civil Code and (2) that, in any event, by the orders of
the trial court of May 27, and December 14, 1957, the trial
court had already finally and irrevocably adjudicated to her
husband the whole free portion of her estate to the exclusion of
her brothers and sisters, both of which poses, We have
overruled. Nowhere in its pleadings, briefs and memoranda
does PCIB maintain that the application of the laws of Texas
would result in the other heirs of Mrs. Hodges not inheriting
anything under her will. And since PCIB's representations in
regard to the laws of Texas virtually constitute admissions of
fact which the other parties and the Court are being made to
rely and act upon, PCIB is "not permitted to contradict them or
subsequently take a position contradictory to or inconsistent
with them." (5 Moran, id, p. 65, citing Cunanan vs. Amparo, 80
Phil. 227; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968, 24
SCRA 1018).
Accordingly, the only question that remains to be settled in the
further proceedings hereby ordered to be held in the court
below is how much more than as fixed above is the estate of
Mrs. Hodges, and this would depend on (1) whether or not the
applicable laws of Texas do provide in effect for more, such as,
when there is no legitime provided therein, and (2) whether or
not Hodges has validly waived his whole inheritance from Mrs.
Hodges.
In the course of the deliberations, it was brought out by some
members of the Court that to avoid or, at least, minimize further
protracted legal controversies between the respective heirs of
the Hodges spouses, it is imperative to elucidate on the
possible consequences of dispositions made by Hodges after
the death of his wife from the mass of the unpartitioned estates
without any express indication in the pertinent documents as to
whether his intention is to dispose of part of his inheritance
from his wife or part of his own share of the conjugal estate as
well as of those made by PCIB after the death of Hodges. After
a long discussion, the consensus arrived at was as follows: (1)
any such dispositions made gratuitously in favor of third
parties, whether these be individuals, corporations or
foundations, shall be considered as intended to be of
properties constituting part of Hodges' inheritance from his
wife, it appearing from the tenor of his motions of May 27 and
December 11, 1957 that in asking for general authority to make
sales or other disposals of properties under the jurisdiction of
the court, which include his own share of the conjugal estate,
he was not invoking particularly his right over his own share,
but rather his right to dispose of any part of his inheritance
pursuant to the will of his wife; (2) as regards sales, exchanges
or other remunerative transfers, the proceeds of such sales or
the properties taken in by virtue of such exchanges, shall be
considered as merely the products of "physical changes" of the
properties of her estate which the will expressly authorizes
Hodges to make, provided that whatever of said products
should remain with the estate at the time of the death of
Hodges should go to her brothers and sisters; (3) the
dispositions made by PCIB after the death of Hodges must
naturally be deemed as covering only the properties belonging
to his estate considering that being only the administrator of
the estate of Hodges, PCIB could not have disposed of
properties belonging to the estate of his wife. Neither could
such dispositions be considered as involving conjugal
properties, for the simple reason that the conjugal partnership
automatically ceased when Mrs. Hodges died, and by the
peculiar provision of her will, under discussion, the remainder
of her share descended also automatically upon the death of
Hodges to her brothers and sisters, thus outside of the scope
of PCIB's administration. Accordingly, these construction of the
will of Mrs. Hodges should be adhered to by the trial court in its
final order of adjudication and distribution and/or partition of the
two estates in question.
THE APPEALS
A cursory examination of the seventy-eight assignments of
error in appellant PCIB's brief would readily reveal that all of
them are predicated mainly on the contention that inasmuch as
Hodges had already adjudicated unto himself all the properties
constituting his wife's share of the conjugal partnership,
allegedly with the sanction of the trial court per its order of
December 14, 1957, there has been, since said date, no longer
any estate of Mrs. Hodges of which appellee Magno could be
administratrix, hence the various assailed orders sanctioning
her actuations as such are not in accordance with law. Such
being the case, with the foregoing resolution holding such
posture to be untenable in fact and in law and that it is in the
best interest of justice that for the time being the two estates
should be administered conjointly by the respective
administrators of the two estates, it should follow that said
assignments of error have lost their fundamental reasons for
being. There are certain matters, however, relating peculiarly to
the respective orders in question, if commonly among some of
them, which need further clarification. For instance, some of
them authorized respondent Magno to act alone or without
concurrence of PCIB. And with respect to many of said orders,
PCIB further claims that either the matters involved were not
properly within the probate jurisdiction of the trial court or that
the procedure followed was not in accordance with the rules.
Hence, the necessity of dealing separately with the merits of
each of the appeals.
Indeed, inasmuch as the said two estates have until now
remained commingled pro-indiviso, due to the failure of
Hodges and the lower court to liquidate the conjugal
partnership, to recognize appellee Magno as Administratrix of
the Testate Estate of Mrs. Hodges which is still unsegregated
from that of Hodges is not to say, without any qualification, that
she was therefore authorized to do and perform all her acts
complained of in these appeals, sanctioned though they might
have been by the trial court. As a matter of fact, it is such
commingling pro-indiviso of the two estates that should deprive
appellee of freedom to act independently from PCIB, as
administrator of the estate of Hodges, just as, for the same
reason, the latter should not have authority to act
independently from her. And considering that the lower court
failed to adhere consistently to this basic point of view, by
allowing the two administrators to act independently of each
other, in the various instances already noted in the narration of
facts above, the Court has to look into the attendant
circumstances of each of the appealed orders to be able to
determine whether any of them has to be set aside or they may
all be legally maintained notwithstanding the failure of the court
a quo to observe the pertinent procedural technicalities, to the
end only that graver injury to the substantive rights of the
parties concerned and unnecessary and undesirable
proliferation of incidents in the subject proceedings may be
forestalled. In other words, We have to determine, whether or
not, in the light of the unusual circumstances extant in the
record, there is need to be more pragmatic and to adopt a
rather unorthodox approach, so as to cause the least
disturbance in rights already being exercised by numerous
innocent third parties, even if to do so may not appear to be
strictly in accordance with the letter of the applicable purely
adjective rules.
Incidentally, it may be mentioned, at this point, that it was
principally on account of the confusion that might result later
from PCIB's continuing to administer all the community
properties, notwithstanding the certainty of the existence of the
separate estate of Mrs. Hodges, and to enable both estates to
function in the meantime with a relative degree of regularity,
that the Court ordered in the resolution of September 8, 1972
the modification of the injunction issued pursuant to the
resolutions of August 8, October 4 and December 6, 1967, by
virtue of which respondent Magno was completely barred from
any participation in the administration of the properties herein
involved. In the September 8 resolution, We ordered that,
pending this decision, Special Proceedings 1307 and 1672
should proceed jointly and that the respective administrators
therein "act conjointly — none of them to act singly and
independently of each other for any purpose." Upon mature
deliberation, We felt that to allow PCIB to continue managing
or administering all the said properties to the exclusion of the
administratrix of Mrs. Hodges' estate might place the heirs of
Hodges at an unduly advantageous position which could result
in considerable, if not irreparable, damage or injury to the other
parties concerned. It is indeed to be regretted that apparently,
up to this date, more than a year after said resolution, the
same has not been given due regard, as may be gleaned from
the fact that recently, respondent Magno has filed in these
proceedings a motion to declare PCIB in contempt for alleged
failure to abide therewith, notwithstanding that its repeated
motions for reconsideration thereof have all been denied soon
after they were filed.9
Going back to the appeals, it is perhaps best to begin first with
what appears to Our mind to be the simplest, and then proceed
to the more complicated ones in that order, without regard to
the numerical sequence of the assignments of error in
appellant's brief or to the order of the discussion thereof by
counsel.
Assignments of error numbers
LXXII, LXXVII and LXXVIII.
These assignments of error relate to (1) the order of the trial
court of August 6, 1965 providing that "the deeds of sale
(therein referred to involving properties in the name of Hodges)
should be signed jointly by the PCIB, as Administrator of
Testate Estate of C.N. Hodges, and Avelina A. Magno, as
Administratrix of the Testate Estate of Linnie Jane Hodges, and
to this effect, the PCIB should take the necessary steps so that
Administratrix Avelina A. Magno could sign the deeds of sale,"
(p. 248, Green Rec. on Appeal) (2) the order of October 27,
1965 denying the motion for reconsideration of the foregoing
order, (pp. 276-277, id.) (3) the other order also dated October
27, 1965 enjoining inter alia, that "(a) all cash collections
should be deposited in the joint account of the estate of Linnie
Jane Hodges and estate of C. N. Hodges, (b) that whatever
cash collections (that) had been deposited in the account of
either of the estates should be withdrawn and since then (sic)
deposited in the joint account of the estate of Linnie Jane
Hodges and the estate of C. N. Hodges; ... (d) (that)
Administratrix Magno — allow the PCIB to inspect whatever
records, documents and papers she may have in her
possession, in the same manner that Administrator PCIB is
also directed to allow Administratrix Magno to inspect whatever
records, documents and papers it may have in its possession"
and "(e) that the accountant of the estate of Linnie Jane
Hodges shall have access to all records of the transactions of
both estates for the protection of the estate of Linnie Jane
Hodges; and in like manner, the accountant or any authorized
representative of the estate of C. N. Hodges shall have access
to the records of transactions of the Linnie Jane Hodges estate
for the protection of the estate of C. N. Hodges", (pp. 292-295,
id.) and (4) the order of February 15, 1966, denying, among
others, the motion for reconsideration of the order of October
27, 1965 last referred to. (pp. 455-456, id.)
As may be readily seen, the thrust of all these four impugned
orders is in line with the Court's above-mentioned resolution of
September 8, 1972 modifying the injunction previously issued
on August 8, 1967, and, more importantly, with what We have
said the trial court should have always done pending the
liquidation of the conjugal partnership of the Hodges spouses.
In fact, as already stated, that is the arrangement We are
ordering, by this decision, to be followed. Stated differently,
since the questioned orders provide for joint action by the two
administrators, and that is precisely what We are holding out to
have been done and should be done until the two estates are
separated from each other, the said orders must be affirmed.
Accordingly the foregoing assignments of error must be, as
they are hereby overruled.
Assignments of error Numbers LXVIII
to LXXI and LXXIII to LXXVI.
The orders complained of under these assignments of error
commonly deal with expenditures made by appellee Magno, as
Administratrix of the Estate of Mrs. Hodges, in connection with
her administration thereof, albeit additionally, assignments of
error Numbers LXIX to LXXI put into question the payment of
attorneys fees provided for in the contract for the purpose, as
constituting, in effect, premature advances to the heirs of Mrs.
Hodges.
More specifically, assignment Number LXXIII refers to
reimbursement of overtime pay paid to six employees of the
court and three other persons for services in copying the court
records to enable the lawyers of the administration to be fully
informed of all the incidents in the proceedings. The
reimbursement was approved as proper legal expenses of
administration per the order of December 19, 1964, (pp. 221-
222, id.) and repeated motions for reconsideration thereof were
denied by the orders of January 9, 1965, (pp. 231-232, id.)
October 27, 1965, (p. 277, id.) and February 15, 1966. (pp.
455-456, id.) On the other hand, Assignments Numbers LXVIII
to LXXI, LXXIV and LXXV question the trial court's order of
November 3, 1965 approving the agreement of June 6, 1964
between Administratrix Magno and James L. Sullivan, attorney-
in-fact of the heirs of Mrs. Hodges, as Parties of the First Part,
and Attorneys Raul Manglapus and Rizal R. Quimpo, as
Parties of the Second Part, regarding attorneys fees for said
counsel who had agreed "to prosecute and defend their
interests (of the Parties of the First Part) in certain cases now
pending litigation in the Court of First Instance of Iloilo —, more
specifically in Special Proceedings 1307 and 1672 —" (pp.
126-129, id.) and directing Administratrix Magno "to issue and
sign whatever check or checks maybe needed to implement
the approval of the agreement annexed to the motion" as well
as the "administrator of the estate of C. N. Hodges — to
countersign the said check or checks as the case maybe." (pp.
313-320, id.), reconsideration of which order of approval was
denied in the order of February 16, 1966, (p. 456, id.)
Assignment Number LXXVI imputes error to the lower court's
order of October 27, 1965, already referred to above, insofar
as it orders that "PCIB should counter sign the check in the
amount of P250 in favor of Administratrix Avelina A. Magno as
her compensation as administratrix of Linnie Jane Hodges
estate chargeable to the Testate Estate of Linnie Jane Hodges
only." (p. 294, id.)
Main contention again of appellant PCIB in regard to these
eight assigned errors is that there is no such estate as the
estate of Mrs. Hodges for which the questioned expenditures
were made, hence what were authorized were in effect
expenditures from the estate of Hodges. As We have already
demonstrated in Our resolution above of the petition for
certiorari and prohibition, this posture is incorrect. Indeed, in
whichever way the remaining issues between the parties in
these cases are ultimately resolved, 10 the final result will
surely be that there are properties constituting the estate of
Mrs. Hodges of which Magno is the current administratrix. It
follows, therefore, that said appellee had the right, as such
administratrix, to hire the persons whom she paid overtime pay
and to be paid for her own services as administratrix. That she
has not yet collected and is not collecting amounts as
substantial as that paid to or due appellant PCIB is to her
credit.
Of course, she is also entitled to the services of counsel and to
that end had the authority to enter into contracts for attorney's
fees in the manner she had done in the agreement of June 6,
1964. And as regards to the reasonableness of the amount
therein stipulated, We see no reason to disturb the discretion
exercised by the probate court in determining the same. We
have gone over the agreement, and considering the obvious
size of the estate in question and the nature of the issues
between the parties as well as the professional standing of
counsel, We cannot say that the fees agreed upon require the
exercise by the Court of its inherent power to reduce it.
PCIB insists, however, that said agreement of June 6, 1964 is
not for legal services to the estate but to the heirs of Mrs.
Hodges, or, at most, to both of them, and such being the case,
any payment under it, insofar as counsels' services would
redound to the benefit of the heirs, would be in the nature of
advances to such heirs and a premature distribution of the
estate. Again, We hold that such posture cannot prevail.
Upon the premise We have found plausible that there is an
existing estate of Mrs. Hodges, it results that juridically and
factually the interests involved in her estate are distinct and
different from those involved in her estate of Hodges and vice
versa. Insofar as the matters related exclusively to the estate of
Mrs. Hodges, PCIB, as administrator of the estate of Hodges,
is a complete stranger and it is without personality to question
the actuations of the administratrix thereof regarding matters
not affecting the estate of Hodges. Actually, considering the
obviously considerable size of the estate of Mrs. Hodges, We
see no possible cause for apprehension that when the two
estates are segregated from each other, the amount of
attorney's fees stipulated in the agreement in question will
prejudice any portion that would correspond to Hodges' estate.
And as regards the other heirs of Mrs. Hodges who ought to be
the ones who should have a say on the attorney's fees and
other expenses of administration assailed by PCIB, suffice it to
say that they appear to have been duly represented in the
agreement itself by their attorney-in-fact, James L. Sullivan and
have not otherwise interposed any objection to any of the
expenses incurred by Magno questioned by PCIB in these
appeals. As a matter of fact, as ordered by the trial court, all
the expenses in question, including the attorney's fees, may be
paid without awaiting the determination and segregation of the
estate of Mrs. Hodges.
Withal, the weightiest consideration in connection with the point
under discussion is that at this stage of the controversy among
the parties herein, the vital issue refers to the existence or non-
existence of the estate of Mrs. Hodges. In this respect, the
interest of respondent Magno, as the appointed administratrix
of the said estate, is to maintain that it exists, which is naturally
common and identical with and inseparable from the interest of
the brothers and sisters of Mrs. Hodges. Thus, it should not be
wondered why both Magno and these heirs have seemingly
agreed to retain but one counsel. In fact, such an arrangement
should be more convenient and economical to both. The
possibility of conflict of interest between Magno and the heirs
of Mrs. Hodges would be, at this stage, quite remote and, in
any event, rather insubstantial. Besides, should any substantial
conflict of interest between them arise in the future, the same
would be a matter that the probate court can very well take
care of in the course of the independent proceedings in Case
No. 1307 after the corresponding segregation of the two
subject estates. We cannot perceive any cogent reason why, at
this stage, the estate and the heirs of Mrs. Hodges cannot be
represented by a common counsel.
Now, as to whether or not the portion of the fees in question
that should correspond to the heirs constitutes premature
partial distribution of the estate of Mrs. Hodges is also a matter
in which neither PCIB nor the heirs of Hodges have any
interest. In any event, since, as far as the records show, the
estate has no creditors and the corresponding estate and
inheritance taxes, except those of the brothers and sisters of
Mrs. Hodges, have already been paid, 11 no prejudice can
caused to anyone by the comparatively small amount of
attorney's fees in question. And in this connection, it may be
added that, although strictly speaking, the attorney's fees of the
counsel of an administrator is in the first instance his personal
responsibility, reimbursable later on by the estate, in the final
analysis, when, as in the situation on hand, the attorney-in-fact
of the heirs has given his conformity thereto, it would be idle
effort to inquire whether or not the sanction given to said fees
by the probate court is proper.
For the foregoing reasons, Assignments of Error LXVIII to LXXI
and LXXIII to LXXVI should be as they are hereby overruled.
Assignments of error I to IV,
XIII to XV, XXII to XXV, XXXV
to XXX VI, XLI to XLIII and L.
These assignments of error deal with the approval by the trial
court of various deeds of sale of real properties registered in
the name of Hodges but executed by appellee Magno, as
Administratrix of the Estate of Mrs. Hodges, purportedly in
implementation of corresponding supposed written "Contracts
to Sell" previously executed by Hodges during the interim
between May 23, 1957, when his wife died, and December 25,
1962, the day he died. As stated on pp. 118-120 of appellant's
main brief, "These are: the, contract to sell between the
deceased, Charles Newton Hodges, and the appellee, Pepito
G. Iyulores executed on February 5, 1961; the contract to sell
between the deceased, Charles Newton Hodges, and the
appellant Esperidion Partisala, executed on April 20, 1960; the
contract to sell between the deceased, Charles Newton
Hodges, and the appellee, Winifredo C. Espada, executed on
April 18, 1960; the contract to sell between the deceased,
Charles Newton Hodges, and the appellee, Rosario Alingasa,
executed on August 25, 1958; the contract to sell between the
deceased, Charles Newton Hodges, and the appellee, Lorenzo
Carles, executed on June 17, 1958; the contract to sell
between the deceased, Charles Newton Hodges, and the
appellee, Salvador S. Guzman, executed on September 13,
1960; the contract to sell between the deceased, Charles
Newton Hodges, and the appellee, Florenia Barrido, executed
on February 21, 1958; the contract to sell between the
deceased, Charles Newton Hodges, and the appellee,
Purificacion Coronado, executed on August 14, 1961; the
contract to sell between the deceased, Charles Newton
Hodges, and the appellee, Graciano Lucero, executed on
November 27, 1961; the contract to sell between the
deceased, Charles Newton Hodges, and the appellee, Ariteo
Thomas Jamir, executed on May 26, 1961; the contract to sell
between the deceased, Charles Newton Hodges, and the
appellee, Melquiades Batisanan, executed on June 9, 1959;
the contract to sell between the deceased, Charles Newton
Hodges, and the appellee, Belcezar Causing, executed on
February 10, 1959 and the contract to sell between the
deceased, Charles Newton Hodges, and the appellee, Adelfa
Premaylon, executed on October 31, 1959, re Title No. 13815."
Relative to these sales, it is the position of appellant PCIB that,
inasmuch as pursuant to the will of Mrs. Hodges, her husband
was to have dominion over all her estate during his lifetime, it
was as absolute owner of the properties respectively covered
by said sales that he executed the aforementioned contracts to
sell, and consequently, upon his death, the implementation of
said contracts may be undertaken only by the administrator of
his estate and not by the administratrix of the estate of Mrs.
Hodges. Basically, the same theory is invoked with particular
reference to five other sales, in which the respective "contracts
to sell" in favor of these appellees were executed by Hodges
before the death of his wife, namely, those in favor of appellee
Santiago Pacaonsis, Alfredo Catedral, Jose Pablico, Western
Institute of Technology and Adelfa Premaylon.
Anent those deeds of sale based on promises or contracts to
sell executed by Hodges after the death of his wife, those
enumerated in the quotation in the immediately preceding
paragraph, it is quite obvious that PCIB's contention cannot be
sustained. As already explained earlier, 11* all proceeds of
remunerative transfers or dispositions made by Hodges after
the death of his wife should be deemed as continuing to be
parts of her estate and, therefore, subject to the terms of her
will in favor of her brothers and sisters, in the sense that should
there be no showing that such proceeds, whether in cash or
property have been subsequently conveyed or assigned
subsequently by Hodges to any third party by acts inter vivos
with the result that they could not thereby belong to him
anymore at the time of his death, they automatically became
part of the inheritance of said brothers and sisters. The deeds
here in question involve transactions which are exactly of this
nature. Consequently, the payments made by the appellees
should be considered as payments to the estate of Mrs.
Hodges which is to be distributed and partitioned among her
heirs specified in the will.
The five deeds of sale predicated on contracts to sell executed
Hodges during the lifetime of his wife, present a different
situation. At first blush, it would appear that as to them, PCIB's
position has some degree of plausibility. Considering, however,
that the adoption of PCIB's theory would necessarily have
tremendous repercussions and would bring about considerable
disturbance of property rights that have somehow accrued
already in favor of innocent third parties, the five purchasers
aforenamed, the Court is inclined to take a pragmatic and
practical view of the legal situation involving them by
overlooking the possible technicalities in the way, the non-
observance of which would not, after all, detract materially from
what should substantially correspond to each and all of the
parties concerned.
To start with, these contracts can hardly be ignored. Bona fide
third parties are involved; as much as possible, they should not
be made to suffer any prejudice on account of judicial
controversies not of their own making. What is more, the
transactions they rely on were submitted by them to the
probate court for approval, and from already known and
recorded actuations of said court then, they had reason to
believe that it had authority to act on their motions, since
appellee Magno had, from time to time prior to their
transactions with her, been allowed to act in her capacity as
administratrix of one of the subject estates either alone or
conjointly with PCIB. All the sales in question were executed by
Magno in 1966 already, but before that, the court had
previously authorized or otherwise sanctioned expressly many
of her act as administratrix involving expenditures from the
estate made by her either conjointly with or independently from
PCIB, as Administrator of the Estate of Hodges. Thus, it may
be said that said buyers-appellees merely followed precedents
in previous orders of the court. Accordingly, unless the
impugned orders approving those sales indubitably suffer from
some clearly fatal infirmity the Court would rather affirm them.
It is quite apparent from the record that the properties covered
by said sales are equivalent only to a fraction of what should
constitute the estate of Mrs. Hodges, even if it is assumed that
the same would finally be held to be only one-fourth of the
conjugal properties of the spouses as of the time of her death
or, to be more exact, one-half of her estate as per the inventory
submitted by Hodges as executor, on May 12, 1958. In none of
its numerous, varied and voluminous pleadings, motions and
manifestations has PCIB claimed any possibility otherwise.
Such being the case, to avoid any conflict with the heirs of
Hodges, the said properties covered by the questioned deeds
of sale executed by appellee Magno may be treated as among
those corresponding to the estate of Mrs. Hodges, which would
have been actually under her control and administration had
Hodges complied with his duty to liquidate the conjugal
partnership. Viewing the situation in that manner, the only ones
who could stand to be prejudiced by the appealed orders
referred to in the assignment of errors under discussion and
who could, therefore, have the requisite interest to question
them would be only the heirs of Mrs. Hodges, definitely not
PCIB.
It is of no moment in what capacity Hodges made the
"contracts to sell' after the death of his wife. Even if he had
acted as executor of the will of his wife, he did not have to
submit those contracts to the court nor follow the provisions of
the rules, (Sections 2, 4, 5, 6, 8 and 9 of Rule 89 quoted by
appellant on pp. 125 to 127 of its brief) for the simple reason
that by the very orders, much relied upon by appellant for other
purposes, of May 27, 1957 and December 14, 1957, Hodges
was "allowed or authorized" by the trial court "to continue the
business in which he was engaged and to perform acts which
he had been doing while the deceased was living", (Order of
May 27) which according to the motion on which the court
acted was "of buying and selling personal and real properties",
and "to execute subsequent sales, conveyances, leases and
mortgages of the properties left by the said deceased Linnie
Jane Hodges in consonance with the wishes conveyed in the
last will and testament of the latter." (Order of December 14) In
other words, if Hodges acted then as executor, it can be said
that he had authority to do so by virtue of these blanket orders,
and PCIB does not question the legality of such grant of
authority; on the contrary, it is relying on the terms of the order
itself for its main contention in these cases. On the other hand,
if, as PCIB contends, he acted as heir-adjudicatee, the
authority given to him by the aforementioned orders would still
suffice.
As can be seen, therefore, it is of no moment whether the
"contracts to sell" upon which the deeds in question were
based were executed by Hodges before or after the death of
his wife. In a word, We hold, for the reasons already stated,
that the properties covered by the deeds being assailed pertain
or should be deemed as pertaining to the estate of Mrs.
Hodges; hence, any supposed irregularity attending the
actuations of the trial court may be invoked only by her heirs,
not by PCIB, and since the said heirs are not objecting, and the
defects pointed out not being strictly jurisdictional in nature, all
things considered, particularly the unnecessary disturbance of
rights already created in favor of innocent third parties, it is
best that the impugned orders are not disturbed.
In view of these considerations, We do not find sufficient merit
in the assignments of error under discussion.
Assignments of error V to VIII,
XVI to XVIII, XXVI to XXIX, XXXVII
to XXXVIII, XLIV to XLVI and LI.
All these assignments of error commonly deal with alleged
non-fulfillment by the respective vendees, appellees herein, of
the terms and conditions embodied in the deeds of sale
referred to in the assignments of error just discussed. It is
claimed that some of them never made full payments in
accordance with the respective contracts to sell, while in the
cases of the others, like Lorenzo Carles, Jose Pablico, Alfredo
Catedral and Salvador S. Guzman, the contracts with them had
already been unilaterally cancelled by PCIB pursuant to
automatic rescission clauses contained in them, in view of the
failure of said buyers to pay arrearages long overdue. But
PCIB's posture is again premised on its assumption that the
properties covered by the deeds in question could not pertain
to the estate of Mrs. Hodges. We have already held above that,
it being evident that a considerable portion of the conjugal
properties, much more than the properties covered by said
deeds, would inevitably constitute the estate of Mrs. Hodges, to
avoid unnecessary legal complications, it can be assumed that
said properties form part of such estate. From this point of
view, it is apparent again that the questions, whether or not it
was proper for appellee Magno to have disregarded the
cancellations made by PCIB, thereby reviving the rights of the
respective buyers-appellees, and, whether or not the rules
governing new dispositions of properties of the estate were
strictly followed, may not be raised by PCIB but only by the
heirs of Mrs. Hodges as the persons designated to inherit the
same, or perhaps the government because of the still unpaid
inheritance taxes. But, again, since there is no pretense that
any objections were raised by said parties or that they would
necessarily be prejudiced, the contentions of PCIB under the
instant assignments of error hardly merit any consideration.
Assignments of error IX to XII, XIX
to XXI, XXX to XXIV, XXXIX to XL,
XLVII to XLIX, LII and LIII to LXI.
PCIB raises under these assignments of error two issues which
according to it are fundamental, namely: (1) that in approving
the deeds executed by Magno pursuant to contracts to sell
already cancelled by it in the performance of its functions as
administrator of the estate of Hodges, the trial court deprived
the said estate of the right to invoke such cancellations it
(PCIB) had made and (2) that in so acting, the court "arrogated
unto itself, while acting as a probate court, the power to
determine the contending claims of third parties against the
estate of Hodges over real property," since it has in effect
determined whether or not all the terms and conditions of the
respective contracts to sell executed by Hodges in favor of the
buyers-appellees concerned were complied with by the latter.
What is worse, in the view of PCIB, is that the court has taken
the word of the appellee Magno, "a total stranger to his estate
as determinative of the issue".
Actually, contrary to the stand of PCIB, it is this last point
regarding appellee Magno's having agreed to ignore the
cancellations made by PCIB and allowed the buyers-appellees
to consummate the sales in their favor that is decisive. Since
We have already held that the properties covered by the
contracts in question should be deemed to be portions of the
estate of Mrs. Hodges and not that of Hodges, it is PCIB that is
a complete stranger in these incidents. Considering, therefore,
that the estate of Mrs. Hodges and her heirs who are the real
parties in interest having the right to oppose the consummation
of the impugned sales are not objecting, and that they are the
ones who are precisely urging that said sales be sanctioned,
the assignments of error under discussion have no basis and
must accordingly be as they are hereby overruled.
With particular reference to assignments LIII to LXI, assailing
the orders of the trial court requiring PCIB to surrender the
respective owner's duplicate certificates of title over the
properties covered by the sales in question and otherwise
directing the Register of Deeds of Iloilo to cancel said
certificates and to issue new transfer certificates of title in favor
of the buyers-appellees, suffice it to say that in the light of the
above discussion, the trial court was within its rights to so
require and direct, PCIB having refused to give way, by
withholding said owners' duplicate certificates, of the
corresponding registration of the transfers duly and legally
approved by the court.
Assignments of error LXII to LXVII
All these assignments of error commonly deal with the appeal
against orders favoring appellee Western Institute of
Technology. As will be recalled, said institute is one of the
buyers of real property covered by a contract to sell executed
by Hodges prior to the death of his wife. As of October, 1965, it
was in arrears in the total amount of P92,691.00 in the
payment of its installments on account of its purchase, hence it
received under date of October 4, 1965 and October 20, 1965,
letters of collection, separately and respectively, from PCIB
and appellee Magno, in their respective capacities as
administrators of the distinct estates of the Hodges spouses,
albeit, while in the case of PCIB it made known that "no other
arrangement can be accepted except by paying all your past
due account", on the other hand, Magno merely said she would
"appreciate very much if you can make some remittance to
bring this account up-to-date and to reduce the amount of the
obligation." (See pp. 295-311, Green R. on A.) On November
3, 1965, the Institute filed a motion which, after alleging that it
was ready and willing to pay P20,000 on account of its overdue
installments but uncertain whether it should pay PCIB or
Magno, it prayed that it be "allowed to deposit the aforesaid
amount with the court pending resolution of the conflicting
claims of the administrators." Acting on this motion, on
November 23, 1965, the trial court issued an order, already
quoted in the narration of facts in this opinion, holding that
payment to both or either of the two administrators is "proper
and legal", and so "movant — can pay to both estates or either
of them", considering that "in both cases (Special Proceedings
1307 and 1672) there is as yet no judicial declaration of heirs
nor distribution of properties to whomsoever are entitled
thereto."
The arguments under the instant assignments of error revolve
around said order. From the procedural standpoint, it is
claimed that PCIB was not served with a copy of the Institute's
motion, that said motion was heard, considered and resolved
on November 23, 1965, whereas the date set for its hearing
was November 20, 1965, and that what the order grants is
different from what is prayed for in the motion. As to the
substantive aspect, it is contended that the matter treated in
the motion is beyond the jurisdiction of the probate court and
that the order authorized payment to a person other than the
administrator of the estate of Hodges with whom the Institute
had contracted.
The procedural points urged by appellant deserve scant
consideration. We must assume, absent any clear proof to the
contrary, that the lower court had acted regularly by seeing to it
that appellant was duly notified. On the other hand, there is
nothing irregular in the court's having resolved the motion three
days after the date set for hearing the same. Moreover, the
record reveals that appellants' motion for reconsideration
wherein it raised the same points was denied by the trial court
on March 7, 1966 (p. 462, Green R. on A.) Withal, We are not
convinced that the relief granted is not within the general intent
of the Institute's motion.
Insofar as the substantive issues are concerned, all that need
be said at this point is that they are mere reiterations of
contentions We have already resolved above adversely to
appellants' position. Incidentally, We may add, perhaps, to
erase all doubts as to the propriety of not disturbing the lower
court's orders sanctioning the sales questioned in all these
appeal s by PCIB, that it is only when one of the parties to a
contract to convey property executed by a deceased person
raises substantial objections to its being implemented by the
executor or administrator of the decedent's estate that Section
8 of Rule 89 may not apply and, consequently, the matter has,
to be taken up in a separate action outside of the probate
court; but where, as in the cases of the sales herein involved,
the interested parties are in agreement that the conveyance be
made, it is properly within the jurisdiction of the probate court to
give its sanction thereto pursuant to the provisions of the rule
just mentioned. And with respect to the supposed automatic
rescission clauses contained in the contracts to sell executed
by Hodges in favor of herein appellees, the effect of said
clauses depend on the true nature of the said contracts,
despite the nomenclature appearing therein, which is not
controlling, for if they amount to actual contracts of sale instead
of being mere unilateral accepted "promises to sell", (Art. 1479,
Civil Code of the Philippines, 2nd paragraph) the pactum
commissorium or the automatic rescission provision would not
operate, as a matter of public policy, unless there has been a
previous notarial or judicial demand by the seller (10 Manresa
263, 2nd ed.) neither of which have been shown to have been
made in connection with the transactions herein involved.
Consequently, We find no merit in the assignments of error
Number LXII to LXVII.
SUMMARY
Considering the fact that this decision is unusually extensive
and that the issues herein taken up and resolved are rather
numerous and varied, what with appellant making seventy-
eight assignments of error affecting no less than thirty separate
orders of the court a quo, if only to facilitate proper
understanding of the import and extent of our rulings herein
contained, it is perhaps desirable that a brief restatement of the
whole situation be made together with our conclusions in
regard to its various factual and legal aspects. .
The instant cases refer to the estate left by the late Charles
Newton Hodges as well as that of his wife, Linnie Jane
Hodges, who predeceased him by about five years and a half.
In their respective wills which were executed on different
occasions, each one of them provided mutually as follows: "I
give, devise and bequeath all of the rest, residue and
remainder (after funeral and administration expenses, taxes
and debts) of my estate, both real and personal, wherever
situated or located, to my beloved (spouse) to have and to hold
unto (him/her) — during (his/her) natural lifetime", subject to
the condition that upon the death of whoever of them survived
the other, the remainder of what he or she would inherit from
the other is "give(n), devise(d) and bequeath(ed)" to the
brothers and sisters of the latter.
Mrs. Hodges died first, on May 23, 1957. Four days later, on
May 27, Hodges was appointed special administrator of her
estate, and in a separate order of the same date, he was
"allowed or authorized to continue the business in which he
was engaged, (buying and selling personal and real properties)
and to perform acts which he had been doing while the
deceased was living." Subsequently, on December 14, 1957,
after Mrs. Hodges' will had been probated and Hodges had
been appointed and had qualified as Executor thereof, upon
his motion in which he asserted that he was "not only part
owner of the properties left as conjugal, but also, the successor
to all the properties left by the deceased Linnie Jane Hodges",
the trial court ordered that "for the reasons stated in his motion
dated December 11, 1957, which the Court considers well
taken, ... all the sales, conveyances, leases and mortgages of
all properties left by the deceased Linnie Jane Hodges
executed by the Executor, Charles Newton Hodges are hereby
APPROVED. The said Executor is further authorized to
execute subsequent sales, conveyances, leases and
mortgages of the properties left by the said deceased Linnie
Jane Hodges in consonance with the wishes contained in the
last will and testament of the latter."
Annually thereafter, Hodges submitted to the court the
corresponding statements of account of his administration, with
the particularity that in all his motions, he always made it point
to urge the that "no person interested in the Philippines of the
time and place of examining the herein accounts be given
notice as herein executor is the only devisee or legatee of the
deceased in accordance with the last will and testament
already probated by the Honorable Court." All said accounts
approved as prayed for.
Nothing else appears to have been done either by the court a
quo or Hodges until December 25, 1962. Importantly to be the
provision in the will of Mrs. Hodges that her share of the
conjugal partnership was to be inherited by her husband "to
have and to hold unto him, my said husband, during his natural
lifetime" and that "at the death of my said husband, I give,
devise and bequeath all the rest, residue and remainder of my
estate, both real and personal, wherever situated or located, to
be equally divided among my brothers and sisters, share and
share alike", which provision naturally made it imperative that
the conjugal partnership be promptly liquidated, in order that
the "rest, residue and remainder" of his wife's share thereof, as
of the time of Hodges' own death, may be readily known and
identified, no such liquidation was ever undertaken. The record
gives no indication of the reason for such omission, although
relatedly, it appears therein:
1. That in his annual statement submitted to
the court of the net worth of C. N. Hodges
and the Estate of Linnie Jane Hodges,
Hodges repeatedly and consistently reported
the combined income of the conjugal
partnership and then merely divided the
same equally between himself and the estate
of the deceased wife, and, more importantly,
he also, as consistently, filed corresponding
separate income tax returns for each
calendar year for each resulting half of such
combined income, thus reporting that the
estate of Mrs. Hodges had its own income
distinct from his own.
2. That when the court a quo happened to
inadvertently omit in its order probating the
will of Mrs. Hodges, the name of one of her
brothers, Roy Higdon then already
deceased, Hodges lost no time in asking for
the proper correction "in order that the heirs
of deceased Roy Higdon may not think or
believe they were omitted, and that they
were really interested in the estate of the
deceased Linnie Jane Hodges".
3. That in his aforementioned motion of
December 11, 1957, he expressly stated that
"deceased Linnie Jane Hodges died leaving
no descendants or ascendants except
brothers and sisters and herein petitioner as
the surviving spouse, to inherit the properties
of the decedent", thereby indicating that he
was not excluding his wife's brothers and
sisters from the inheritance.
4. That Hodges allegedly made statements
and manifestations to the United States
inheritance tax authorities indicating that he
had renounced his inheritance from his wife
in favor of her other heirs, which attitude he
is supposed to have reiterated or ratified in
an alleged affidavit subscribed and sworn to
here in the Philippines and in which he even
purportedly stated that his reason for so
disclaiming and renouncing his rights under
his wife's will was to "absolve (him) or (his)
estate from any liability for the payment of
income taxes on income which has accrued
to the estate of Linnie Jane Hodges", his
wife, since her death.
On said date, December 25, 1962, Hodges died. The very next
day, upon motion of herein respondent and appellee, Avelina
A. Magno, she was appointed by the trial court as
Administratrix of the Testate Estate of Linnie Jane Hodges, in
Special Proceedings No. 1307 and as Special Administratrix of
the estate of Charles Newton Hodges, "in the latter case,
because the last will of said Charles Newton Hodges is still
kept in his vault or iron safe and that the real and personal
properties of both spouses may be lost, damaged or go to
waste, unless Special Administratrix is appointed," (Order of
December 26, 1962, p. 27, Yellow R. on A.) although, soon
enough, on December 29, 1962, a certain Harold K. Davies
was appointed as her Co-Special Administrator, and when
Special Proceedings No. 1672, Testate Estate of Charles
Newton Hodges, was opened, Joe Hodges, as next of kin of
the deceased, was in due time appointed as Co-Administrator
of said estate together with Atty. Fernando P. Mirasol, to
replace Magno and Davies, only to be in turn replaced
eventually by petitioner PCIB alone.
At the outset, the two probate proceedings appear to have
been proceeding jointly, with each administrator acting together
with the other, under a sort of modus operandi. PCIB used to
secure at the beginning the conformity to and signature of
Magno in transactions it wanted to enter into and submitted the
same to the court for approval as their joint acts. So did Magno
do likewise. Somehow, however, differences seem to have
arisen, for which reason, each of them began acting later on
separately and independently of each other, with apparent
sanction of the trial court. Thus, PCIB had its own lawyers
whom it contracted and paid handsomely, conducted the
business of the estate independently of Magno and otherwise
acted as if all the properties appearing in the name of Charles
Newton Hodges belonged solely and only to his estate, to the
exclusion of the brothers and sisters of Mrs. Hodges, without
considering whether or not in fact any of said properties
corresponded to the portion of the conjugal partnership
pertaining to the estate of Mrs. Hodges. On the other hand,
Magno made her own expenditures, hired her own lawyers, on
the premise that there is such an estate of Mrs. Hodges, and
dealth with some of the properties, appearing in the name of
Hodges, on the assumption that they actually correspond to the
estate of Mrs. Hodges. All of these independent and separate
actuations of the two administrators were invariably approved
by the trial court upon submission. Eventually, the differences
reached a point wherein Magno, who was more cognizant than
anyone else about the ins and outs of the businesses and
properties of the deceased spouses because of her long and
intimate association with them, made it difficult for PCIB to
perform normally its functions as administrator separately from
her. Thus, legal complications arose and the present judicial
controversies came about.
Predicating its position on the tenor of the orders of May 27
and December 14, 1957 as well as the approval by the court a
quo of the annual statements of account of Hodges, PCIB
holds to the view that the estate of Mrs. Hodges has already
been in effect closed with the virtual adjudication in the
mentioned orders of her whole estate to Hodges, and that,
therefore, Magno had already ceased since then to have any
estate to administer and the brothers and sisters of Mrs.
Hodges have no interests whatsoever in the estate left by
Hodges. Mainly upon such theory, PCIB has come to this Court
with a petition for certiorari and prohibition praying that the
lower court's orders allowing respondent Magno to continue
acting as administratrix of the estate of Mrs. Hodges in Special
Proceedings 1307 in the manner she has been doing, as
detailed earlier above, be set aside. Additionally, PCIB
maintains that the provision in Mrs. Hodges' will instituting her
brothers and sisters in the manner therein specified is in the
nature of a testamentary substitution, but inasmuch as the
purported substitution is not, in its view, in accordance with the
pertinent provisions of the Civil Code, it is ineffective and may
not be enforced. It is further contended that, in any event,
inasmuch as the Hodges spouses were both residents of the
Philippines, following the decision of this Court in Aznar vs.
Garcia, or the case of Christensen, 7 SCRA 95, the estate left
by Mrs. Hodges could not be more than one-half of her share
of the conjugal partnership, notwithstanding the fact that she
was citizen of Texas, U.S.A., in accordance with Article 16 in
relation to Articles 900 and 872 of the Civil Code. Initially, We
issued a preliminary injunction against Magno and allowed
PCIB to act alone.
At the same time PCIB has appealed several separate orders
of the trial court approving individual acts of appellee Magno in
her capacity as administratrix of the estate of Mrs. Hodges,
such as, hiring of lawyers for specified fees and incurring
expenses of administration for different purposes and
executing deeds of sale in favor of her co-appellees covering
properties which are still registered in the name of Hodges,
purportedly pursuant to corresponding "contracts to sell"
executed by Hodges. The said orders are being questioned on
jurisdictional and procedural grounds directly or indirectly
predicated on the principal theory of appellant that all the
properties of the two estates belong already to the estate of
Hodges exclusively.
On the other hand, respondent-appellee Magno denies that the
trial court's orders of May 27 and December 14, 1957 were
meant to be finally adjudicatory of the hereditary rights of
Hodges and contends that they were no more than the court's
general sanction of past and future acts of Hodges as executor
of the will of his wife in due course of administration. As to the
point regarding substitution, her position is that what was given
by Mrs. Hodges to her husband under the provision in question
was a lifetime usufruct of her share of the conjugal partnership,
with the naked ownership passing directly to her brothers and
sisters. Anent the application of Article 16 of the Civil Code,
she claims that the applicable law to the will of Mrs. Hodges is
that of Texas under which, she alleges, there is no system of
legitime, hence, the estate of Mrs. Hodges cannot be less than
her share or one-half of the conjugal partnership properties.
She further maintains that, in any event, Hodges had as a
matter of fact and of law renounced his inheritance from his
wife and, therefore, her whole estate passed directly to her
brothers and sisters effective at the latest upon the death of
Hodges.
In this decision, for the reasons discussed above, and upon the
issues just summarized, We overrule PCIB's contention that
the orders of May 27, 1957 and December 14, 1957 amount to
an adjudication to Hodges of the estate of his wife, and We
recognize the present existence of the estate of Mrs. Hodges,
as consisting of properties, which, while registered in that
name of Hodges, do actually correspond to the remainder of
the share of Mrs. Hodges in the conjugal partnership, it
appearing that pursuant to the pertinent provisions of her will,
any portion of said share still existing and undisposed of by her
husband at the time of his death should go to her brothers and
sisters share and share alike. Factually, We find that the
proven circumstances relevant to the said orders do not
warrant the conclusion that the court intended to make thereby
such alleged final adjudication. Legally, We hold that the tenor
of said orders furnish no basis for such a conclusion, and what
is more, at the time said orders were issued, the proceedings
had not yet reached the point when a final distribution and
adjudication could be made. Moreover, the interested parties
were not duly notified that such disposition of the estate would
be done. At best, therefore, said orders merely allowed Hodges
to dispose of portions of his inheritance in advance of final
adjudication, which is implicitly permitted under Section 2 of
Rule 109, there being no possible prejudice to third parties,
inasmuch as Mrs. Hodges had no creditors and all pertinent
taxes have been paid.
More specifically, We hold that, on the basis of circumstances
presently extant in the record, and on the assumption that
Hodges' purported renunciation should not be upheld, the
estate of Mrs. Hodges inherited by her brothers and sisters
consists of one-fourth of the community estate of the spouses
at the time of her death, minus whatever Hodges had
gratuitously disposed of therefrom during the period from, May
23, 1957, when she died, to December 25, 1962, when he died
provided, that with regard to remunerative dispositions made
by him during the same period, the proceeds thereof, whether
in cash or property, should be deemed as continuing to be part
of his wife's estate, unless it can be shown that he had
subsequently disposed of them gratuitously.
At this juncture, it may be reiterated that the question of what
are the pertinent laws of Texas and what would be the estate
of Mrs. Hodges under them is basically one of fact, and
considering the respective positions of the parties in regard to
said factual issue, it can already be deemed as settled for the
purposes of these cases that, indeed, the free portion of said
estate that could possibly descend to her brothers and sisters
by virtue of her will may not be less than one-fourth of the
conjugal estate, it appearing that the difference in the stands of
the parties has reference solely to the legitime of Hodges,
PCIB being of the view that under the laws of Texas, there is
such a legitime of one-fourth of said conjugal estate and
Magno contending, on the other hand, that there is none. In
other words, hereafter, whatever might ultimately appear, at
the subsequent proceedings, to be actually the laws of Texas
on the matter would no longer be of any consequence, since
PCIB would anyway be in estoppel already to claim that the
estate of Mrs. Hodges should be less than as contended by it
now, for admissions by a party related to the effects of foreign
laws, which have to be proven in our courts like any other
controverted fact, create estoppel.
In the process, We overrule PCIB's contention that the
provision in Mrs. Hodges' will in favor of her brothers and
sisters constitutes ineffective hereditary substitutions. But
neither are We sustaining, on the other hand, Magno's pose
that it gave Hodges only a lifetime usufruct. We hold that by
said provision, Mrs. Hodges simultaneously instituted her
brothers and sisters as co-heirs with her husband, with the
condition, however, that the latter would have complete rights
of dominion over the whole estate during his lifetime and what
would go to the former would be only the remainder thereof at
the time of Hodges' death. In other words, whereas they are
not to inherit only in case of default of Hodges, on the other
hand, Hodges was not obliged to preserve anything for them.
Clearly then, the essential elements of testamentary
substitution are absent; the provision in question is a simple
case of conditional simultaneous institution of heirs, whereby
the institution of Hodges is subject to a partial resolutory
condition the operative contingency of which is coincidental
with that of the suspensive condition of the institution of his
brothers and sisters-in-law, which manner of institution is not
prohibited by law.
We also hold, however, that the estate of Mrs. Hodges
inherited by her brothers and sisters could be more than just
stated, but this would depend on (1) whether upon the proper
application of the principle of renvoi in relation to Article 16 of
the Civil Code and the pertinent laws of Texas, it will appear
that Hodges had no legitime as contended by Magno, and (2)
whether or not it can be held that Hodges had legally and
effectively renounced his inheritance from his wife. Under the
circumstances presently obtaining and in the state of the
record of these cases, as of now, the Court is not in a position
to make a final ruling, whether of fact or of law, on any of these
two issues, and We, therefore, reserve said issues for further
proceedings and resolution in the first instance by the court a
quo, as hereinabove indicated. We reiterate, however, that
pending such further proceedings, as matters stand at this
stage, Our considered opinion is that it is beyond cavil that
since, under the terms of the will of Mrs. Hodges, her husband
could not have anyway legally adjudicated or caused to be
adjudicated to himself her whole share of their conjugal
partnership, albeit he could have disposed any part thereof
during his lifetime, the resulting estate of Mrs. Hodges, of
which Magno is the uncontested administratrix, cannot be less
than one-fourth of the conjugal partnership properties, as of the
time of her death, minus what, as explained earlier, have been
gratuitously disposed of therefrom, by Hodges in favor of third
persons since then, for even if it were assumed that, as
contended by PCIB, under Article 16 of the Civil Code and
applying renvoi the laws of the Philippines are the ones
ultimately applicable, such one-fourth share would be her free
disposable portion, taking into account already the legitime of
her husband under Article 900 of the Civil Code.
The foregoing considerations leave the Court with no
alternative than to conclude that in predicating its orders on the
assumption, albeit unexpressed therein, that there is an estate
of Mrs. Hodges to be distributed among her brothers and
sisters and that respondent Magno is the legal administratrix
thereof, the trial court acted correctly and within its jurisdiction.
Accordingly, the petition for certiorari and prohibition has to be
denied. The Court feels however, that pending the liquidation
of the conjugal partnership and the determination of the
specific properties constituting her estate, the two
administrators should act conjointly as ordered in the Court's
resolution of September 8, 1972 and as further clarified in the
dispositive portion of its decision.
Anent the appeals from the orders of the lower court
sanctioning payment by appellee Magno, as administratrix, of
expenses of administration and attorney's fees, it is obvious
that, with Our holding that there is such an estate of Mrs.
Hodges, and for the reasons stated in the body of this opinion,
the said orders should be affirmed. This We do on the
assumption We find justified by the evidence of record, and
seemingly agreed to by appellant PCIB, that the size and value
of the properties that should correspond to the estate of Mrs.
Hodges far exceed the total of the attorney's fees and
administration expenses in question.
With respect to the appeals from the orders approving
transactions made by appellee Magno, as administratrix,
covering properties registered in the name of Hodges, the
details of which are related earlier above, a distinction must be
made between those predicated on contracts to sell executed
by Hodges before the death of his wife, on the one hand, and
those premised on contracts to sell entered into by him after
her death. As regards the latter, We hold that inasmuch as the
payments made by appellees constitute proceeds of sales of
properties belonging to the estate of Mrs. Hodges, as may be
implied from the tenor of the motions of May 27 and December
14, 1957, said payments continue to pertain to said estate,
pursuant to her intent obviously reflected in the relevant
provisions of her will, on the assumption that the size and value
of the properties to correspond to the estate of Mrs. Hodges
would exceed the total value of all the properties covered by
the impugned deeds of sale, for which reason, said properties
may be deemed as pertaining to the estate of Mrs. Hodges.
And there being no showing that thus viewing the situation,
there would be prejudice to anyone, including the government,
the Court also holds that, disregarding procedural technicalities
in favor of a pragmatic and practical approach as discussed
above, the assailed orders should be affirmed. Being a
stranger to the estate of Mrs. Hodges, PCIB has no personality
to raise the procedural and jurisdictional issues raised by it.
And inasmuch as it does not appear that any of the other heirs
of Mrs. Hodges or the government has objected to any of the
orders under appeal, even as to these parties, there exists no
reason for said orders to be set aside.
DISPOSITIVE PART
IN VIEW OF ALL THE FOREGOING PREMISES, judgment is
hereby rendered DISMISSING the petition in G. R. Nos. L-
27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936-
37 and the other thirty-one numbers hereunder ordered to be
added after payment of the corresponding docket fees, all the
orders of the trial court under appeal enumerated in detail on
pages 35 to 37 and 80 to 82 of this decision; the existence of
the Testate Estate of Linnie Jane Hodges, with respondent-
appellee Avelina A. Magno, as administratrix thereof is
recognized, and it is declared that, until final judgment is
ultimately rendered regarding (1) the manner of applying Article
16 of the Civil Code of the Philippines to the situation obtaining
in these cases and (2) the factual and legal issue of whether or
not Charles Newton Hodges had effectively and legally
renounced his inheritance under the will of Linnie Jane
Hodges, the said estate consists of one-fourth of the
community properties of the said spouses, as of the time of the
death of the wife on May 23, 1957, minus whatever the
husband had already gratuitously disposed of in favor of third
persons from said date until his death, provided, first, that with
respect to remunerative dispositions, the proceeds thereof
shall continue to be part of the wife's estate, unless
subsequently disposed of gratuitously to third parties by the
husband, and second, that should the purported renunciation
be declared legally effective, no deductions whatsoever are to
be made from said estate; in consequence, the preliminary
injunction of August 8, 1967, as amended on October 4 and
December 6, 1967, is lifted, and the resolution of September 8,
1972, directing that petitioner-appellant PCIB, as Administrator
of the Testate Estate of Charles Newton Hodges, in Special
Proceedings 1672, and respondent-appellee Avelina A.
Magno, as Administratrix of the Testate Estate of Linnie Jane
Hodges, in Special Proceedings 1307, should act thenceforth
always conjointly, never independently from each other, as
such administrators, is reiterated, and the same is made part of
this judgment and shall continue in force, pending the
liquidation of the conjugal partnership of the deceased spouses
and the determination and segregation from each other of their
respective estates, provided, that upon the finality of this
judgment, the trial court should immediately proceed to the
partition of the presently combined estates of the spouses, to
the end that the one-half share thereof of Mrs. Hodges may be
properly and clearly identified; thereafter, the trial court should
forthwith segregate the remainder of the one-fourth herein
adjudged to be her estate and cause the same to be turned
over or delivered to respondent for her exclusive administration
in Special Proceedings 1307, while the other one-fourth shall
remain under the joint administration of said respondent and
petitioner under a joint proceedings in Special Proceedings
1307 and 1672, whereas the half unquestionably pertaining to
Hodges shall be administered by petitioner exclusively in
Special Proceedings 1672, without prejudice to the resolution
by the trial court of the pending motions for its removal as
administrator12; and this arrangement shall be maintained until
the final resolution of the two issues of renvoi and renunciation
hereby reserved for further hearing and determination, and the
corresponding complete segregation and partition of the two
estates in the proportions that may result from the said
resolution.
Generally and in all other respects, the parties and the court a
quo are directed to adhere henceforth, in all their actuations in
Special Proceedings 1307 and 1672, to the views passed and
ruled upon by the Court in the foregoing opinion.
Appellant PCIB is ordered to pay, within five (5) days from
notice hereof, thirty-one additional appeal docket fees, but this
decision shall nevertheless become final as to each of the
parties herein after fifteen (15) days from the respective notices
to them hereof in accordance with the rules.
Costs against petitioner-appellant PCIB.
MENANDRO B. LAUREANO vs. COURT OF APPEALS AND
SINGAPORE AIRLINES LIMITED; G.R. No. 114776.
February 2, 2000; QUISUMBING, J.:
This petition for review on certiorari under Rule 45 of the Rules
of Court seeks to reverse the Decision of the Court of Appeals,
dated October 29, 1993, in C.A. G.R. No. CV 34476, as well as
its Resolution dated February 28, 1994, which denied the
motion for reconsideration.
The facts of the case as summarized by the respondent
appellate court are as follows:
"Sometime in 1978, plaintiff [Menandro B.
Laureano, herein petitioner], then Director of
Flight Operations and Chief Pilot of Air
Manila, applied for employment with
defendant company [herein private
respondent] through its Area Manager in
Manila.
On September 30, 1978, after the usual
personal interview, defendant wrote to
plaintiff, offering a contract of employment as
an expatriate B-707 captain for an original
period of two (2) years commencing on
January 21, 1978, Plaintiff accepted the offer
and commenced working on January 20,
1979. After passing the six-month probation
period, plaintiff's appointment was confirmed
effective July 21, 1979. (Annex "B", p. 30,
Rollo).
On July 21, 1979, defendant offered plaintiff
an extension of his two-year contract to five
(5) years effective January 21, 1979 to
January 20, 1984 subject to the terms and
conditions set forth in the contract of
employment, which the latter accepted
(Annex "C", p. 31, Rec.).
During his service as B-707 captain, plaintiff
on August 24, 1980, while in command of a
flight, committed a noise violation offense at
the Zurich Airport, for which plaintiff
apologized. (Exh. "3", p. 307, Rec.).
Sometime in 1980, plaintiff featured in a tail
scraping incident wherein the tail of the
aircraft scraped or touched the runway
during landing. He was suspended for a few
days until he was investigated by a board
headed by Capt. Choy. He was reprimanded.
Scjuris
On September 25, 1981, plaintiff was invited
to take a course of A-300 conversion training
at Aeroformacion, Toulouse, France at
defendant's expense. Having successfully
completed and passed the training course,
plaintiff was cleared on April 7, 1981 for solo
duty as captain of the Airbus A-300 and
subsequently appointed as captain of the A-
300 fleet commanding an Airbus A-300 in
flights over Southeast Asia. (Annexes "D",
"E" and "F", pp. 34-38, Rec.).
Sometime in 1982, defendant, hit by a
recession, initiated cost-cutting measures.
Seventeen (17) expatriate captains in the
Airbus fleet were found in excess of the
defendant's requirement (t.s.n., July 6, 1988.
p. 11). Consequently, defendant informed its
expatriate pilots including plaintiff of the
situation and advised them to take advance
leaves. (Exh. "15", p. 466, Rec.).
Realizing that the recession would not be for
a short time, defendant decided to terminate
its excess personnel (t.s.n., July 6, 1988, p.
17). It did not, however, immediately
terminate it's A-300 pilots. It reviewed their
qualifications for possible promotion to the B-
747 fleet. Among the 17 excess Airbus pilots
reviewed, twelve were found qualified.
Unfortunately, plaintiff was not one of the
twelve. Jurissc
On October 5, 1982, defendant informed
plaintiff of his termination effective November
1, 1982 and that he will be paid three (3)
months salary in lieu of three months notice
(Annex "I", pp. 41-42, Rec.). Because he
could not uproot his family on such short
notice, plaintiff requested a three-month
notice to afford him time to exhaust all
possible avenues for reconsideration and
retention. Defendant gave only two (2)
months notice and one (1) month salary.
(t.s.n., Nov. 12, 1987. p. 25).
Aggrieved, plaintiff on June 29, 1983,
instituted a case for illegal dismissal before
the Labor Arbiter. Defendant moved to
dismiss on jurisdictional grounds. Before said
motion was resolved, the complaint was
withdrawn. Thereafter, plaintiff filed the
instant case for damages due to illegal
termination of contract of services before the
court a quo (Complaint, pp. 1-10, Rec.).
Again, defendant on February 11, 1987 filed
a motion to dismiss alleging inter alia: (1)
that the court has no jurisdiction over the
subject matter of the case, and (2) that
Philippine courts have no jurisdiction over
the instant case. Defendant contends that
the complaint is for illegal dismissal together
with a money claim arising out of and in the
course of plaintiff's employment "thus it is the
Labor Arbiter and the NLRC who have the
jurisdiction pursuant to Article 217 of the
Labor Code" and that, since plaintiff was
employed in Singapore, all other aspects of
his employment contract and/or documents
executed in Singapore. Thus, defendant
postulates that Singapore laws should apply
and courts thereat shall have jurisdiction.
(pp. 50-69, Rec.). Misjuris
In traversing defendant's arguments, plaintiff
claimed that: (1) where the items demanded
in a complaint are the natural consequences
flowing from a breach of an obligation and
not labor benefits, the case is intrinsically a
civil dispute; (2) the case involves a question
that is beyond the field of specialization of
labor arbiters; and (3) if the complaint is
grounded not on the employee's dismissal
per se but on the manner of said dismissal
and the consequence thereof, the case falls
under the jurisdiction of the civil courts. (pp.
70-73, Rec.)
On March 23, 1987, the court a quo denied
defendant's motion to dismiss (pp. 82-84,
Ibid). The motion for reconsideration was
likewise denied. (p. 95 ibid)
On September 16, 1987, defendant filed its
answer reiterating the grounds relied upon in
its motion to dismiss and further arguing that
plaintiff is barred by laches, waiver, and
estoppel from instituting the complaint and
that he has no cause of action. (pp. 102-
115)"
On April 10, 1991, the trial court handed down its decision in
favor of plaintiff. The dispositive portion of which reads:
"WHEREFORE, judgment is hereby
rendered in favor of plaintiff Menandro
 Laureano and against defendant Singapore
Airlines Limited, ordering defendant to pay
plaintiff the amounts of -
SIN$396,104.00, or its equivalent in
Philippine currency at the current rate of
exchange at the time of payment, as and for
unearned compensation with legal interest
from the filing of the complaint until fully paid;
Jjlex
SIN$154,742.00, or its equivalent in
Philippine currency at the current rate of
exchange at the time of payment; and the
further amounts of P67,500.00 as
consequential damages with legal interest
from the filing of the complaint until fully paid;
P1,000,000.00 as and for moral damages;
P1,000,000.00 as and for exemplary
damages; and P100,000.00 as and for
attorney's fees.
Costs against defendant.
SO ORDERED."
Singapore Airlines timely appealed before the respondent court
and raised the issues of jurisdiction, validity of termination,
estoppel, and damages.
On October 29, 1993, the appellate court set aside the decision
of the trial court, thus,
"...In the instant case, the action for damages
due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982.
Clearly, plaintiff-appellee's action has already
prescribed.
WHEREFORE, the appealed decision is
hereby REVERSED and SET ASIDE. The
complaint is hereby dismissed.
SO ORDERED." Newmiso
Petitioner's and Singapore Airlines' respective motions for
reconsideration were denied.
Now, before the Court, petitioner poses the following queries:
1. IS THE PRESENT ACTION ONE
BASED ON CONTRACT WHICH
PRESCRIBES IN TEN YEARS UNDER
ARTICLE 1144 OF THE NEW CIVIL CODE
OR ONE FOR DAMAGES ARISING FROM
AN INJURY TO THE RIGHTS OF THE
PLAINTIFF WHICH PRESCRIBES IN FOUR
YEARS UNDER ARTICLE 1146 OF THE
NEW CIVIL CODE?
2. CAN AN EMPLOYEE WITH A
FIXED PERIOD OF EMPLOYMENT BE
RETRENCHED BY HIS EMPLOYER?
3. CAN THERE BE VALID
RETRENCHMENT IF AN EMPLOYER
MERELY FAILS TO REALIZE THE
EXPECTED PROFITS EVEN IF IT WERE
NOT, IN FACT, INCURRING LOSSES?
At the outset, we find it necessary to state our concurrence on
the assumption of jurisdiction by the Regional Trial Court of
Manila, Branch 9. The trial court rightly ruled on the application
of Philippine law, thus: Acctmis
"Neither can the Court determine whether
the termination of the plaintiff is legal under
the Singapore Laws because of the
defendant's failure to show which specific
laws of Singapore Laws apply to this case.
As substantially discussed in the preceding
paragraphs, the Philippine Courts do not
take judicial notice of the laws of Singapore.
The defendant that claims the applicability of
the Singapore Laws to this case has the
burden of proof. The defendant has failed to
do so. Therefore, the Philippine law should
be applied."
Respondent Court of Appeals acquired jurisdiction when
defendant filed its appeal before said court. On this matter,
respondent court was correct when it barred defendant-
appellant below from raising further the issue of jurisdiction.
Petitioner now raises the issue of whether his action is one
based on Article 1144 or on Article 1146 of the Civil Code.
According to him, his termination of employment effective
November 1, 1982, was based on an employment contract
which is under Article 1144, so his action should prescribe in
10 years as provided for in said article. Thus he claims the
ruling of the appellate court based on Article 1146 where
prescription is only four (4) years, is an error. The appellate
court concluded that the action for illegal dismissal originally
filed before the Labor Arbiter on June 29, 1983, but which was
withdrawn, then filed again in 1987 before the Regional Trial
Court, had already prescribed.
In our view, neither Article 1144 nor Article 1146 of the Civil
Code is here pertinent. What is applicable is Article 291 of the
Labor Code, viz:
"Article 291. Money claims. - All money
claims arising from employee-employer
relations accruing during the effectivity of this
 Code shall be filed within three (3) years
from the time the cause of action accrued;
otherwise they shall be forever barred.
x x x" Misact
What rules on prescription should apply in cases like this one
has long been decided by this Court. In illegal dismissal, it is
settled, that the ten-year prescriptive period fixed in Article
1144 of the Civil Code may not be invoked by petitioners, for
the Civil Code is a law of general application, while the
prescriptive period fixed in Article 292 of the Labor Code [now
Article 291] is a SPECIAL LAW applicable to claims arising
from employee-employer relations.
More recently in De Guzman. vs. Court of Appeals, where the
money claim was based on a written contract, the Collective
Bargaining Agreement, the Court held:
"...The language of Art. 291 of the Labor
Code does not limit its application only to
'money claims specifically recoverable under
said Code' but covers all money claims
arising from an employee-employer
relations" (Citing Cadalin v. POEA
Administrator, 238 SCRA 721, 764 [1994];
and Uy v. National Labor Relations
Commission, 261 SCRA 505, 515 [1996]). ...
It should be noted further that Article 291 of
the Labor Code is a special law applicable to
money claims arising from employer-
employee relations; thus, it necessarily
prevails over Article 1144 of the Civil Code, a
general law. Basic is the rule in statutory
construction that 'where two statutes are of
equal theoretical application to a particular
case, the one designed therefore should
prevail.' (Citing Leveriza v. Intermediate
Appellate Court, 157 SCRA 282, 294.)
Generalia specialibus non derogant."
In the light of Article 291, aforecited, we agree with the
appellate court's conclusion that petitioner's action for
damages due to illegal termination filed again on January 8,
1987 or more than four (4) years after the effective date of his
dismissal on November 1, 1982 has already prescribed.
"In the instant case, the action for damages
due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982.
Clearly, plaintiff-appellee's action has already
prescribed."
We base our conclusion not on Article 1144 of the Civil Code
but on Article 291 of the Labor Code, which sets the
prescription period at three (3) years and which governs under
this jurisdiction.
Petitioner claims that the running of the prescriptive period was
tolled when he filed his complaint for illegal dismissal before
the Labor Arbiter of the National Labor Relations Commission.
However, this claim deserves scant consideration; it has no
legal leg to stand on. In Olympia International, Inc. vs. Court of
Appeals, we held that "although the commencement of a civil
action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff
leaves the parties in exactly the same position as though no
action had been commenced at all."
Now, as to whether petitioner's separation from the company
due to retrenchment was valid, the appellate court found that
the employment contract of petitioner allowed for pre-
termination of employment. We agree with the Court of
Appeals when it said, Sdjad
"It is a settled rule that contracts have the
force of law between the parties. From the
moment the same is perfected, the parties
are bound not only to the fulfillment of what
has been expressly stipulated but also to all
consequences which, according to their
nature, may be in keeping with good faith,
usage and law. Thus, when plaintiff-appellee
accepted the offer of employment, he was
bound by the terms and conditions set forth
in the contract, among others, the right of
mutual termination by giving three months
written notice or by payment of three months
salary. Such provision is clear and readily
understandable, hence, there is no room for
interpretation."
xxx
Further, plaintiff-appellee's contention that he
is not bound by the provisions of the
Agreement, as he is not a signatory thereto,
deserves no merit. It must be noted that
when plaintiff-appellee's employment was
confirmed, he applied for membership with
the Singapore Airlines Limited (Pilots)
Association, the signatory to the
aforementioned Agreement. As such,
plaintiff-appellee is estopped from
questioning the legality of the said
agreement or any proviso contained therein."
Moreover, the records of the present case clearly show that
respondent court's decision is amply supported by evidence
and it did not err in its findings, including the reason for the
retrenchment:
"When defendant-appellant was faced with
the world-wide recession of the airline
 industry resulting in a slow down in the
company's growth particularly in the regional
operation (Asian Area) where the Airbus 300
operates. It had no choice but to adopt cost
cutting measures, such as cutting down
services, number of frequencies of flights,
and reduction of the number of flying points
for the A-300 fleet (t.s.n., July 6, 1988, pp.
17-18). As a result, defendant-appellant had
to layoff A-300 pilots, including plaintiff-
appellee, which it found to be in excess of
what is reasonably needed."
All these considered, we find sufficient factual and legal basis
to conclude that petitioner's termination from employment was
for an authorized cause, for which he was given ample notice
and opportunity to be heard, by respondent company. No error
nor grave abuse of discretion, therefore, could be attributed to
respondent appellate court. Sppedsc
ACCORDINGLY, the instant petition is DISMISSED. The
decision of the Court of Appeals in C.A. CV No. 34476 is
AFFIRMED.
SO ORDERED.
YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN
YEN vs. AIDA SY-GONZALES, MANUEL SY, TERESITA SY-
BERNABE, RODOLFO SY, and HONORABLE COURT OF
APPEALS; G.R. No. L-55960; November 24, 1988; CORTES,
J.:
Sy Kiat, a Chinese national. died on January 17, 1977 in
Caloocan City where he was then residing, leaving behind real
and personal properties here in the Philippines worth
P300,000.00 more or less.
Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-
Bernabe and Rodolfo Sy filed a petition for the grant of letters
of administration docketed as Special Proceedings Case No.
C-699 of the then Court of First Instance of Rizal Branch
XXXIII, Caloocan City. In said petition they alleged among
others that (a) they are the children of the deceased with
Asuncion Gillego; (b) to their knowledge Sy Mat died intestate;
(c) they do not recognize Sy Kiat's marriage to Yao Kee nor the
filiation of her children to him; and, (d) they nominate Aida Sy-
Gonzales for appointment as administratrix of the intestate
estate of the deceased [Record on Appeal, pp. 4-9; Rollo, p.
107.]
The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai
Cho and Sy Yun Chen who alleged that: (a) Yao Kee is the
lawful wife of Sy Kiat whom he married on January 19, 1931 in
China; (b) the other oppositors are the legitimate children of the
deceased with Yao Kee; and, (c) Sze Sook Wah is the eldest
among them and is competent, willing and desirous to become
the administratrix of the estate of Sy Kiat [Record on Appeal,
pp. 12-13; Rollo, p. 107.] After hearing, the probate court,
finding among others that:
(1) Sy Kiat was legally married to Yao Kee
[CFI decision, pp. 12-27; Rollo, pp. 49-64;]
(2) Sze Sook Wah, Sze Lai Cho and Sze
Chun Yen are the legitimate children of Yao
Kee with Sy Mat [CFI decision, pp. 28-31;
Rollo. pp. 65-68;] and,
(3) Aida Sy-Gonzales, Manuel Sy, Teresita
Sy-Bernabe and Rodolfo Sy are the
acknowledged illegitimate offsprings of Sy
Kiat with Asuncion Gillego [CFI decision, pp.
27-28; Rollo, pp. 64- 65.]
held if favor of the oppositors (petitioners herein) and
appointed Sze Sook Wah as the administratrix of the intestate
estate of the deceased [CFI decision, pp. 68-69; Rollo, pp.
105-106.]
On appeal the Court of Appeals rendered a decision modifying
that of the probate court, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, the
decision of the lower Court is hereby
MODIFIED and SET ASIDE and a new
judgment rendered as follows:
(1) Declaring petitioners Aida Sy-Gonzales,
Manuel Sy, Teresita Sy- Bernabe and
Rodolfo Sy acknowledged natural children of
the deceased Sy Kiat with Asuncion Gillego,
an unmarried woman with whom he lived as
husband and wife without benefit of marriage
for many years:
(2) Declaring oppositors Sze Sook Wah, Sze
Lai Chu and Sze Chun Yen, the
acknowledged natural children of the
deceased Sy Kiat with his Chinese wife Yao
Kee, also known as Yui Yip, since the
legality of the alleged marriage of Sy Mat to
Yao Kee in China had not been proven to be
valid to the laws of the Chinese People's
Republic of China (sic);
(3) Declaring the deed of sale executed by
Sy Kiat on December 7, 1976 in favor of
Tomas Sy (Exhibit "G-1", English translation
of Exhibit "G") of the Avenue Tractor and
Diesel Parts Supply to be valid and
accordingly, said property should be
excluded from the estate of the deceased Sy
Kiat; and
(4) Affirming the appointment by the lower
court of Sze Sook Wah as judicial
administratrix of the estate of the deceased.
[CA decision, pp. 11-12; Rollo, pp. 36- 37.]
From said decision both parties moved for partial
reconsideration, which was however denied by respondent
court. They thus interposed their respective appeals to this
Court.
Private respondents filed a petition with this Court docketed as
G.R. No. 56045 entitled "Aida Sy-Gonzales, Manuel Sy,
Teresita Sy-Bernabe and Rodolfo Sy v. Court of Appeals, Yao
Kee, Sze Sook Wah, Sze Lai Cho and Sy Chun Yen"
questioning paragraphs (3) and (4) of the dispositive portion of
the Court of Appeals' decision. The Supreme Court however
resolved to deny the petition and the motion for
reconsideration. Thus on March 8, 1982 entry of judgment was
made in G.R. No. 56045. **
The instant petition, on the other hand, questions paragraphs
(1) and (2) of the dispositive portion of the decision of the Court
of Appeals. This petition was initially denied by the Supreme
Court on June 22, 1981. Upon motion of the petitioners the
Court in a resolution dated September 16, 1981 reconsidered
the denial and decided to give due course to this petition.
Herein petitioners assign the following as errors:
I. RESPONDENT COURT OF APPEALS
SERIOUSLY ERRED IN DECLARING THE
MARRIAGE OF SY KIAT TO YAO YEE AS
NOT HAVE (sic) BEEN PROVEN VALID IN
ACCORDANCE WITH LAWS OF THE
PEOPLE'S REPUBLIC OF CHINA.
II. RESPONDENT COURT OF APPEALS
GRAVELY ERRED IN DECLARING AIDA
SY-GONZALES, MANUEL SY, TERESITA
SY-BERNABE AND RODOLFO SY AS
NATURAL CHILDREN OF SY KIAT WITH
ASUNCION GILLEGO. [Petition, p. 2; Rollo,
p. 6.]
I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in
accordance with Chinese law and custom was conclusively
proven. To buttress this argument they rely on the following
testimonial and documentary evidence.
First, the testimony of Yao Kee summarized by the trial court
as follows:
Yao Kee testified that she was married to Sy
Kiat on January 19, 1931 in Fookien, China;
that she does not have a marriage certificate
because the practice during that time was for
elders to agree upon the betrothal of their
children, and in her case, her elder brother
was the one who contracted or entered into
[an] agreement with the parents of her
husband; that the agreement was that she
and Sy Mat would be married, the wedding
date was set, and invitations were sent out;
that the said agreement was complied with;
that she has five children with Sy Kiat, but
two of them died; that those who are alive
are Sze Sook Wah, Sze Lai Cho, and Sze
Chun Yen, the eldest being Sze Sook Wah
who is already 38 years old; that Sze Sook
Wah was born on November 7, 1939; that
she and her husband, Sy Mat, have been
living in FooKien, China before he went to
the Philippines on several occasions; that the
practice during the time of her marriage was
a written document [is exchanged] just
between the parents of the bride and the
parents of the groom, or any elder for that
matter; that in China, the custom is that there
is a go- between, a sort of marriage broker
who is known to both parties who would talk
to the parents of the bride-to-be; that if the
parents of the bride-to-be agree to have the
groom-to-be their son in-law, then they agree
on a date as an engagement day; that on
engagement day, the parents of the groom
would bring some pieces of jewelry to the
parents of the bride-to-be, and then one
month after that, a date would be set for the
wedding, which in her case, the wedding
date to Sy Kiat was set on January 19, 1931;
that during the wedding the bridegroom
brings with him a couch (sic) where the bride
would ride and on that same day, the parents
of the bride would give the dowry for her
daughter and then the document would be
signed by the parties but there is no
solemnizing officer as is known in the
Philippines; that during the wedding day, the
document is signed only by the parents of
the bridegroom as well as by the parents of
the bride; that the parties themselves do not
sign the document; that the bride would then
be placed in a carriage where she would be
brought to the town of the bridegroom and
before departure the bride would be covered
with a sort of a veil; that upon reaching the
town of the bridegroom, the bridegroom
takes away the veil; that during her wedding
to Sy Kiat (according to said Chinese
custom), there were many persons present;
that after Sy Kiat opened the door of the
carriage, two old ladies helped her go down
the carriage and brought her inside the
house of Sy Mat; that during her wedding, Sy
Chick, the eldest brother of Sy Kiat, signed
the document with her mother; that as to the
whereabouts of that document, she and Sy
Mat were married for 46 years already and
the document was left in China and she
doubt if that document can still be found
now; that it was left in the possession of Sy
Kiat's family; that right now, she does not
know the whereabouts of that document
because of the lapse of many years and
because they left it in a certain place and it
 was already eaten by the termites; that after
her wedding with Sy Kiat, they lived
immediately together as husband and wife,
and from then on, they lived together; that Sy
Kiat went to the Philippines sometime in
March or April in the same year they were
married; that she went to the Philippines in
1970, and then came back to China; that
again she went back to the Philippines and
lived with Sy Mat as husband and wife; that
she begot her children with Sy Kiat during
the several trips by Sy Kiat made back to
China. [CFI decision, pp. 13-15; Rollo, pp.
50-52.]
Second, the testimony of Gan Ching, a younger brother of Yao
Kee who stated that he was among the many people who
attended the wedding of his sister with Sy Kiat and that no
marriage certificate is issued by the Chinese government, a
document signed by the parents or elders of the parties being
sufficient [CFI decision, pp. 15-16; Rollo, pp.
52-53.]
Third, the statements made by Asuncion Gillego when she
testified before the trial court to the effect that (a) Sy Mat was
married to Yao Kee according to Chinese custom; and, (b) Sy
Kiat's admission to her that he has a Chinese wife whom he
married according to Chinese custom [CFI decision, p. 17;
Rollo, p. 54.]
Fourth, Sy Kiat's Master Card of Registered Alien issued in
Caloocan City on October 3, 1972 where the following entries
are found: "Marital status—Married"; "If married give name of
spouses—Yao Kee"; "Address-China; "Date of marriage—
1931"; and "Place of marriage—China" [Exhibit "SS-1".]
Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila
on January 12, 1968 where the following entries are likewise
found: "Civil status—Married"; and, 'If married, state name and
address of spouse—Yao Kee Chingkang, China" [Exhibit "4".]
And lastly, the certification issued in Manila on October 28,
1977 by the Embassy of the People's Republic of China to the
effect that "according to the information available at the
Embassy Mr. Sy Kiat a Chinese national and Mrs. Yao Kee
alias Yui Yip also Chinese were married on January 19, 1931
in Fukien, the People's Republic of China" [Exhibit "5".]
These evidence may very well prove the fact of marriage
between Yao Kee and Sy Kiat. However, the same do not
suffice to establish the validity of said marriage in accordance
with Chinese law or custom.
Custom is defined as "a rule of conduct formed by repetition of
acts, uniformly observed (practiced) as a social rule, legally
binding and obligatory" [In the Matter of the Petition for
Authority to Continue Use of the Firm Name "Ozaeta, Romulo,
de Leon, Mabanta and Reyes", July 30, 1979, SCRA 3, 12
citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth
Ed., Vol. 1, p. 7.] The law requires that "a custom must be
proved as a fact, according to the rules of evidence" [Article 12,
Civil Code.] On this score the Court had occasion to state that
"a local custom as a source of right can not be considered by a
court of justice unless such custom is properly established by
competent evidence like any other fact" [Patriarca v. Orate, 7
Phil. 390, 395 (1907).] The same evidence, if not one of a
higher degree, should be required of a foreign custom.
The law on foreign marriages is provided by Article 71 of the
Civil Code which states that:
Art. 71. All marriages performed outside the
Philippines in accordance with the laws in
force in the country where they were
performed and valid there as such, shall also
be valid in this country, except bigamous,
Polygamous, or incestuous marriages, as
determined by Philippine law. (Emphasis
supplied.) ***
Construing this provision of law the Court has held that to
establish a valid foreign marriage two things must be proven,
namely: (1) the existence of the foreign law as a question of
fact; and (2) the alleged foreign marriage by convincing
evidence [Adong v. Cheong Seng Gee, 43 Phil. 43, 49 (1922).]
In proving a foreign law the procedure is provided in the Rules
of Court. With respect to an unwritten foreign law, Rule 130
section 45 states that:
SEC. 45. Unwritten law.—The oral testimony
of witnesses, skilled therein, is admissible as
evidence of the unwritten law of a foreign
country, as are also printed and published
books of reports of decisions of the courts of
the foreign country, if proved to be commonly
admitted in such courts.
Proof of a written foreign law, on the other hand, is provided for
under Rule 132 section 25, thus:
SEC. 25. Proof of public or official record.—
An official record or an entry therein, when
admissible for any purpose, may be
evidenced by an official publication thereof or
by a copy attested by the officer having the
legal custody of the record, or by his deputy,
and accompanied, if the record is not kept in
the Philippines, with a certificate that such
officer has the custody. If the office in which
the record is kept is in a foreign country, the
certificate may be made by a secretary of
embassy or legation, consul general, consul,
vice consul, or consular agent or by any
officer in the foreign service of the
Philippines stationed in the foreign country in
which the record is kept and authenticated
by the seal of his office.
The Court has interpreted section 25 to include competent
evidence like the testimony of a witness to prove the existence
of a written foreign law [Collector of Internal Revenue v. Fisher
110 Phil. 686, 700-701 (1961) citing Willamette Iron and Steel
Works v. Muzzal, 61 Phil. 471 (1935).]
In the case at bar petitioners did not present any competent
evidence relative to the law and custom of China on marriage.
The testimonies of Yao and Gan Ching cannot be considered
as proof of China's law or custom on marriage not only
because they are
self-serving evidence, but more importantly, there is no
showing that they are competent to testify on the subject
matter. For failure to prove the foreign law or custom, and
consequently, the validity of the marriage in accordance with
said law or custom, the marriage between Yao Kee and Sy Kiat
cannot be recognized in this jurisdiction.
Petitioners contend that contrary to the Court of Appeals' ruling
they are not duty bound to prove the Chinese law on marriage
as judicial notice thereof had been taken by this Court in the
case of Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).]
This contention is erroneous. Well-established in this
jurisdiction is the principle that Philippine courts cannot take
judicial notice of foreign laws. They must be alleged and
proved as any other fact [Yam Ka Lim v. Collector of Customs,
30 Phil. 46, 48 (1915); Fluemer v. Hix, 54 Phil. 610 (1930).]
Moreover a reading of said case would show that the party
alleging the foreign marriage presented a witness, one Li Ung
Bieng, to prove that matrimonial letters mutually exchanged by
the contracting parties constitute the essential requisite for a
marriage to be considered duly solemnized in China. Based on
his testimony, which as found by the Court is uniformly
corroborated by authors on the subject of Chinese marriage,
what was left to be decided was the issue of whether or not the
fact of marriage in accordance with Chinese law was duly
proven [Sy Joc Lieng v. Sy Quia, supra., at p. 160.]
Further, even assuming for the sake of argument that the Court
has indeed taken judicial notice of the law of China on
marriage in the aforecited case, petitioners however have not
shown any proof that the Chinese law or custom obtaining at
the time the Sy Joc Lieng marriage was celebrated in 1847
was still the law when the alleged marriage of Sy Kiat to Yao
Kee took place in 1931 or eighty-four (84) years later.
Petitioners moreover cite the case of U.S. v. Memoracion [34
Phil. 633 (1916)] as being applicable to the instant case. They
aver that the judicial pronouncement in the Memoracion case,
that the testimony of one of the contracting parties is
competent evidence to show the fact of marriage, holds true in
this case.
The Memoracion case however is not applicable to the case at
bar as said case did not concern a foreign marriage and the
issue posed was whether or not the oral testimony of a spouse
is competent evidence to prove the fact of marriage in a
complaint for adultery.
Accordingly, in the absence of proof of the Chinese law on
marriage, it should be presumed that it is the same as ours ***
[Wong Woo Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13
SCRA 552, 555.] Since Yao Kee admitted in her testimony that
there was no solemnizing officer as is known here in the
Philippines [See Article 56, Civil Code] when her alleged
marriage to Sy Mat was celebrated [CFI decision, p. 14; Rollo,
p. 51], it therefore follows that her marriage to Sy Kiat, even if
true, cannot be recognized in this jurisdiction [Wong Woo Yiu v.
Vivo, supra., pp. 555-556.]
II. The second issue raised by petitioners concerns the status
of private respondents.
Respondent court found the following evidence of petitioners'
filiation:
(1) Sy Kiat's Master Card of Registered Alien
where the following are entered: "Children if
any: give number of children—Four"; and,
"Name—All living in China" [Exhibit "SS-1";]
(2) the testimony of their mother Yao Kee
who stated that she had five children with Sy
Kiat, only three of whom are alive namely,
Sze Sook Wah, Sze Lai Chu and Sze Chin
Yan [TSN, December 12, 1977, pp. 9-11;]
and,
(3) an affidavit executed on March 22,1961
by Sy Kiat for presentation to the Local Civil
Registrar of Manila to support Sze Sook
Wah's application for a marriage license,
wherein Sy Kiat expressly stated that she is
his daughter [Exhibit "3".]
Likewise on the record is the testimony of Asuncion Gillego
that Sy Kiat told her he has three daughters with his Chinese
wife, two of whom—Sook Wah and Sze Kai Cho—she knows,
and one adopted son [TSN, December 6,1977, pp. 87-88.]
However, as petitioners failed to establish the marriage of Yao
Kee with Sy Mat according to the laws of China, they cannot be
accorded the status of legitimate children but only that of
acknowledged natural children. Petitioners are natural children,
it appearing that at the time of their conception Yao Kee and
Sy Kiat were not disqualified by any impediment to marry one
another [See Art. 269, Civil Code.] And they are acknowledged
children of the deceased because of Sy Kiat's recognition of
Sze Sook Wah [Exhibit "3"] and its extension to Sze Lai Cho
and Sy Chun Yen who are her sisters of the full blood [See Art.
271, Civil Code.]
Private respondents on the other hand are also the deceased's
acknowledged natural children with Asuncion Gillego, a Filipina
with whom he lived for twenty-five (25) years without the
benefit of marriage. They have in their favor their father's
acknowledgment, evidenced by a compromise agreement
entered into by and between their parents and approved by the
Court of First Instance on February 12, 1974 wherein Sy Kiat
not only acknowleged them as his children by Asuncion Gillego
but likewise made provisions for their support and future
inheritance, thus:
xxx xxx xxx
2. The parties also acknowledge that they
are common-law husband and wife and that
out of such relationship, which they have
likewise decided to definitely and finally
terminate effective immediately, they begot
five children, namely: Aida Sy, born on May
30, 1950; Manuel Sy, born on July 1, 1953;
Teresita Sy, born on January 28, 1955;
Ricardo Sy now deceased, born on
December 14, 1956; and Rodolfo Sy, born
on May 7, 1958.
3. With respect to the AVENUE TRACTOR
AND DIESEL PARTS SUPPLY ... , the
parties mutually agree and covenant that—
(a) The stocks and
merchandize and the
furniture and equipments
..., shall be divided into two
equal shares between, and
distributed to, Sy Kiat who
shall own
one-half of the total and
the other half to Asuncion
Gillego who shall transfer
the same to their children,
namely, Aida Sy, Manuel
Sy, Teresita Sy, and
Rodolfo Sy.
(b) the business name and
premises ... shall be
retained by Sy Kiat.
However, it shall be his
obligation to give to the
aforenamed children an
amount of One Thousand
Pesos ( Pl,000.00 )
monthly out of the rental of
the two doors of the same
building now occupied by
Everett Construction.
xxx xxx xxx
(5) With respect to the acquisition, during the
existence of the
common-law husband-and-wife relationship
between the parties, of the real estates and
properties registered and/or appearing in the
name of Asuncion Gillego ... , the parties
mutually agree and covenant that the said
real estates and properties shall be
transferred in equal shares to their children,
namely, Aida Sy, Manuel Sy, Teresita Sy,
and Rodolfo Sy, but to be administered by
Asuncion Gillego during her lifetime ...
[Exhibit "D".] (Emphasis supplied.)
xxx xxx xxx
This compromise agreement constitutes a statement before a
court of record by which a child may be voluntarily
acknowledged [See Art. 278, Civil Code.]
Petitioners further argue that the questions on the validity of Sy
Mat's marriage to Yao Kee and the paternity and filiation of the
parties should have been ventilated in the Juvenile and
Domestic Relations Court.
Specifically, petitioners rely on the following provision of
Republic Act No. 5502, entitled "An Act Revising Rep. Act No.
3278, otherwise known as the Charter of the City of Caloocan',
with regard to the Juvenile and Domestic Relations Court:
SEC. 91-A. Creation and Jurisdiction of the
Court.—
xxx xxx xxx
The provisions of the Judiciary Act to the
contrary notwithstanding, the court shall
have exclusive original jurisdiction to hear
and decide the following cases:
xxx xxx xxx
(2) Cases involving custody, guardianship,
adoption, revocation of adoption, paternity
and acknowledgment;
(3) Annulment of marriages, relief from
marital obligations, legal separation of
spouses, and actions for support;
(4) Proceedings brought under the provisions
of title six and title seven, chapters one to
three of the civil code;
xxx xxx xxx
and the ruling in the case of Bartolome v. Bartolome [G.R. No.
L-23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira
[G.R. No. L-42615, 72 SCRA 307.]
With the enactment of Batas Pambansa Blg. 129, otherwise
known as the Judiciary Reorganization Act of 1980, the
Juvenile and Domestic Relations Courts were abolished. Their
functions and jurisdiction are now vested with the Regional
Trial Courts [See Section 19 (7), B.P. Blg. 129 and
Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986,
143 SCRA 356, 360] hence it is no longer necessary to pass
upon the issue of jurisdiction raised by petitioners.
Moreover, even without the exactment of Batas Pambansa Blg.
129 we find in Rep. Act No. 5502 sec. 91-A last paragraph that:
xxx xxx xxx
If any question involving any of the above
matters should arise as an incident in any
case pending in the ordinary court, said
incident shall be determined in the main
case.
xxx xxx xxx
As held in the case of Divinagracia v. Rovira [G.R. No. L42615.
August 10, 1976, 72 SCRA 307]:
xxx xxx xxx
It is true that under the aforequoted section 1
of Republic Act No. 4834 **** a case
involving paternity and acknowledgment may
be ventilated as an incident in the intestate
or testate proceeding (See Baluyot vs. Ines
Luciano, L-42215, July 13, 1976). But that
legal provision presupposes that such an
administration proceeding is pending or
existing and has not been terminated. [at pp.
313-314.] (Emphasis supplied.)
xxx xxx xxx
The reason for ths rule is not only "to obviate the rendition of
conflicting rulings on the same issue by the Court of First
Instance and the Juvenile and Domestic Relations Court" [Vda.
de Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72
SCRA 52, 63] but more importantly to prevent multiplicity of
suits. Accordingly, this Court finds no reversible error
committed by respondent court.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED. SO ORDERED.
In re: Testate Estate of the deceased JOSE B. SUNTAY.
SILVINO SUNTAY vs. In re: Intestate Estate of the
deceased JOSE B. SUNTAY, FEDERICO C. SUNTAY; G.R.
Nos. L-3087 and L-3088; July 31, 1954; PADILLA, J.:
This is an appeal from a decree of the Court of First Instance of
Bulacan disallowing the alleged will and testament executed in
Manila on November 1929, and the alleged last will and
testament executed in Kulangsu, Amoy, China, on 4 January
1931, by Jose B. Suntay. The value of the estate left by the
deceased is more than P50,000.
On 14 May 1934 Jose B. Suntay, a Filipino citizen and resident
of the Philippines, died in the city of Amoy, Fookien province,
Republic of China, leaving real and personal properties in the
Philippines and a house in Amoy, Fookien province, China,
and children by the first marriage had with the late Manuela T.
Cruz namely, Apolonio, Concepcion, Angel, Manuel, Federico,
Ana, Aurora, Emiliano, and Jose, Jr. and a child named Silvino
by the second marriage had with Maria Natividad Lim Billian
who survived him. Intestate proceedings were instituted in the
Court of First Instance of Bulacan (special proceedings No.
4892) and after hearing letters of administration were issued to
Apolonio Suntay. After the latter's death Federico C. Suntay
was appointed administrator of the estate. On 15 October 1934
the surviving widow filed a petition in the Court of First Instance
of Bulacan for the probate of a last will and testament claimed
to have been executed and signed in the Philippines on
November 1929 by the late Jose B. Suntay. This petition was
denied because of the loss of said will after the filing of the
petition and before the hearing thereof and of the insufficiency
of the evidence to establish the loss of the said will. An appeal
was taken from said order denying the probate of the will and
this Court held the evidence before the probate court sufficient
to prove the loss of the will and remanded the case to the
Court of First Instance of Bulacan for the further proceedings
(63 Phil., 793). In spite of the fact that a commission from the
probate court was issued on 24 April 1937 for the taking of the
deposition of Go Toh, an attesting witness to the will, on 7
February 1938 the probate court denied a motion for
continuance of the hearing sent by cablegram from China by
the surviving widow and dismissed the petition. In the
meantime the Pacific War supervened. After liberation,
claiming that he had found among the files, records and
documents of his late father a will and testament in Chinese
characters executed and signed by the deceased on 4 January
1931 and that the same was filed, recorded and probated in
the Amoy district court, Province of Fookien, China, Silvino
Suntay filed a petition in the intestate proceedings praying for
the probate of the will executed in the Philippines on November
1929 (Exhibit B) or of the will executed in Amoy, Fookien,
China, on 4 January 1931 (Exhibit N).
There is no merit in the contention that the petitioner Silvino
Suntay and his mother Maria Natividad Lim Billian are
estopped from asking for the probate of the lost will or of the
foreign will because of the transfer or assignment of their share
right, title and interest in the estate of the late Jose B. Suntay
to Jose G. Gutierrez and the spouses Ricardo Gutierrez and
Victoria Goño and the subsequent assignment thereof by the
assignees to Francisco Pascual and by the latter to Federico
C. Suntay, for the validity and legality of such assignments
cannot be threshed out in this proceedings which is concerned
only with the probate of the will and testament executed in the
Philippines on November 1929 or of the foreign will allegedly
executed in Amoy on 4 January 1931 and claimed to have
been probated in the municipal district court of Amoy, Fookien
province, Republic of China.
As to prescription, the dismissal of the petition for probate of
the will on 7 February 1938 was no bar to the filing of this
petition on 18 June 1947, or before the expiration of ten years.
As to the lost will, section 6, Rule 77, provides:
No will shall be proved as a lost or destroyed will
unless the execution and validity of the same be
established, and the will is proved to have been in
existence at the time of the death of the testator, or is
shown to have been fraudulently or accidentally
destroyed in the lifetime of the testator without his
knowledge, nor unless its provisions are clearly and
distinctly proved by at least two credible witnesses.
When a lost will is proved, the provisions thereof must
be distinctly stated and certified by the judge, under
the seal of the court, and the certificate must be filed
and recorded as other wills are filed and recorded.
The witnesses who testified to the provisions of the lost will are
Go Toh, an attesting witness, Anastacio Teodoro and Ana
Suntay. Manuel Lopez, who was an attesting witness to the
lost will, was dead at the time of the hearing of this alternative
petition. In his deposition Go Toh testifies that he was one of
the witnesses to the lost will consisting of twenty-three sheets
signed by Jose B. Suntay at the bottom of the will and each
and every page thereof in the presence of Alberto Barretto,
Manuel Lopez and himself and underneath the testator's
signature the attesting witnesses signed and each of them
signed the attestation clause and each and every page of the
will in the presence of the testator and of the other witnesses
(answers to the 31st, 41st, 42nd, 49th, 50th, 55th and 63rd
interrogatories, Exhibit D-1), but did not take part in the drafting
thereof (answer to the 11th interrogatory, Id.); that he knew the
contents of the will written in Spanish although he knew very
little of that language (answers to the 22nd and 23rd
interrogatories and to X-2 cross-interrogatory, Id.) and all he
knows about the contends of the lost will was revealed to him
by Jose B. Suntay at the time it was executed (answers to the
25th interrogatory and to X-4 and X-8 cross-interrogatories,
Id.); that Jose B. Suntay told him that the contents thereof are
the same as those of the draft (Exhibit B) (answers to the 33rd
interrogatory and to X-8 cross-interrogatory, Id.) which he saw
in the office of Alberto Barretto in November 1929 when the will
was signed (answers to the 69th, 72nd, and 74th
interrogatories, Id); that Alberto Barretto handed the draft and
said to Jose B. Suntay: "You had better see if you want any
correction" (answers to the 81st, 82nd and 83rd interrogatories,
Id.); that "after checking Jose B. Suntay put the "Exhibit B" in
his pocket and had the original signed and executed" (answers
to the 91st interrogatory, and to X-18 cross-interrogatory, Id.);
that Mrs. Suntay had the draft of the will (Exhibit B) translated
into Chinese and he read the translation (answers to the 67th
interrogatory, Id.); that he did not read the will and did not
compare it (check it up) with the draft (Exhibit B) (answers to X-
6 and X-20 cross-interrogatories, Id.).
Ana Suntay testifies that sometime in September 1934 in the
house of her brother Apolonio Suntay she learned that her
father left a will "because of the arrival of my brother Manuel
Suntay, who was bringing along with him certain document and
he told us or he was telling us that it was the will of our father
Jose B. Suntay which was taken from Go Toh. ..." (p. 524, t. s.
n., hearing of 24 February 1948); that she saw her brother
Apolonio Suntay read the document in her presence and of
Manuel and learned of the adjudication made in the will by her
father of his estate, to wit: one-third to his children, one-third to
Silvino and his mother and the other third to Silvino, Apolonio,
Concepcion and Jose, Jr. (pp. 526-8, 530-1, 542, t. s. n. Id.);
that "after Apolonio read that portion, then he turned over the
document to Manuel, and he went away," (p. 528, t. s. n., Id.).
On cross-examination, she testifies that she read the part of
the will on adjudication to know what was the share of each
heir (pp. 530, 544, t. s. n., Id.) and on redirect she testifies that
she saw the signature of her father, Go Toh, Manuel Lopez
and Alberto Barretto (p. 546, t. s. n., Id.).
Anastacio Teodoro testifies that one day in November 1934 (p.
273, t. s. n., hearing of 19 January 1948), before the last
postponement of the hearing granted by the Court, Go Toh
arrived at his law office in the De los Reyes Building and left an
envelope wrapped in red handkerchief [Exhibit C] (p. 32, t. s.
n., hearing of 13 October 1947); that he checked up the
signatures on the envelope Exhibit A with those on the will
placed in the envelope (p. 33, t. s. n., Id.); that the will was
exactly the same as the draft Exhibit B (pp. 32, 47, 50, t. s. n.,
Id.).
If the will was snatched after the delivery thereof by Go Toh to
Anastacio Teodoro And returned by the latter to the former
because they could not agree on the amount of fees, the
former coming to the latter's office straight from the boat (p.
315, t. s. n., hearing of 19 January 1948) that brought him to
the Philippines from Amoy, and that delivery took place in
November 1934 (p. 273, t. s. n., Id.), then the testimony of Ana
Suntay that she saw and heard her brother Apolonio Suntay
read the will sometime in September 1934 (p. 524, t. s. n.,
hearing of 24 February 1948), must not be true.
Although Ana Suntay would be a good witness because she
was testifying against her own interest, still the fact remains
that she did not read the whole will but only the adjudication
(pp. 526-8, 530-1, 542, t. s. n., Id.) and saw only the signature,
of her father and of the witnesses Go Toh, Manuel Lopez and
Alberto Barretto (p. 546, t. s. n., Id.). But her testimony on
cross-examination that she read the part of the will on
adjudication is inconsistent with her testimony in chief that after
Apolonio had read that part of the will he turned over or handed
the document to Manuel who went away (p. 528, t. s. n., Id.).
If it is true that Go Toh saw the draft Exhibit B in the office of
Alberto Barretto in November 1929 when the will was signed,
then the part of his testimony that Alberto Barretto handed the
draft to Jose B. Suntay to whom he said: "You had better see if
you want any correction" and that "after checking Jose B.
Suntay put the "Exhibit B" in his pocket and had the original
signed and executed" cannot be true, for it was not the time for
correcting the draft of the will, because it must have been
corrected before and all corrections and additions written in
lead pencil must have been inserted and copied in the final
draft of the will which was signed on that occasion. The
bringing in for the draft (Exhibit B) on that occasion is just to fit
it within the framework of the appellant's theory. At any rate, all
of Go Toh's testimony by deposition on the provisions of the
alleged lost will is hearsay, because he came to know or he
learned to them from information given him by Jose B. Suntay
and from reading the translation of the draft (Exhibit B) into
Chinese.
Much stress is laid upon the testimony of Federico C. Suntay
who testifies that he read the supposed will or the alleged will
of his father and that the share of the surviving widow,
according to the will, is two-thirds of the estate (p. 229, t. s. n.,
hearing of 24 October 1947). But this witness testified to
oppose the appointment of a co-administrator of the estate, for
the reason that he had acquired the interest of the surviving
widow not only in the estate of her deceased husband but also
in the conjugal property (pp. 148, 205, 228, 229, 231, t. s. n.,
Id.) Whether he read the original will or just the copy thereof
(Exhibit B) is not clear. For him the important point was that he
had acquired all the share, participation and interest of the
surviving widow and of the only child by the second marriage in
the estate of his deceased father. Be that as it may, his
testimony that under the will the surviving widow would take
two-thirds of the estate of the late Jose B. Suntay is at variance
with Exhibit B and the testimony of Anastacio Teodoro.
According to the latter, the third for strict legitime is for the ten
children; the third for betterment is for Silvino, Apolonio,
Concepcion and Jose Jr.; and the third for free disposal is for
the surviving widow and her child Silvino.
Hence, granting that there was a will duly executed by Jose B.
Suntay placed in the envelope (Exhibit A) and that it was in
existence at the time of, and not revoked before, his death, still
the testimony of Anastacio Teodoro alone falls short of the
legal requirement that the provisions of the lost will must be
"clearly and distinctly proved by at least two credible
witnesses." Credible witnesses mean competent witnesses and
those who testify to facts from or upon hearsay are neither
competent nor credible witnesses.
On the other hand, Alberto Barretto testifies that in the early
part of 1929 he prepared or drew up two mills for Jose B.
Suntay at the latter's request, the rough draft of the first will
was in his own handwriting, given to Manuel Lopez for the final
draft or typing and returned to him; that after checking up the
final with the rough draft he tore it and returned the final draft to
Manuel Lopez; that this draft was in favor of all the children and
the widow (pp. 392-4, 449, t. s. n., hearing of 21 February
1948); that two months later Jose B. Suntay and Manuel Lopez
called on him and the former asked him to draw up another will
favoring more his wife and child Silvino; that he had the rough
draft of the second will typed (pp. 395, 449 t. s. n., Id.) and
gave it to Manuel Lopez (p. 396, t. s. n., Id.); that he did not
sign as witness the second will of Jose B. Suntay copied from
the typewritten draft [Exhibit B] (p. 420, t. s. n., Id.); that the
handwritten insertions or additions in lead pencil to Exhibit B
are not his (pp. 415-7 435-6, 457, t. s. n., Id.); that the final
draft of the first will made up of four or five pages (p. 400, t. s.
n., Id.) was signed and executed, two or three months after
Suntay and Lopez had called on him (pp. 397-8, 403, 449, t. s.
n., Id.) in his office at the Cebu Portland Cement in the China
Banking Building on Dasmariñas street by Jose B. Suntay,
Manuel Lopez and a Chinaman who had all come from
Hagonoy (p. 398, t. s. n., Id.); that on that occasion they
brought an envelope (Exhibit A) where the following words
were written: "Testamento de Jose B. Suntay" (pp. 399, 404, t.
s. n., Id.); that after the signing of the will it was placed inside
the envelope (Exhibit A) together with an inventory of the
properties of Jose B. Suntay and the envelope was sealed by
the signatures of the testator and the attesting witnesses (pp.
398, 401, 441, 443, 461, t. s. n., Id.); that he again saw the
envelope (Exhibit A) in his house one Saturday in the later part
of August 1934, brought by Go Toh and it was then in perfect
condition (pp. 405-6, 411, 440-2, t. s. n., Id.); that on the
following Monday Go Toh went to his law office bringing along
with him the envelope (Exhibit A) in the same condition; that he
told Go Toh that he would charge P25,000 as fee for probating
the will (pp. 406, 440-2, Id.); that Go Toh did not leave the
envelope (Exhibit A) either in his house or in his law office (p.
407, t. s. n., Id.); that Go Toh said he wanted to keep it and on
no occasion did Go Toh leave it to him (pp. 409, 410, t. s. n.,
Id.).
The testimony of Go Toh taken and heard by Assistant Fiscal
F. B. Albert in connection with the complaint for estafa filed
against Manuel Suntay for the alleged snatching of the
envelope (Exhibit A), corroborates the testimony of Alberto
Barretto to the effect that only one will was signed by Jose B.
Suntay at his office in which he (Alberto Barretto), Manuel
Lopez and Go Toh took part as attesting witnesses (p. 15, t. s.
n., Exhibit 6). Go Toh testified before the same assistant fiscal
that he did not leave the will in the hands of Anastacio Teodoro
(p. 26, t. s. n., Exhibit 6). He said, quoting his own words,
"Because I can not give him this envelope even though the
contract (on fees) was signed. I have to bring that document to
court or to anywhere else myself." (p. 27, t. s. n., Exhibit 6).
As to the will claimed to have been executed on 4 January
1931 in Amoy, China, the law on the point in Rule 78. Section 1
of the rule provides:
Wills proved and allowed in a foreign country,
according to the laws of such country, may be
allowed, filed, and recorded by the proper Court of
First Instance in the Philippines.
Section 2 provides:
When a copy of such will and the allowance thereof,
duly authenticated, is filed with a petition for
allowance in the Philippines, by the executor or other
person interested, in the court having jurisdiction,
such court shall fix a time and place for the hearing,
 and cause notice thereof to be given as in case of an
original will presented for allowance.
Section 3 provides:
If it appears at the hearing that the will should be
allowed in the Philippines, the court shall so allow it,
and a certificate of its allowance, signed by the Judge,
and attested by the seal of the courts, to which shall
be attached a copy of the will, shall be filed and
recorded by the clerk, and the will shall have the
same effect as if originally proved and allowed in such
court.
The fact that the municipal district court of Amoy, China, is a
probate court must be proved. The law of China on procedure
in the probate or allowance of wills must also be proved. The
legal requirements for the execution of a valid will in China in
1931 should also be established by competent evidence. There
is no proof on these points. The unverified answers to the
questions propounded by counsel for the appellant to the
Consul General of the Republic of China set forth in Exhibits R-
1 and R-2, objected to by counsel for the appellee, are
inadmissible, because apart from the fact that the office of
Consul General does not qualify and make the person who
holds it an expert on the Chinese law on procedure in probate
matters, if the same be admitted, the adverse party would be
deprived of his right to confront and cross-examine the witness.
Consuls are appointed to attend to trade matters. Moreover, it
appears that all the proceedings had in the municipal district
court of Amoy were for the purpose of taking the testimony of
two attesting witnesses to the will and that the order of the
municipal district court of Amoy does not purport to probate the
will. In the absence of proof that the municipal district court of
Amoy is a probate court and on the Chinese law of procedure
in probate matters, it may be presumed that the proceedings in
the matter of probating or allowing a will in the Chinese courts
are the a deposition or to a perpetuation of testimony, and
even if it were so it does not measure same as those provided
for in our laws on the subject. It is a proceedings in rem and for
the validity of such proceedings personal notice or by
publication or both to all interested parties must be made. The
interested parties in the case were known to reside in the
Philippines. The evidence shows that no such notice was
received by the interested parties residing in the Philippines
(pp. 474, 476, 481, 503-4, t. s. n., hearing of 24 February
1948). The proceedings had in the municipal district court of
Amoy, China, may be likened toe or come up to the standard of
such proceedings in the Philippines for lack of notice to all
interested parties and the proceedings were held at the back of
such interested parties.
The order of the municipal district court of Amoy, China, which
reads as follows:
ORDER:
SEE BELOW
The above minutes were satisfactorily confirmed by
the interrogated parties, who declare that there are no
errors, after said minutes were loudly read and
announced actually in the court.
Done and subscribed on the Nineteenth day of the
English month of the 35th year of the Republic of
China in the Civil Section of the Municipal District
Court of Amoy, China.
HUANG KUANG CHENG
Clerk of Court
CHIANG TENG HWA
Judge
(Exhibit N-13, p. 89 Folder of Exhibits.).
does not purport to probate or allow the will which was the
subject of the proceedings. In view thereof, the will and the
alleged probate thereof cannot be said to have been done in
accordance with the accepted basic and fundamental concepts
and principles followed in the probate and allowance of wills.
Consequently, the authenticated transcript of proceedings held
in the municipal district court of Amoy, China, cannot be
deemed and accepted as proceedings leading to the probate
or allowance of a will and, therefore, the will referred to therein
cannot be allowed, filed and recorded by a competent court of
this country.
The decree appealed from is affirmed, without pronouncement
as to costs.
DUMEZ COMPANY and TRANS-ORIENT ENGINEERS, INC.,
petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and VERONICO EBILANE, respondents.; G.R.
No. 74495. July 11, 1996; HERMOSISIMA, JR., J.:
Before us is a petition for certiorari assailing the Decision of the
National Labor Relations Commission (hereafter, NLRC) in an
illegal dismissal case involving an overseas contract worker
who contracted a debilitating illness while rendering services
under a subsisting job contract in Riyadh, Saudi Arabia. The
assailed Decision affirmed the award by the Workers'
Assistance and Adjudication Office of the Philippine Overseas
Employment Administration (hereafter POEA) in favor of
private respondent in the amount of U.S.$1,110.00 or its peso
equivalent as and for his medical compensation benefits.
The facts of the case are not in dispute:
On May 21, 1982, petitioner Dumez Company, a French
company, through petitioner Trans-Orient Engineers, Inc., a
corporation organized and existing under the laws of the
Philippines, engaged the services of private respondent
Veronico Ebilane as carpenter for one of its projects in the
Middle East, with Riyadh, Saudi Arabia, as his place of actual
employment. The parties executed and signed a one-year
overseas employment agreement embodying the terms and
conditions of private respondent's employment.
Private respondent commenced performance of said contract
on July 3, 1982. On August 31, 1982, while at the job site,
private respondent was suddenly seized by abdominal pain
and rushed to the Riyadh Central Hospital were appendectomy
was performed on him. During his confinement, he developed
right-sided weakness and numbness and difficulty of speaking
which was found to have been caused by Atrial Fibrillation and
CVA embolism.
In a letter dated September 22, 1982, petitioners formally
terminated private respondent's employment effective
September 29, 1982, up to which time petitioners paid private
respondent his salaries under his employment contract.
Thereafter, on October 13, 1982, private respondent was
repatriated to Manila.
On November 23, 1982, private respondent filed a complaint
for illegal dismissal against petitioners. Such complaint was
filed with the Workers' Assistance and Adjudication Office of
the POEA.
Private respondent asseverates that he bad been terminated
pursuant to the provision of Section 1 (d) of the employment
agreement which refers to termination of an employee who is
unqualified. He maintains that such ground for termination did
not exist in his case and, thus, his dismissal was without
cause.
On January 24, 1984, the POEA Administrator rendered the
assailed Decision ordering petitioners to pay private
respondent medical compensation benefits in the amount of
U.S.$1,110.00 or its peso equivalent. Notwithstanding an
explicit finding made in the assailed Decision that "there can be
no dispute that complainant could be terminated for medical
reasons," still petitioners were found to have failed to perform
its obligation to give private respondent his "daily allowance for
each day of work disability, including holidays."
Believing that the POEA Administrator erred in finding them
liable for private respondent's medical compensation benefits,
petitioners appealed to the NLRC. In a Resolution promulgated
on March 25, 1986, the NLRC affirmed in toto the assailed
Decision and dismissed the appeal for lack of merit.
Petitioners thus came to this Court on a petition for certiorari
seeking the voiding of the Resolution of the NLRC. In the
meantime, petitioners prayed that a temporary restraining order
be issued to enjoin the POEA from enforcing the assailed
Resolution.
As prayed for, we issued a temporary restraining order
enjoining the POEA and the NLRC from enforcing the assailed
Resolution.
On November 17, 1986, the Solicitor General filed a Comment
"as his own, considering that he is unable to agree with the
position adopted by public respondent National Labor
Relations Commission." The Solicitor General does not dispute
private complainant's entitlement, under Saudi Arabia law, to
medical benefits corresponding to the period of his physical
incapacity. It is his position, however, that while payment of
said medical benefits is explicitly mandated by the Social
Insurance Law of Saudi Arabia,
x x x the same law x x x is equally explicit that the liability
decreed therein devolves at the General Organization's
expense, and not on the employer of the private respondent.
Significantly, neither the private nor the public respondent has
filed any pleading to refute the aforementioned postulate of the
Solicitor General.
Understandably, the sole error attributed to the NLRC and the
POEA is that there is no legal basis to require petitioners to
pay private respondent medical compensation benefits equal to
75% of his salaries for four (4) months.
Petitioners are correct.
The POEA Administrator, in finding petitioners liable to private
respondent for medical benefits accruing to the latter under the
Social Insurance Law of Saudi Arabia, took judicial notice of
the said law. To this extent, the POEA Administrator's
actuations are legally defensible. We have earlier ruled in
Norse Management Co. (PTE) vs. National Seamen Board that
evidence is usually a matter of procedure of which a mere
quasi-judicial body is not strict about. Although in a long line of
cases, we have ruled that a foreign law, being a matter of
evidence must be alleged and proved, in order to be
recognized and applied in a particular controversy involving
conflicts of laws, jurisprudence on this matter was not meant to
apply to cases before administrative or quasi-judicial bodies in
the light of the well-settled rule that administrative and quasi-
judicial bodies are not bound strictly by technical rules.
Nonetheless, only to this extent were the acts of the POEA
Administrator amply supported by the law. Her actual
application thereof, however, is starkly erroneous.
Section 6(a) of the Overseas Employment Agreement entered
into and signed by the private parties herein, provides that
"Workmen's Compensation insurance benefits will be provided
within the limits of the compensation law of the host country."
That compensation for disability was to be provided in
accordance with the law of the host country, Saudi Arabia, is a
necessary consequence of the compulsory coverage under the
General Organization for Social Insurance Law of Saudi Arabia
(hereafter, GOSI Law of Saudi Arabia), upon all workers,
regardless of nationality, sex or age, who render their services
within the territory of Saudi Arabia by virtue of a labor contract.
Article 49 of the GOSI Law of Saudi Arabia provides that the
General Organization shall pay to the beneficiaries the
insurance compensation, the employer being under no
obligation to pay any allowance to the insured or to his heirs
unless the injury has been intentionally caused by the
employer or the injury has occurred by reason of the latter's
gross error or failure to abide by the GOSI Law or the rules
relating to occupational health and safety.
Under the GOSI Law of Saudi Arabia as pleaded by petitioners
clearly the obligation to pay medical benefits as compensation
for work-related injury or illness, devolves upon the General
Organization and not upon petitioners. Furthermore, after
taking judicial notice of the GOSI Law of Saudi Arabia, the
POEA Administrator considered the said law as one of a
similar nature as that of our own compensation laws. Thus, in
awarding the medical benefits to private respondent, she
rationalized the same by quoting Article 166 of the Labor Code
of the Philippines which provides that "the State shall promote
and develop a tax-exempt employees' compensation program
whereby employees x x x in the event of work-connected
disability or death, may promptly secure adequate income
benefit and medical or related benefits." Indeed, we may
postulate further that the policies underlying our compensation
laws and the GOSI Law of Saudi Arabia being similar, the
nature thereof could not be so dissimilar. Suffice it to say that
our own compensation program imposes on the employer
nothing more than the obligation to remit monthly premiums to
the State Insurance Fund and it is the latter, not the employer,
on which is laid the burden of compensating the employee for
any disability; in fact, once the employer pays his share to the
fund, all obligation on his part to his employees is ended. No
showing at all has there been that petitioners had failed to
comply with its obligations as employer under the GOSI Law of
Saudi Arabia.
WHEREFORE, the petition for certiorari is GRANTED. The
decisions of the POEA Administrator and of the NLRC are
hereby ANNULLED and SET ASIDE. No pronouncement as to
costs. SO ORDERED.
ASIAVEST LIMITED vs. THE COURT OF APPEALS AND
ANTONIO HERAS; G.R. No. 128803. September 25, 1998;
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign
judgment. The antecedents are summarized in the 24 August
1990 Decision of Branch 107 of the Regional Trial Court of
Quezon City in Civil Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on
December 3, 1987 against the defendant Antonio
Heras praying that said defendant be ordered to pay
to the plaintiff the amounts awarded by the Hong
Kong Court Judgment dated December 28, 1984
and amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in
Hong Kong currency at the time of
payment with legal interest from
December 28, 1984 until fully paid;
2) interest on the sum of US$1,500.00 at
9.875% per annum from October
31, 1984 to December 28, 1984;
and
3) HK$905.00 at fixed cost in the action;
and
4) at least $80,000.00 representing
attorneys fees, litigation expenses
and cost, with interest thereon from
the date of the judgment until fully
paid.
On March 3, 1988, the defendant filed a Motion to
Dismiss. However, before the court could resolve
the said motion, a fire which partially razed the
Quezon City Hall Building on June 11, 1988 totally
destroyed the office of this Court, together with all
its records, equipment and properties. On July 26,
1988, the plaintiff, through counsel filed a Motion for
Reconstitution of Case Records. The Court, after
allowing the defendant to react thereto, granted the
said Motion and admitted the annexes attached
thereto as the reconstituted records of this case per
Order dated September 6, 1988. Thereafter, the
Motion to Dismiss, the resolution of which had been
deferred, was denied by the Court in its Order of
October 4, 1988.
On October 19, 1988, defendant filed his Answer.
The case was then set for pre-trial conference. At
the conference, the parties could not arrive at any
settlement. However, they agreed on the following
stipulations of facts:
1) The defendant admits the
existence of the judgment dated
December 28, 1984 as well as its
amendment dated April 13, 1987,
but not necessarily the authenticity
or validity thereof;
2) The plaintiff is not doing business
and is not licensed to do business in
the Philippines;
3) The residence of defendant, Antonio
Heras, is New Manila, Quezon City.
The only issue for this Court to determine is,
whether or not the judgment of the Hong Kong
Court has been repelled by evidence of want of
jurisdiction, want of notice to the party, collusion,
fraud or clear mistake of law or fact, such as to
overcome the presumption established in Section
50, Rule 39 of the Rules of Court in favor of foreign
judgments.
In view of the admission by the defendant of the
existence of the aforementioned judgment (Pls. See
Stipulations of Facts in the Order dated January 5,
1989 as amended by the Order of January 18,
1989), as well as the legal presumption in favor of
the plaintiff as provided for in paragraph (b), Sec.
50, (Ibid.), the plaintiff presented only documentary
evidence to show rendition, existence, and
authentication of such judgment by the proper
officials concerned (Pls. See Exhibits A thru B, with
their submarkings). In addition, the plaintiff
presented testimonial and documentary evidence to
show its entitlement to attorneys fees and other
expenses of litigation.
On the other hand, the defendant presented two
witnesses, namely, Fortunata dela Vega and Russel
Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect
that no writ of summons or copy of a statement of
claim of Asiavest Limited was ever served in the
office of the Navegante Shipping Agency Limited
and/or for Mr. Antonio Heras, and that no service of
the writ of summons was either served on the
defendant at his residence in New Manila, Quezon
City. Her knowledge is based on the fact that she
was the personal secretary of Mr. Heras during his
JD Transit days up to the latter part of 1972 when
he shifted or diversified to shipping business in
Hong Kong; that she was in-charge of all his letters
and correspondence, business commitments,
undertakings, conferences and appointments, until
October 1984 when Mr. Heras left Hong Kong for
good; that she was also the Officer-in-Charge or
Office Manager of Navegante Shipping Agency
LTD, a Hong Kong registered and based company
acting as ships agent, up to and until the company
closed shop sometime in the first quarter of 1985,
when shipping business collapsed worldwide; that
the said company held office at 34-35 Connaught
Road, Central Hong Kong and later transferred to
Caxton House at Duddel Street, Hong Kong, until
the company closed shop in 1985; and that she was
certain of such facts because she held office at
Caxton House up to the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws
of Hong Kong, and as a representative of the law
office of the defendants counsel who made a
verification of the record of the case filed by the
plaintiff in Hong Kong against the defendant, as well
as the procedure in serving Court processes in
Hong Kong.
In his affidavit (Exh. 2) which constitutes his direct
testimony, the said witness stated that:
The defendant was sued on the basis of
his personal guarantee of the obligations
of Compania Hermanos de Navegacion
S.A. There is no record that a writ of
summons was served on the person of
the defendant in Hong Kong, or that any
such attempt at service was made.
Likewise, there is no record that a copy of
the judgment of the High Court was
furnished or served on the defendant;
anyway, it is not a legal requirement to do
so under Hong Kong laws;
a) The writ of summons or claim can
be served by the solicitor
(lawyer) of the claimant or
plaintiff. In Hong Kong there are
no Court personnel who serve
writs of summons and/or most
other processes.
b) If the writ of summons or claim (or
complaint) is not contested, the
claimant or the plaintiff is not
required to present proof of his
claim or complaint nor present
evidence under oath of the
claim in order to obtain a
Judgment.
c) There is no legal requirement that
such a Judgment or decision
rendered by the Court in Hong
Kong [to] make a recitation of
the facts or the law upon which
the claim is based.
d) There is no necessity to furnish
the defendant with a copy of the
Judgment or decision rendered
against him.
e) In an action based on a
guarantee, there is no
established legal requirement
or obligation under Hong Kong
laws that the creditor must first
bring proceedings against the
principal debtor. The creditor
can immediately go against the
guarantor.
On cross examination, Mr. Lousich stated that
before he was commissioned by the law firm of the
defendants counsel as an expert witness and to
verify the records of the Hong Kong case, he had
been acting as counsel for the defendant in a
number of commercial matters; that there was an
application for service of summons upon the
defendant outside the jurisdiction of Hong Kong;
that there was an order of the Court authorizing
service upon Heras outside of Hong Kong,
particularly in Manila or any other place in the
Philippines (p. 9, TSN, 2/14/90); that there must be
adequate proof of service of summons, otherwise
the Hong Kong Court will refuse to render judgment
(p. 10, ibid); that the mere fact that the Hong Kong
Court rendered judgment, it can be presumed that
there was service of summons; that in this case, it is
not just a presumption because there was an
affidavit stating that service was effected in [sic] a
particular man here in Manila; that such affidavit
 was filed by one Jose R. Fernandez of the firm
Sycip Salazar on the 21st of December 1984, and
stated in essence that on Friday, the 23rd of
November 1984 he served the 4th defendant at No.
6 First Street, Quezon City by leaving it at that
address with Mr. Dionisio Lopez, the son-in-law of
the 4th defendant the copy of the writ and Mr. Lopez
informed me and I barely believed that he would
bring the said writ to the attention of the 4th
defendant (pp. 11-12, ibid.); that upon filing of that
affidavit, the Court was asked and granted judgment
against the 4th defendant; and that if the summons
or claim is not contested, the claimant of the plaintiff
is not required to present proof of his claim or
complaint or present evidence under oath of the
claim in order to obtain judgment; and that such
judgment can be enforced in the same manner as a
judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment
had been duly proved, it is a presumptive evidence of a right as
between the parties; hence, the party impugning it had the
burden to prove want of jurisdiction over his person. HERAS
failed to discharge that burden. He did not testify to state
categorically and under oath that he never received summons.
Even his own witness Lousich admitted that HERAS was
served with summons in his Quezon City residence. As to De
la Vegas testimony regarding non-service of summons, the
same was hearsay and had no probative value.
As to HERAS contention that the Hong Kong court judgment
violated the Constitution and the procedural laws of the
Philippines because it contained no statements of the facts and
the law on which it was based, the trial court ruled that since
the issue related to procedural matters, the law of the forum,
i.e., Hong Kong laws, should govern. As testified by the expert
witness Lousich, such legalities were not required under Hong
Kong laws. The trial court also debunked HERAS contention
that the principle of excussion under Article 2058 of the Civil
Code of the Philippines was violated. It declared that matters of
substance are subject to the law of the place where the
transaction occurred; in this case, Hong Kong laws must
govern.
The trial court concluded that the Hong Kong court judgment
should be recognized and given effect in this jurisdiction for
failure of HERAS to overcome the legal presumption in favor of
the foreign judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered
ordering defendant to pay to the plaintiff the
following sums or their equivalents in Philippine
currency at the time of payment: US$1,810,265.40
plus interest on the sum of US$1,500,000.00 at
9.875% per annum from October 31, 1984 to
December 28, 1984, and HK$905 as fixed cost,
with legal interests on the aggregate amount from
December 28, 1984, and to pay attorneys fees in
the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It
sought an award of judicial costs and an increase in attorneys
fees in the amount of US$19,346.45 with interest until full
payment of the said obligations. On the other hand, HERAS no
longer opposed the motion and instead appealed the decision
to the Court of Appeals, which docketed the appeal as CA-G.R.
CV No. 29513.
In its order November 1990, the trial court granted ASIAVESTs
motion for reconsideration by increasing the award of attorneys
fees to US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT,
provided that ASIAVEST would pay the corresponding filing
fees for the increase. ASIAVEST appealed the order requiring
prior payment of filing fees. However, it later withdrew its
appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision
reversing the decision of the trial court and dismissing
ASIAVESTs complaint without prejudice. It underscored the
fact that a foreign judgment does not of itself have any
extraterritorial application. For it to be given effect, the foreign
tribunal should have acquired jurisdiction over the person and
the subject matter. If such tribunal has not acquired jurisdiction,
its judgment is void.
The Court of Appeals agreed with the trial court that matters of
remedy and procedure such as those relating to service of
summons upon the defendant are governed by the lex fori,
which was, in this case, the law of Hong Kong. Relative
thereto, it gave weight to Lousichs testimony that under the
Hong Kong law, the substituted service of summons upon
HERAS effected in the Philippines by the clerk of Sycip Salazar
Hernandez & Gatmaitan firm would be valid provided that it
was done in accordance with Philippine laws. It then stressed
that where the action is in personam and the defendant is in
the Philippines, the summons should be personally served on
the defendant pursuant to Section 7, Rule 14 of the Rules of
Court. Substituted service may only be availed of where the
defendant cannot be promptly served in person, the fact of
impossibility of personal service should be explained in the
proof of service. It also found as persuasive HERAS argument
that instead of directly using the clerk of the Sycip Salazar
Hernandez & Gatmaitan law office, who was not authorized by
the judge of the court issuing the summons, ASIAVEST should
have asked for leave of the local courts to have the foreign
summons served by the sheriff or other court officer of the
place where service was to be made, or for special reasons by
any person authorized by the judge.
The Court of Appeals agreed with HERAS that notice sent
outside the state to a non-resident is unavailing to give
jurisdiction in an action against him personally for money
recovery. Summons should have been personally served on
HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS
was physically present in Hong Kong for nearly 14 years. Since
there was not even an attempt to serve summons on HERAS
in Hong Kong, the Hong Kong Supreme Court did not acquire
jurisdiction over HERAS. Nonetheless, it did not totally
foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has
a meritorious defense against [ASIAVESTs] claims
or that [HERAS] ought to be absolved of any
liability, nevertheless, in view of the foregoing
discussion, there is a need to deviate from the
findings of the lower court in the interest of justice
and fair play. This, however, is without prejudice to
whatever action [ASIAVEST] might deem proper in
order to enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it
was necessary that evidence supporting the validity of the
foreign judgment be submitted, and that our courts are not
bound to give effect to foreign judgments which contravene our
laws and the principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the
Court of Appeals erred in ruling that
I. IT WAS NECESSARY FOR [ASIAVEST] TO
PRESENT EVIDENCE SUPPORTING THE
VALIDITY OF THE JUDGMENT;
II. THE SERVICE OF SUMMONS ON [HERAS]
WAS DEFECTIVE UNDER PHILIPPINE LAW;
III. SUMMONS SHOULD HAVE BEEN
PERSONALLY SERVED ON HERAS IN HONG
KONG;
IV. THE HONG KONG SUMMONS SHOULD HAVE
BEEN SERVED WITH LEAVE OF PHILIPPINE
COURTS;
V. THE FOREIGN JUDGMENT CONTRAVENES
PHILIPPINE LAWS, THE PRINCIPLES OF SOUND
MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned
errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of
Court, which was the governing law at the time this case was
decided by the trial court and respondent Court of Appeals, a
foreign judgment against a person rendered by a court having
jurisdiction to pronounce the judgment is presumptive evidence
of a right as between the parties and their successors in
interest by the subsequent title. However, the judgment may be
repelled by evidence of want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence
provides that in the absence of proof to the contrary, a court, or
judge acting as such, whether in the Philippines or elsewhere,
is presumed to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved,
the burden to repel it on grounds provided for in paragraph (b)
of Section 50, Rule 39 of the Rules of Court is on the party
challenging the foreign judgment -- HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of
the Hong Kong judgment. On the other hand, ASIAVEST
presented evidence to prove rendition, existence, and
authentication of the judgment by the proper officials. The
judgment is thus presumed to be valid and binding in the
country from which it comes, until the contrary is shown.
Consequently, the first ground relied upon by ASIAVEST has
merit. The presumption of validity accorded foreign judgment
would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is
that the Hong Kong Supreme Court did not acquire jurisdiction
over the person of HERAS. This involves the issue of whether
summons was properly and validly served on HERAS. It is
settled that matters of remedy and procedure such as those
relating to the service of process upon the defendant are
governed by the lex fori or the law of the forum, i.e., the law of
Hong Kong in this case. HERAS insisted that according to his
witness Mr. Lousich, who was presented as an expert on Hong
Kong laws, there was no valid service of summons on him.
In his counter-affidavit, which served as his direct testimony
per agreement of the parties, Lousich declared that the record
of the Hong Kong case failed to show that a writ of summons
was served upon HERAS in Hong Kong or that any such
attempt was made. Neither did the record show that a copy of
the judgment of the court was served on HERAS. He stated
further that under Hong Kong laws (a) a writ of summons could
be served by the solicitor of the claimant or plaintiff; and (b)
where the said writ or claim was not contested, the claimant or
plaintiff was not required to present proof under oath in order to
obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich
testified that the Hong Kong court authorized service of
summons on HERAS outside of its jurisdiction, particularly in
the Philippines. He admitted also the existence of an affidavit
of one Jose R. Fernandez of the Sycip Salazar Hernandez &
Gatmaitan law firm stating that he (Fernandez) served
summons on HERAS on 13 November 1984 at No. 6, 1 st St.,
Quezon City, by leaving a copy with HERASs son-in-law
Dionisio Lopez. On redirect examination, Lousich declared that
such service of summons would be valid under Hong Kong
laws provided that it was in accordance with Philippine laws.
We note that there was no objection on the part of ASIAVEST
on the qualification of Mr. Lousich as an expert on the Hong
Kong law. Under Sections 24 and 25, Rule 132 of the New
Rules of Evidence, the record of public documents of a
sovereign authority, tribunal, official body, or public officer may
be proved by (1) an official publication thereof or (2) a copy
attested by the officer having the legal custody thereof, which
must be accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody.
The certificate may be issued by a secretary of the embassy or
legation, consul general, consul, vice consul, or consular
agent, or any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. The attestation must
state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be, and
must be under the official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be
allowed to prove a foreign law. An authority on private
international law thus noted:
Although it is desirable that foreign law be proved in
accordance with the above rule, however, the
Supreme Court held in the case of Willamette Iron
and Steel Works v. Muzzal, that Section 41, Rule
123 (Section 25, Rule 132 of the Revised Rules of
Court) does not exclude the presentation of other
competent evidence to prove the existence of a
foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-
at-law of San Francisco, California, who quoted
verbatim a section of California Civil Code and who
stated that the same was in force at the time the
obligations were contracted, as sufficient evidence
to establish the existence of said law. Accordingly,
in line with this view, the Supreme Court in the
Collector of Internal Revenue v. Fisher et al., upheld
the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In
that case, the counsel for respondent testified that
as an active member of the California Bar since
1951, he is familiar with the revenue and taxation
laws of the State of California. When asked by the
lower court to state the pertinent California law as
regards exemption of intangible personal properties,
the witness cited Article 4, Sec. 13851 (a) & (b) of
the California Internal and Revenue Code as
published in Derrings California Code, a publication
of Bancroft-Whitney Co., Inc. And as part of his
testimony, a full quotation of the cited section was
offered in evidence by respondents. Likewise, in
several naturalization cases, it was held by the
Court that evidence of the law of a foreign country
on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule
of practice, may be allowed and used as basis for
favorable action, if, in the light of all the
circumstances, the Court is satisfied of the
authenticity of the written proof offered. Thus, in a
number of decisions, mere authentication of the
Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be
competent proof of that law.
There is, however, nothing in the testimony of Mr. Lousich that
touched on the specific law of Hong Kong in respect of service
of summons either in actions in rem or in personam, and where
the defendant is either a resident or nonresident of Hong Kong.
In view of the absence of proof of the Hong Kong law on this
particular issue, the presumption of identity or similarity or the
so-called processual presumption shall come into play. It will
thus be presumed that the Hong Kong law on the matter is
similar to the Philippine law.
As stated in Valmonte vs. Court of Appeals, it will be helpful to
determine first whether the action is in personam, in rem, or
quasi in rem because the rules on service of summons under
Rule 14 of the Rules of Court of the Philippines apply
according to the nature of the action.
An action in personam is an action against a person on the
basis of his personal liability. An action in rem is an action
against the thing itself instead of against the person. An action
quasi in rem is one wherein 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.
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide
the case. Jurisdiction over the person of a resident defendant
who does not voluntarily appear in court can be acquired by
personal service of summons as provided under Section 7,
Rule 14 of the Rules of Court. If he cannot be personally
served with summons within a reasonable time, substituted
service may be made in accordance with Section 8 of said
Rule. If he is temporarily out of the country, any of the following
modes of service may be resorted to: (1) substituted service
set forth in Section 8; (2) personal service outside the country,
with leave of court; (3) service by publication, also with leave of
court; or (4) any other manner the court may deem sufficient.
However, in an action in personam wherein the defendant is a
non-resident who does not voluntarily submit himself to the
authority of the court, personal service of summons within the
state is essential to the acquisition of jurisdiction over her
person. This method of service is possible if such defendant is
physically present in the country. If he is not found therein, the
court cannot acquire jurisdiction over his person and therefore
cannot validly try and decide the case against him. An
exception was laid down in Gemperle v. Schenker wherein a
non-resident was served with summons through his wife, who
was a resident of the Philippines and who was his
representative and attorney-in-fact in a prior civil case filed by
him; moreover, the second case was a mere offshoot of the
first case.
On the other hand, in a proceeding in rem or quasi in rem,
jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the
court acquires jurisdiction over the res. Nonetheless, summons
must be served upon the defendant not for the purpose of
vesting the court with jurisdiction but merely for satisfying the
due process requirements. Thus, where the defendant is a
non-resident who is not found in the Philippines and (1) the
action affects the personal status of the plaintiff; (2) the action
relates to, or the subject matter of which is property in the
Philippines in which the defendant has or claims a lien or
interest; (3) the action seeks the exclusion of the defendant
from any interest in the property located in the Philippines; or
(4) the property of the defendant has been attached in the
Philippines -- service of summons may be effected by (a)
personal service out of the country, with leave of court; (b)
publication, also with leave of court; or (c) any other manner
the court may deem sufficient.
In the case at bar, the action filed in Hong Kong against
HERAS was in personam, since it was based on his personal
guarantee of the obligation of the principal debtor. Before we
can apply the foregoing rules, we must determine first whether
HERAS was a resident of Hong Kong.
Fortunata de la Vega, HERAS’s personal secretary in Hong
Kong since 1972 until 1985, testified that HERAS was the
President and part owner of a shipping company in Hong Kong
during all those times that she served as his secretary. He had
in his employ a staff of twelve. He had business commitments,
undertakings, conferences, and appointments until October
1984 when [he] left Hong Kong for good. HERASs other
witness, Russel Warren Lousich, testified that he had acted as
counsel for HERAS for a number of commercial matters.
ASIAVEST then infers that HERAS was a resident of Hong
Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, as well as in his
Answer to ASIAVESTs complaint for the enforcement of the
Hong Kong court judgment, HERAS maintained that the Hong
Kong court did not have jurisdiction over him because the
fundamental rule is that jurisdiction in personam over non-
resident defendants, so as to sustain a money judgment, must
be based upon personal service of summons within the state
which renders the judgment.
For its part, ASIAVEST, in its Opposition to the Motion to
Dismiss contended: The question of Hong Kong courts want of
jurisdiction is therefore a triable issue if it is to be pleaded by
the defendant to repel the foreign judgment. Facts showing
jurisdictional lack (e.g. that the Hong Kong suit was in
personam, that defendant was not a resident of Hong Kong
when the suit was filed or that he did not voluntarily submit to
the Hong Kong courts jurisdiction) should be alleged and
proved by the defendant.
In his Reply (to the Opposition to Motion to Dismiss), HERAS
argued that the lack of jurisdiction over his person was
corroborated by ASIAVESTs allegation in the complaint that he
has his residence at No. 6, 1st St., New Manila, Quezon City,
Philippines. He then concluded that such judicial admission
amounted to evidence that he was and is not a resident of
Hong Kong.
Significantly, in the pre-trial conference, the parties came up
with stipulations of facts, among which was that the residence
of defendant, Antonio Heras, is New Manila, Quezon City.
We note that the residence of HERAS insofar as the action for
the enforcement of the Hong Kong court judgment is
concerned, was never in issue. He never challenged the
service of summons on him through a security guard in his
Quezon City residence and through a lawyer in his office in that
city. In his Motion to Dismiss, he did not question the
jurisdiction of the Philippine court over his person on the
ground of invalid service of summons. What was in issue was
his residence as far as the Hong Kong suit was concerned. We
therefore conclude that the stipulated fact that HERAS is a
resident of New Manila, Quezon City, Philippines refers to his
residence at the time jurisdiction over his person was being
sought by the Hong Kong court. With that stipulation of fact,
ASIAVEST cannot now claim that HERAS was a resident of
Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong
and the action against him was, indisputably, one in personam,
summons should have been personally served on him in Hong
Kong. The extraterritorial service in the Philippines was
therefore invalid and did not confer on the Hong Kong court
jurisdiction over his person. It follows that the Hong Kong court
judgment cannot be given force and effect here in the
Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong
Kong, he was no longer so in November 1984 when the
extraterritorial service of summons was attempted to be made
on him. As declared by his secretary, which statement was not
disputed by ASIAVEST, HERAS left Hong Kong in October
1984 for good. His absence in Hong Kong must have been the
reason why summons was not served on him therein; thus,
ASIAVEST was constrained to apply for leave to effect service
in the Philippines, and upon obtaining a favorable action on the
matter, it commissioned the Sycip Salazar Hernandez &
Gatmaitan law firm to serve the summons here in the
Philippines.
In Brown v. Brown, the defendant was previously a resident of
the Philippines. Several days after a criminal action for
concubinage was filed against him, he abandoned the
Philippines. Later, a proceeding quasi in rem was instituted
against him. Summons in the latter case was served on the
defendants attorney-in-fact at the latters address. The Court
held that under the facts of the case, it could not be said that
the defendant was still a resident of the Philippines because he
ha[d] escaped to his country and [was] therefore an absentee
in the Philippines. As such, he should have been summoned in
the same manner as one who does not reside and is not found
in the Philippines.
Similarly, HERAS, who was also an absentee, should have
been served with summons in the same manner as a non-
resident not found in Hong Kong. Section 17, Rule 14 of the
Rules of Court providing for extraterritorial service will not apply
because the suit against him was in personam. Neither can we
apply Section 18, which allows extraterritorial service on a
resident defendant who is temporarily absent from the country,
because even if HERAS be considered as a resident of Hong
Kong, the undisputed fact remains that he left Hong Kong not
only temporarily but for good.
IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered DENYING the petition in this case and AFFIRMING
the assailed judgment of the Court of Appeals in CA-G.R. CV
No. 29513.No costs. SO ORDERED.
ROBERTO S. BENEDICTO and HECTOR T. RIVERA,
petitioners, vs. THE COURT OF APPEALS, HON.
GUILLERMO L. LOJA, SR., PRESIDING JUDGE, REGIONAL
TRIAL COURT OF MANILA, BRANCH 26, and PEOPLE OF
THE PHILIPPINES, respondents; [G.R. No. 125359.
September 4, 2001]; QUISUMBING, J.:
Assailed in this petition is the consolidated decision rendered
on May 23, 1996, by the Court of Appeals in CA-G.R. SP No.
35928 and CA-G.R. SP No. 35719. CA-G.R. SP No. 35928
had affirmed the order dated September 6, 1994, of the
Regional Trial Court, Manila, Branch 26, insofar as it denied
petitioners respective Motions to Quash the Informations in
twenty-five (25) criminal cases for violation of Central Bank
Circular No. 960. Therein included were informations involving:
(a) consolidated Criminal Cases Nos. 91-101879 to 91-101883
filed against Mrs. Imelda R. Marcos, Roberto S. Benedicto, and
Hector T. Rivera; (b) consolidated Criminal Cases Nos. 91-
101884 to 91-101892 filed against Mrs. Marcos and Benedicto;
and (c) Criminal Cases Nos. 92-101959 to 92-101969 also
against Mrs. Marcos and Benedicto. Note, however, that the
Court of Appeals already dismissed Criminal Case No. 91-
101884.
The factual antecedents of the instant petition are as follows:
On December 27, 1991, Mrs. Imelda Marcos and Messrs.
Benedicto and Rivera were indicted for violation of Section 10
of Circular No. 960 in relation to Section 34 of the Central Bank
Act (Republic Act No. 265, as amended) in five Informations
filed with the Regional Trial Court of Manila. Docketed as
Criminal Cases Nos. 91-101879 to 91-101883, the charge
sheets alleged that the trio failed to submit reports of their
foreign exchange earnings from abroad and/or failed to register
with the Foreign Exchange Department of the Central Bank
within the period mandated by Circular No. 960. Said Circular
prohibited natural and juridical persons from maintaining
foreign exchange accounts abroad without prior authorization
from the Central Bank. It also required all residents of the
Philippines who habitually earned or received foreign
currencies from invisibles, either locally or abroad, to report
such earnings or receipts to the Central Bank. Violations of the
Circular were punishable as a criminal offense under Section
34 of the Central Bank Act.
That same day, nine additional Informations charging Mrs.
Marcos and Benedicto with the same offense, but involving
different accounts, were filed with the Manila RTC, which
docketed these as Criminal Cases Nos. 91-101884 to 91-
101892. The accusatory portion of the charge sheet in Criminal
Case No. 91-101888 reads:
That from September 1, 1983 up to 1987, both dates inclusive,
and for sometime thereafter, both accused, conspiring and
confederating with each other and with the late President
Ferdinand E. Marcos, all residents of Manila, Philippines, and
within the jurisdiction of this Honorable Court, did then and
there wilfully, unlawfully and feloniously fail to submit reports in
the prescribed form and/or register with the Foreign Exchange
Department of the Central Bank within 90 days from October
21, 1983 as required of them being residents
habitually/customarily earning, acquiring or receiving foreign
exchange from whatever source or from invisibles locally or
from abroad, despite the fact they actually earned interests
regularly every six (6 ) months for the first two years and then
quarterly thereafter for their investment of $50-million, later
reduced to $25-million in December 1985, in Philippine-issued
dollar denominated treasury notes with floating rates and in
bearer form, in the name of Bank Hofmann, AG, Zurich,
Switzerland, for the benefit of Avertina Foundation, their front
organization established for economic advancement purposes
with secret foreign exchange account Category (Rubric) C.A.R.
No. 211 925-02 in Swiss Credit Bank (also known as SKA) in
Zurich, Switzerland, which earned, acquired or received for the
accused Imelda Romualdez Marcos and her late husband an
interest of $2,267,892 as of December 16, 1985 which was
remitted to Bank Hofmann, AG, through Citibank, New York,
United States of America, for the credit of said Avertina
account on December 19, 1985, aside from the redemption of
$25 million (one-half of the original $50-M) as of December 16,
1985 and outwardly remitted from the Philippines in the
amounts of $7,495,297.49 and $17,489,062.50 on December
18, 1985 for further investment outside the Philippines without
first complying with the Central Bank reporting/registering
requirements.
CONTRARY TO LAW.
The other charge sheets were similarly worded except the days
of the commission of the offenses, the name(s) of the alleged
dummy or dummies, the amounts in the foreign exchange
accounts maintained, and the names of the foreign banks
where such accounts were held by the accused.
On January 3, 1992, eleven more Informations accusing Mrs.
Marcos and Benedicto of the same offense, again in relation to
different accounts, were filed with the same court, docketed as
Criminal Cases Nos. 92-101959 to 92-101969. The
Informations were similarly worded as the earlier indictments,
save for the details as to the dates of the violations of Circular
No. 960, the identities of the dummies used, the balances and
sources of the earnings, and the names of the foreign banks
where these accounts were maintained.
All of the aforementioned criminal cases were consolidated
before Branch 26 of the said trial court.
On the same day that Criminal Cases Nos. 92-101959 to 92-
101969 were filed, the Central Bank issued Circular No. 1318
which revised the rules governing non-trade foreign exchange
transactions. It took effect on January 20, 1992.
On August 24, 1992, the Central Bank, pursuant to the
governments policy of further liberalizing foreign exchange
transactions, came out with Circular No. 1353, which amended
Circular No. 1318. Circular No. 1353 deleted the requirement
of prior Central Bank approval for foreign exchange-funded
expenditures obtained from the banking system.
Both of the aforementioned circulars, however, contained a
saving clause, excepting from their coverage pending criminal
actions involving violations of Circular No. 960 and, in the case
of Circular No. 1353, violations of both Circular No. 960 and
Circular No. 1318.
On September 19, 1993, the government allowed petitioners
Benedicto and Rivera to return to the Philippines, on condition
that they face the various criminal charges instituted against
them, including the dollar-salting cases. Petitioners posted bail
in the latter cases.
On February 28, 1994, petitioners Benedicto and Rivera were
arraigned. Both pleaded not guilty to the charges of violating
Central Bank Circular No. 960. Mrs. Marcos had earlier entered
a similar plea during her arraignment for the same offense on
February 12, 1992.
On August 11, 1994, petitioners moved to quash all the
Informations filed against them in Criminal Cases Nos. 91-
101879 to 91-101883; 91-101884 to 91-101892, and 91-
101959 to 91-101969. Their motion was grounded on lack of
jurisdiction, forum shopping, extinction of criminal liability with
the repeal of Circular No. 960, prescription, exemption from the
Central Banks reporting requirement, and the grant of absolute
immunity as a result of a compromise agreement entered into
with the government.
On September 6, 1994, the trial court denied petitioners
motion. A similar motion filed on May 23, 1994 by Mrs. Marcos
seeking to dismiss the dollar-salting cases against her due to
the repeal of Circular No. 960 had earlier been denied by the
trial court in its order dated June 9, 1994. Petitioners then filed
a motion for reconsideration, but the trial court likewise denied
this motion on October 18, 1994.
On November 21, 1994, petitioners moved for leave to file a
second motion for reconsideration. The trial court, in its order
of November 23, 1994, denied petitioners motion and set the
consolidated cases for trial on January 5, 1995.
Two separate petitions for certiorari and prohibition, with similar
prayers for temporary restraining orders and/or writs of
preliminary injunction, docketed as CA-G.R. SP No. 35719 and
CA-G.R. SP No. 35928, were respectively filed by Mrs. Marcos
and petitioners with the Court of Appeals. Finding that both
cases involved violations of Central Bank Circular No. 960, the
appellate court consolidated the two cases.
On May 23, 1996, the Court of Appeals disposed of the
consolidated cases as follows:
WHEREFORE, finding no grave abuse of discretion on the part
of respondent Judge in denying petitioners respective Motions
to Quash, except that with respect to Criminal Case No. 91-
101884, the instant petitions are hereby DISMISSED for lack of
merit. The assailed September 6, 1994 Order, in so far as it
denied the Motion to Quash Criminal Case No. 91-101884 is
hereby nullified and set aside, and said case is hereby
dismissed. Costs against petitioners.
SO ORDERED.
Dissatisfied with the said decision of the court a quo, except
with respect to the portion ordering the dismissal of Criminal
Case No. 91-101884, petitioners filed the instant petition,
attributing the following errors to the appellate court:
THAT THE COURT ERRED IN NOT FINDING THAT THE
INFORMATIONS/CASES FILED AGAINST PETITIONERS-
APPELLANTS ARE QUASHABLE BASED ON THE
FOLLOWING GROUNDS:
(A) LACK OF JURISDICTION/FORUM SHOPPING/NO
VALID PRELIMINARY INVESTIGATION
(B) EXTINCTION OF CRIMINAL LIABILITY
1) REPEAL OF CB CIRCULAR NO. 960 BY
CB CIRCULAR NO. 1353;
2) REPEAL OF R.A. 265 BY R.A. 7653
(C) PRESCRIPTION
(D) EXEMPTION FROM CB REPORTING
REQUIREMENT
(E) GRANT OF ABSOLUTE IMMUNITY.
Simply stated, the issues for our resolution are:
(1) Did the Court of Appeals err in denying the Motion to
Quash for lack of jurisdiction on the part of the trial
court, forum shopping by the prosecution, and
absence of a valid preliminary investigation?
(2) Did the repeal of Central Bank Circular No. 960 and
Republic Act No. 265 by Circular No. 1353 and
Republic Act No. 7653 respectively, extinguish the
criminal liability of petitioners?
(3) Had the criminal cases in violation of Circular No. 960
already prescribed?
(4) Were petitioners exempted from the application and
coverage of Circular No. 960?
 (5) Were petitioners' alleged violations of Circular No. 960
covered by the absolute immunity granted in the
Compromise Agreement of November 3, 1990?
On the first issue, petitioners assail the jurisdiction of the
Regional Trial Court. They aver that the dollar-salting charges
filed against them were violations of the Anti-Graft Law or
Republic Act No. 3019, and the Sandiganbayan has original
and exclusive jurisdiction over their cases.
Settled is the rule that the jurisdiction of a court to try a criminal
case is determined by the law in force at the time the action is
instituted. The 25 cases were filed in 1991-92. The applicable
law on jurisdiction then was Presidential Decree 1606. Under
P.D. No. 1606, offenses punishable by imprisonment of not
more than six years fall within the jurisdiction of the regular trial
courts, not the Sandiganbayan.
In the instant case, all the Informations are for violations of
Circular No. 960 in relation to Section 34 of the Central Bank
Act and not, as petitioners insist, for transgressions of Republic
Act No. 3019. Pursuant to Section 34 of Republic Act No. 265,
violations of Circular No. 960 are punishable by imprisonment
of not more than five years and a fine of not more than
P20,000.00. Since under P.D. No. 1606 the Sandiganbayan
has no jurisdiction to try criminal cases where the imposable
penalty is less than six years of imprisonment, the cases
against petitioners for violations of Circular No. 960 are,
therefore, cognizable by the trial court. No error may thus be
charged to the Court of Appeals when it held that the RTC of
Manila had jurisdiction to hear and try the dollar-salting cases.
Still on the first issue, petitioners next contend that the filing of
the cases for violations of Circular No. 960 before the RTC of
Manila constitutes forum shopping. Petitioners argue that the
prosecution, in an attempt to seek a favorable verdict from
more than one tribunal, filed separate cases involving virtually
the same offenses before the regular trial courts and the
Sandiganbayan. They fault the prosecution with splitting the
cases. Petitioners maintain that while the RTC cases refer only
to the failure to report interest earnings on Treasury Notes, the
Sandiganbayan cases seek to penalize the act of receiving the
same interest earnings on Treasury Notes in violation of the
Anti-Graft Laws provisions on prohibited transactions.
Petitioners aver that the violation of Circular No. 960 is but an
element of the offense of prohibited transactions punished
under Republic Act No. 3019 and should, thus, be deemed
absorbed by the prohibited transactions cases pending before
the Sandiganbayan.
For a charge of forum shopping to prosper, there must exist
between an action pending in one court and another action
before another court: (a) identity of parties, or at least such
parties as represent the same interests in both actions; (b)
identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the
other action will, regardless of which party is successful,
amount to res judicata in the action under consideration. Here,
we find that the single act of receiving unreported interest
earnings on Treasury Notes held abroad constitutes an offense
against two or more distinct and unrelated laws, Circular No.
960 and R.A. 3019. Said laws define distinct offenses, penalize
different acts, and can be applied independently. Hence, no
fault lies at the prosecutions door for having instituted separate
cases before separate tribunals involving the same subject
matter.
With respect to the RTC cases, the receipt of the interest
earnings violate Circular No. 960 in relation to Republic Act No.
265 because the same was unreported to the Central Bank.
The act to be penalized here is the failure to report the interest
earnings from the foreign exchange accounts to the proper
authority. As to the anti-graft cases before the Sandiganbayan
involving the same interest earnings from the same foreign
exchange accounts, the receipt of the interest earnings
transgresses Republic Act No. 3019 because the act of
receiving such interest is a prohibited transaction prejudicial to
the government. What the State seeks to punish in these anti-
graft cases is the prohibited receipt of the interest earnings. In
sum, there is no identity of offenses charged, and prosecution
under one law is not an obstacle to a prosecution under the
other law. There is no forum shopping.
Finally, on the first issue, petitioners contend that the
preliminary investigation by the Department of Justice was
invalid and in violation of their rights to due process. Petitioners
argue that governments ban on their travel effectively
prevented them from returning home and personally appearing
at the preliminary investigation. Benedicto and Rivera further
point out that the joint preliminary investigation by the
Department of Justice, resulted to the charges in one set of
cases before the Sandiganbayan for violations of Republic Act
No. 3019 and another set before the RTC for violation of
Circular No. 960.
Preliminary investigation is not part of the due process
guaranteed by the Constitution. It is an inquiry to determine
whether there is sufficient ground to engender a well-founded
belief that a crime has been committed and the respondent is
probably guilty thereof. Instead, the right to a preliminary
investigation is personal. It is afforded to the accused by
statute, and can be waived, either expressly or by implication.
The waiver extends to any irregularity in the preliminary
investigation, where one was conducted.
The petition in the present case contains the following
admissions:
1. Allowed to return to the Philippines on September 19,
1993on the condition that he face the criminal charges pending
in courts, petitioner-appellant Benedicto, joined by his co-
petitioner Rivera, lost no time in attending to the pending
criminal charges by posting bail in the above-mentioned cases.
2. Not having been afforded a real opportunity of attending the
preliminary investigation because of their forced absence from
the Philippines then, petitioners-appellants invoked their right
to due process thru motions for preliminary investigationUpon
denial of their demands for preliminary investigation, the
petitioners intended to elevate the matter to the Honorable
Court of Appeals and actually caused the filing of a petition for
certiorari/prohibition sometime before their arraignment but
immediately caused the withdrawal thereofin view of the
prosecutions willingness to go to pre-trial wherein petitioners
would be allowed access to the records of preliminary
investigation which they could use for purposes of filing a
motion to quash if warranted.
3. Thus, instead of remanding the Informations to the
Department of Justicerespondent Judge set the case for pre-
trial in order to afford all the accused access to the records of
the prosecution
xxx
5. On the basis of disclosures at the pre-trial, the petitioners-
appellants Benedicto and Rivera moved for the quashing of the
informations/cases
The foregoing admissions lead us to conclude that petitioners
have expressly waived their right to question any supposed
irregularity in the preliminary investigation or to ask for a new
preliminary investigation. Petitioners, in the above excerpts
from this petition, admit posting bail immediately following their
return to the country, entered their respective pleas to the
charges, and filed various motions and pleadings. By so doing,
without simultaneously demanding a proper preliminary
investigation, they have waived any and all irregularities in the
conduct of a preliminary investigation. The trial court did not err
in denying the motion to quash the informations on the ground
of want of or improperly conducted preliminary investigation.
The absence of a preliminary investigation is not a ground to
quash the information.
On the second issue, petitioners contend that they are being
prosecuted for acts punishable under laws that have already
been repealed. They point to the express repeal of Central
Bank Circular No. 960 by Circular Nos. 1318 and 1353 as well
as the express repeal of Republic Act No. 265 by Republic Act
No. 7653. Petitioners, relying on Article 22 of the Revised
Penal Code, contend that repeal has the effect of extinguishing
the right to prosecute or punish the offense committed under
the old laws.
As a rule, an absolute repeal of a penal law has the effect of
depriving a court of its authority to punish a person charged
with violation of the old law prior to its repeal. This is because
an unqualified repeal of a penal law constitutes a legislative act
of rendering legal what had been previously declared as illegal,
such that the offense no longer exists and it is as if the person
who committed it never did so. There are, however, exceptions
to the rule. One is the inclusion of a saving clause in the
repealing statute that provides that the repeal shall have no
effect on pending actions. Another exception is where the
repealing act reenacts the former statute and punishes the act
previously penalized under the old law. In such instance, the
act committed before the reenactment continues to be an
offense in the statute books and pending cases are not
affected, regardless of whether the new penalty to be imposed
is more favorable to the accused.
In the instant case, it must be noted that despite the repeal of
Circular No. 960, Circular No. 1353 retained the same
reportorial requirement for residents receiving earnings or
profits from non-trade foreign exchange transactions. Second,
even the most cursory glance at the repealing circulars,
Circular Nos. 1318 and 1353 shows that both contain a saving
clause, expressly providing that the repeal of Circular No. 960
shall have no effect on pending actions for violation of the latter
Circular. A saving clause operates to except from the effect of
the repealing law what would otherwise be lost under the new
law. In the present case, the respective saving clauses of
Circular Nos. 1318 and 1353 clearly manifest the intent to
reserve the right of the State to prosecute and punish offenses
for violations of the repealed Circular No. 960, where the cases
are either pending or under investigation.
Petitioners, however, insist that the repeal of Republic Act No.
265, particularly Section 34, by Republic Act No. 7653,
removed the applicability of any penal sanction for violations of
any non-trade foreign exchange transactions previously
penalized by Circular No. 960. Petitioners posit that a
comparison of the two provisions shows that Section 36 of
Republic Act No. 7653 neither retained nor reinstated Section
34 of Republic Act No. 265. Since, in creating the Bangko
Sentral ng Pilipinas, Congress did not include in its charter a
clause providing for the application of Section 34 of Republic
Act No. 265 to pending cases, petitioners pending dollar-salting
cases are now bereft of statutory penalty, the saving clause in
Circular No. 1353 notwithstanding. In other words, absent a
provision in Republic Act No. 7653 expressly reviving the
applicability of any penal sanction for the repealed mandatory
foreign exchange reporting regulations formerly required under
Circular No. 960, violations of aforesaid repealed Circular can
no longer be prosecuted criminally.
A comparison of the old Central Bank Act and the new Bangko
Sentrals charter repealing the former show that in consonance
with the general objective of the old law and the new law to
maintain internal and external monetary stability in the
Philippines and preserve the international value of the peso,
both the repealed law and the repealing statute contain a penal
clause which sought to penalize in general, violations of the
law as well as orders, instructions, rules, or regulations issued
by the Monetary Board. In the case of the Bangko Sentral, the
scope of the penal clause was expanded to include violations
of other pertinent banking laws enforced or implemented by the
Bangko Sentral. In the instant case, the acts of petitioners
sought to be penalized are violations of rules and regulations
issued by the Monetary Board. These acts are proscribed and
penalized in the penal clause of the repealed law and this
proviso for proscription and penalty was reenacted in the
repealing law. We find, therefore, that while Section 34 of
Republic Act No. 265 was repealed, it was nonetheless,
simultaneously reenacted in Section 36 of Republic Act No.
7653. Where a clause or provision or a statute for that matter is
simultaneously repealed and reenacted, there is no effect,
upon the rights and liabilities which have accrued under the
original statute, since the reenactment, in effect neutralizes the
repeal and continues the law in force without interruption. The
rule applies to penal laws and statutes with penal provisions.
Thus, the repeal of a penal law or provision, under which a
person is charged with violation thereof and its simultaneous
reenactment penalizing the same act done by him under the
old law, will neither preclude the accuseds prosecution nor
deprive the court of its jurisdiction to hear and try his case. As
pointed out earlier, the act penalized before the reenactment
continues to remain an offense and pending cases are
unaffected. Therefore, the repeal of Republic Act No. 265 by
Republic Act No. 7653 did not extinguish the criminal liability of
petitioners for transgressions of Circular No. 960 and cannot,
under the circumstances of this case, be made a basis for
quashing the indictments against petitioners.
Petitioners, however, point out that Section 36 of Republic Act
No. 7653, in reenacting Section 34 of the old Central Act,
increased the penalty for violations of rules and regulations
issued by the Monetary Board. They claim that such increase
in the penalty would give Republic Act No. 7653 an ex post
facto application, violating the Bill of Rights.
Is Section 36 of Republic Act No. 7653 an ex post facto
legislation?
An ex post facto law is one which: (1) makes criminal an act
done before the passage of the law and which was innocent
when done, and punishes such an act; (2) aggravates a crime,
or makes it greater than it was when committed; (3) changes
the punishment and inflicts a greater punishment than the law
annexed to the crime when committed; (4) alters the legal rules
of evidence, and authorizes conviction upon less or different
testimony than the law required at the time of the commission
of the offense; (5) assuming to regulate civil rights, and
remedies only, in effect imposes penalty or deprivation of a
right for something which when done was lawful; and (6)
deprives a person accused of a crime of some lawful protection
to which he has become entitled such as the protection of a
former conviction or acquittal, or a proclamation of amnesty.
The test whether a penal law runs afoul of the ex post facto
clause of the Constitution is: Does the law sought to be applied
retroactively take from an accused any right that was regarded
at the time of the adoption of the constitution as vital for the
protection of life and liberty and which he enjoyed at the time of
the commission of the offense charged against him?
The crucial words in the test are vital for the protection of life
and liberty. We find, however, the test inapplicable to the penal
clause of Republic Act No. 7653. Penal laws and laws which,
while not penal in nature, nonetheless have provisions defining
offenses and prescribing penalties for their violation operate
prospectively. Penal laws cannot be given retroactive effect,
except when they are favorable to the accused. Nowhere in
Republic Act No. 7653, and in particular Section 36, is there
any indication that the increased penalties provided therein
were intended to operate retroactively. There is, therefore, no
ex post facto law in this case.
On the third issue, petitioners ask us to note that the dollar
interest earnings subject of the criminal cases instituted against
them were remitted to foreign banks on various dates between
1983 to 1987. They maintain that given the considerable lapse
of time from the dates of the commission of the offenses to the
institution of the criminal actions in 1991 and 1992, the States
right to prosecute them for said offenses has already
prescribed. Petitioners assert that the Court of Appeals erred in
computing the prescriptive period from February 1986.
Petitioners theorize that since the remittances were made
through the Central Bank as a regulatory authority, the dates of
the alleged violations are known, and prescription should thus
be counted from these dates.
In ruling that the dollar-salting cases against petitioners have
not yet prescribed, the court a quo quoted with approval the
trial courts finding that:
[T]he alleged violations of law were discovered only after the
EDSA Revolution in 1986 when the dictatorship was toppled
down. The date of the discovery of the offense, therefore,
should be the basis in computing the prescriptive period. Since
(the) offenses charged are punishable by imprisonment of not
more than five (5) years, they prescribe in eight (8) years.
Thus, only a little more than four (4) years had elapsed from
the date of discovery in 1986 when the cases were filed in
1991.
The offenses for which petitioners are charged are penalized
by Section 34 of Republic Act No. 265 by a fine of not more
than Twenty Thousand Pesos (P20,000.00) and by
imprisonment of not more than five years. Pursuant to Act No.
3326, which mandates the periods of prescription for violations
of special laws, the prescriptive period for violations of Circular
No. 960 is eight (8) years. The period shall commence to run
from the day of the commission of the violation of the law, and
if the same be not known at the time, from the discovery
thereof and institution of judicial proceedings for its
investigation and punishment. In the instant case, the
indictments against petitioners charged them with having
conspired with the late President Ferdinand E. Marcos in
transgressing Circular No. 960. Petitioners contention that the
dates of the commission of the alleged violations were known
and prescription should be counted from these dates must be
viewed in the context of the political realities then prevailing.
Petitioners, as close associates of Mrs. Marcos, were not only
protected from investigation by their influence and connections,
but also by the power and authority of a Chief Executive
exercising strong-arm rule. This Court has taken judicial notice
of the fact that Mr. Marcos, his family, relations, and close
associates resorted to all sorts of clever schemes and
manipulations to disguise and hide their illicit acquisitions. In
the instant case, prescription cannot, therefore, be made to run
from the dates of the commission of the offenses charged, for
the obvious reason that the commission of those offenses were
not known as of those dates. It was only after the EDSA
Revolution of February, 1986, that the recovery of ill-gotten
wealth became a highly prioritized state policy, pursuant to the
explicit command of the Provisional Constitution. To ascertain
the relevant facts to recover ill-gotten properties amassed by
the leaders and supporters of the (Marcos) regime various
government agencies were tasked by the Aquino
administration to investigate, and as the evidence on hand may
reveal, file and prosecute the proper cases. Applying the
presumption that official duty has been regularly performed, we
are more inclined to believe that the violations for which
petitioners are charged were discovered only during the post-
February 1986 investigations and the tolling of the prescriptive
period should be counted from the dates of discovery of their
commission. The criminal actions against petitioners, which
gave rise to the instant case, were filed in 1991 and 1992, or
well within the eight-year prescriptive period counted from
February 1986.
The fourth issue involves petitioners claim that they incurred no
criminal liability for violations of Circular No. 960 since they
were exempted from its coverage.
Petitioners postulate that since the purchases of treasury notes
were done through the Central Banks Securities Servicing
Department and payments of the interest were coursed
through its Securities Servicing Department/Foreign Exchange
Department, their filing of reports would be surplusage, since
the requisite information were already with the Central Bank.
Furthermore, they contend that the foreign currency investment
accounts in the Swiss banks were subject to absolute
confidentiality as provided for by Republic Act No. 6426, as
amended by Presidential Decree Nos. 1035, 1246, and 1453,
and fell outside the ambit of the reporting requirements
imposed by Circular No. 960. Petitioners further rely on the
exemption from reporting provided for in Section 10(q),
Circular No. 960, and the confidentiality granted to Swiss bank
accounts by the laws of Switzerland.
Petitioners correctly point out that Section 10(q) of Circular No.
960 exempts from the reporting requirement foreign currency
eligible for deposit under the Philippine Foreign Exchange
Currency Deposit System, pursuant to Republic Act No. 6426,
as amended. But, in order to avail of the aforesaid exemption,
petitioners must show that they fall within its scope. Petitioners
must satisfy the requirements for eligibility imposed by Section
2, Republic Act No. 6426. Not only do we find the record bare
of any proof to support petitioners claim of falling within the
coverage of Republic Act No. 6426, we likewise find from a
reading of Section 2 of the Foreign Currency Deposit Act that
said law is inapplicable to the foreign currency accounts in
question. Section 2, Republic Act No. 6426 speaks of deposit
with such Philippine banks in good standing, as maybe
designated by the Central Bank for the purpose. The criminal
cases filed against petitioners for violation of Circular No. 960
involve foreign currency accounts maintained in foreign banks,
not Philippine banks. By invoking the confidentiality guarantees
provided for by Swiss banking laws, petitioners admit such
reports made. The rule is that exceptions are strictly construed
and apply only so far as their language fairly warrants, with all
doubts being resolved in favor of the general proviso rather
than the exception. Hence, petitioners may not claim
exemption under Section 10(q).
With respect to the banking laws of Switzerland cited by
petitioners, the rule is that Philippine courts cannot take judicial
notice of foreign laws. Laws of foreign jurisdictions must be
alleged and proved. Petitioners failed to prove the Swiss law
relied upon, either by: (1) an official publication thereof; or (2) a
copy attested by the officer having the legal custody of the
record, or by his deputy, and accompanied by a certification
from the secretary of the Philippine embassy or legation in
such country or by the Philippine consul general, consul, vice-
consul, or consular agent stationed in such country, or by any
other authorized officer in the Philippine foreign service
assigned to said country that such officer has custody. Absent
such evidence, this Court cannot take judicial cognizance of
the foreign law invoked by Benedicto and Rivera.
Anent the fifth issue, petitioners insist that the government
granted them absolute immunity under the Compromise
Agreement they entered into with the government on
November 3, 1990. Petitioners cite our decision in Republic v.
Sandiganbayan, 226 SCRA 314 (1993), upholding the validity
of the said Agreement and directing the various government
agencies to be consistent with it. Benedicto and Rivera now
insist that the absolute immunity from criminal investigation or
prosecution granted to petitioner Benedicto, his family, as well
as to officers and employees of firms owned or controlled by
Benedicto under the aforesaid Agreement covers the suits filed
for violations of Circular No. 960, which gave rise to the
present case.
The pertinent provisions of the Compromise Agreement read:
WHEREAS, this Compromise Agreement covers the remaining
claims and the cases of the Philippine Government against
Roberto S. Benedicto including his associates and nominees,
namely, Julita C. Benedicto, Hector T. Rivera, x x x
WHEREAS, specifically these claims are the subject matter of
the following cases (stress supplied):
1. Sandiganbayan Civil Case No. 9
2. Sandiganbayan Civil Case No. 24
3. Sandiganbayan Civil Case No. 34
4. Tanodbayan (Phil-Asia)
5. PCGG I.S. No. 1
xxx
WHEREAS, following the termination of the United States and
Swiss cases, and also without admitting the merits of their
respective claims and counterclaims presently involved in
uncertain, protracted and expensive litigation, the Republic of
the Philippines, solely motivated by the desire for the
immediate accomplishment of its recovery mission and Mr.
Benedicto being interested to lead a peaceful and normal
pursuit of his endeavors, the parties have decided to withdraw
and/or dismiss their mutual claims and counterclaims under the
cases pending in the Philippines, earlier referred to
(underscoring supplied);
xxx
II. Lifting of Sequestrations, Extension of Absolute Immunity
and Recognition of the Freedom to Travel
a) The Government hereby lifts the sequestrations over the
assets listed in Annex C hereof, the same being within the
capacity of Mr. Benedicto to acquire from the exercise of his
profession and conduct of business, as well as all the
haciendas listed in his name in Negros Occidental, all of which
were inherited by him or acquired with income from his
inheritanceand all the other sequestered assets that belong to
Benedicto and his corporation/nominees which are not listed in
Annex A as ceded or to be ceded to the Government.
Provided, however, (that) any asset(s) not otherwise settled or
covered by this Compromise Agreement, hereinafter found and
clearly established with finality by proper competent court as
being held by Mr. Roberto S. Benedicto in trust for the family of
the late Ferdinand E. Marcos, shall be returned or surrendered
to the Government for appropriate custody and disposition.
b) The Government hereby extends absolute immunity, as
authorized under the pertinent provisions of Executive Orders
Nos. 1, 2, 14 and 14-A, to Benedicto, the members of his
family, officers and employees of his corporations above
mentioned, who are included in past, present and future cases
and investigations of the Philippine Government, such that
there shall be no criminal investigation or prosecution against
said persons for acts (or) omissions committed prior to
February 25, 1986, that may be alleged to have violated any
laws, including but not limited to Republic Act No. 3019, in
relation to the acquisition of any asset treated, mentioned or
included in this Agreement.
xxx
In construing contracts, it is important to ascertain the intent of
the parties by looking at the words employed to project their
intention. In the instant case, the parties clearly listed and
limited the applicability of the Compromise Agreement to the
cases listed or identified therein. We have ruled in another
case involving the same Compromise Agreement that:
[T]he subject matters of the disputed compromise agreement
are Sandiganbayan Civil Case No. 0009, Civil Case No. 00234,
Civil Case No. 0034, the Phil-Asia case before the Tanodbayan
and PCGG I.S. No. 1. The cases arose from complaints for
reconveyance, reversion, accounting, restitution, and damages
against former President Ferdinand E. Marcos, members of his
family, and alleged cronies, one of whom was respondent
Roberto S. Benedicto.
Nowhere is there a mention of the criminal cases filed against
petitioners for violations of Circular No. 960. Conformably with
Article 1370 of the Civil Code, the Agreement relied upon by
petitioners should include only cases specifically mentioned
therein. Applying the parol evidence rule, where the parties
have reduced their agreement into writing, the contents of the
writing constitute the sole repository of the terms of the
agreement between the parties. Whatever is not found in the
text of the Agreement should thus be construed as waived and
abandoned. Scrutiny of the Compromise Agreement will reveal
that it does not include all cases filed by the government
against Benedicto, his family, and associates.
Additionally, the immunity covers only criminal investigation or
prosecution against said persons for acts (or) omissions
committed prior to February 25, 1986 that may be alleged to
have violated any penal laws, including but not limited to
Republic Act No. 3019, in relation to the acquisition of any
asset treated, mentioned, or included in this Agreement. It is
only when the criminal investigation or case involves the
acquisition of any ill-gotten wealth treated, mentioned, or
included in this Agreement that petitioners may invoke
immunity. The record is bereft of any showing that the interest
earnings from foreign exchange deposits in banks abroad,
which is the subject matter of the present case, are treated,
mentioned, or included in the Compromise Agreement. The
phraseology of the grant of absolute immunity in the
Agreement precludes us from applying the same to the criminal
charges faced by petitioners for violations of Circular No. 960.
A contract cannot be construed to include matters distinct from
those with respect to which the parties intended to contract.
In sum, we find that no reversible error of law may be attributed
to the Court of Appeals in upholding the orders of the trial court
denying petitioners Motion to Quash the Informations in
Criminal Case Nos. 91-101879 to 91-101883, 91-101884 to 91-
101892, and 92-101959 to 92-101969. In our view, none of the
grounds provided for in the Rules of Court upon which
petitioners rely, finds application in this case.
One final matter. During the pendency of this petition, counsel
for petitioner Roberto S. Benedicto gave formal notice to the
Court that said petitioner died on May 15, 2000. The death of
an accused prior to final judgment terminates his criminal
liability as well as the civil liability based solely thereon.
WHEREFORE, the instant petition is DISMISSED. The
assailed consolidated Decision of the Court of Appeals dated
May 23, 1996, in CA-G.R. SP No. 35928 and CA-G.R. SP No.
35719, is AFFIRMED WITH MODIFICATION that the charges
against deceased petitioner, Roberto S. Benedicto, particularly
in Criminal Cases Nos. 91-101879 to 91-101883, 91-101884 to
101892, and 92-101959 to 92-101969, pending before the
Regional Trial Court of Manila, Branch 26, are ordered dropped
and that any criminal as well as civil liability ex delicto that
might be attributable to him in the aforesaid cases are declared
extinguished by reason of his death on May 15, 2000. No
pronouncement as to costs. SO ORDERED.
MANUFACTURERS HANOVER TRUST CO. and/or
CHEMICAL BANK, petitioners, vs. RAFAEL MA. GUERRERO,
respondent.; [G.R. No. 136804. February 19, 2003]; CARPIO,
J.:
The Case
This is a petition for review under Rule 45 of the Rules of Court
to set aside the Court of Appeals Decision of August 24, 1998
and Resolution of December 14, 1998 in CA-G.R. SP No.
42310 affirming the trial courts denial of petitioners motion for
partial summary judgment.
The Antecedents
On May 17, 1994, respondent Rafael Ma. Guerrero (Guerrero
for brevity) filed a complaint for damages against petitioner
Manufacturers Hanover Trust Co. and/or Chemical Bank (the
Bank for brevity) with the Regional Trial Court of Manila (RTC
for brevity). Guerrero sought payment of damages allegedly for
(1) illegally withheld taxes charged against interests on his
checking account with the Bank; (2) a returned check worth
US$18,000.00 due to signature verification problems; and (3)
unauthorized conversion of his account. Guerrero amended his
complaint on April 18, 1995.
On September 1, 1995, the Bank filed its Answer alleging, inter
alia, that by stipulation Guerreros account is governed by New
York law and this law does not permit any of Guerreros claims
except actual damages. Subsequently, the Bank filed a Motion
for Partial Summary Judgment seeking the dismissal of
Guerreros claims for consequential, nominal, temperate, moral
and exemplary damages as well as attorneys fees on the same
ground alleged in its Answer. The Bank contended that the trial
should be limited to the issue of actual damages. Guerrero
opposed the motion.
The affidavit of Alyssa Walden, a New York attorney,
supported the Banks Motion for Partial Summary Judgment.
Alyssa Waldens affidavit (Walden affidavit for brevity) stated
that Guerreros New York bank account stipulated that the
governing law is New York law and that this law bars all of
Guerreros claims except actual damages. The Philippine
Consular Office in New York authenticated the Walden
affidavit.
The RTC denied the Banks Motion for Partial Summary
Judgment and its motion for reconsideration on March 6, 1996
and July 17, 1996, respectively. The Bank filed a petition for
certiorari and prohibition with the Court of Appeals assailing the
RTC Orders. In its Decision dated August 24, 1998, the Court
of Appeals dismissed the petition. On December 14, 1998, the
Court of Appeals denied the Banks motion for reconsideration.
Hence, the instant petition.
The Ruling of the Court of Appeals
The Court of Appeals sustained the RTC orders denying the
motion for partial summary judgment. The Court of Appeals
ruled that the Walden affidavit does not serve as proof of the
New York law and jurisprudence relied on by the Bank to
support its motion. The Court of Appeals considered the New
York law and jurisprudence as public documents defined in
Section 19, Rule 132 of the Rules on Evidence, as follows:
SEC. 19. Classes of Documents. For the purpose of their
presentation in evidence, documents are either public or
private.
Public documents are:
(a) The written official acts, or records of the official
acts of the sovereign authority, official bodies
and tribunals, and public officers, whether of
the Philippines, or of a foreign country;
x x x.
The Court of Appeals opined that the following procedure
outlined in Section 24, Rule 132 should be followed in proving
foreign law:
SEC. 24. Proof of official record. The record of public
documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official
publication thereof or by a copy attested by the officer having
the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate
may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by
any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and
authenticated by the seal of his office.
The Court of Appeals likewise rejected the Banks argument
that Section 2, Rule 34 of the old Rules of Court allows the
Bank to move with the supporting Walden affidavit for partial
summary judgment in its favor. The Court of Appeals clarified
that the Walden affidavit is not the supporting affidavit referred
to in Section 2, Rule 34 that would prove the lack of genuine
issue between the parties. The Court of Appeals concluded
that even if the Walden affidavit is used for purposes of
summary judgment, the Bank must still comply with the
procedure prescribed by the Rules to prove the foreign law.
The Issues
The Bank contends that the Court of Appeals committed
reversible error in -
x x x HOLDING THAT [THE BANKS] PROOF OF FACTS TO
SUPPORT ITS MOTION FOR SUMMARY JUDGMENT MAY
NOT BE GIVEN BY AFFIDAVIT;
x x x HOLDING THAT [THE BANKS] AFFIDAVIT, WHICH
PROVES FOREIGN LAW AS A FACT, IS HEARSAY AND
THEREBY CANNOT SERVE AS PROOF OF THE NEW YORK
LAW RELIED UPON BY PETITIONERS IN THEIR MOTION
FOR SUMMARY JUDGMENT x x x.
First, the Bank argues that in moving for partial summary
judgment, it was entitled to use the Walden affidavit to prove
that the stipulated foreign law bars the claims for
consequential, moral, temperate, nominal and exemplary
damages and attorneys fees. Consequently, outright dismissal
by summary judgment of these claims is warranted.
Second, the Bank claims that the Court of Appeals mixed up
the requirements of Rule 35 on summary judgments and those
of a trial on the merits in considering the Walden affidavit as
hearsay. The Bank points out that the Walden affidavit is not
hearsay since Rule 35 expressly permits the use of affidavits.
Lastly, the Bank argues that since Guerrero did not submit any
opposing affidavit to refute the facts contained in the Walden
affidavit, he failed to show the need for a trial on his claims for
damages other than actual.
The Courts Ruling
The petition is devoid of merit.
The Bank filed its motion for partial summary judgment
pursuant to Section 2, Rule 34 of the old Rules of Court which
reads:
Section 2. Summary judgment for defending party. A party
against whom a claim, counterclaim, or cross-claim is asserted
or a declaratory relief is sought may, at any time, move with
supporting affidavits for a summary judgment in his favor as to
all or any part thereof.
A court may grant a summary judgment to settle expeditiously
a case if, on motion of either party, there appears from the
pleadings, depositions, admissions, and affidavits that no
important issues of fact are involved, except the amount of
damages. In such event, the moving party is entitled to a
judgment as a matter of law.
In a motion for summary judgment, the crucial question is: are
the issues raised in the pleadings genuine, sham or fictitious,
as shown by affidavits, depositions or admissions
accompanying the motion?
A genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which
is fictitious or contrived so as not to constitute a genuine issue
for trial.
A perusal of the parties respective pleadings would show that
there are genuine issues of fact that necessitate formal trial.
Guerreros complaint before the RTC contains a statement of
the ultimate facts on which he relies for his claim for damages.
He is seeking damages for what he asserts as illegally withheld
taxes charged against interests on his checking account with
the Bank, a returned check worth US$18,000.00 due to
signature verification problems, and unauthorized conversion
of his account. In its Answer, the Bank set up its defense that
the agreed foreign law to govern their contractual relation bars
the recovery of damages other than actual. Apparently, facts
are asserted in Guerreros complaint while specific denials and
affirmative defenses are set out in the Banks answer.
True, the court can determine whether there are genuine
issues in a case based merely on the affidavits or counter-
affidavits submitted by the parties to the court. However, as
correctly ruled by the Court of Appeals, the Banks motion for
partial summary judgment as supported by the Walden affidavit
does not demonstrate that Guerreros claims are sham,
fictitious or contrived. On the contrary, the Walden affidavit
shows that the facts and material allegations as pleaded by the
parties are disputed and there are substantial triable issues
necessitating a formal trial.
There can be no summary judgment where questions of fact
are in issue or where material allegations of the pleadings are
in dispute. The resolution of whether a foreign law allows only
the recovery of actual damages is a question of fact as far as
the trial court is concerned since foreign laws do not prove
themselves in our courts. Foreign laws are not a matter of
judicial notice. Like any other fact, they must be alleged and
proven. Certainly, the conflicting allegations as to whether New
York law or Philippine law applies to Guerreros claims present
a clear dispute on material allegations which can be resolved
only by a trial on the merits.
Under Section 24 of Rule 132, the record of public documents
of a sovereign authority or tribunal may be proved by (1) an
official publication thereof or (2) a copy attested by the
officer having the legal custody thereof. Such official
publication or copy must be accompanied, if the record is not
kept in the Philippines, with a certificate that the attesting
officer has the legal custody thereof. The certificate may be
issued by any of the authorized Philippine embassy or consular
officials stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office. The attestation
must state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be, and
must be under the official seal of the attesting officer.
Certain exceptions to this rule were recognized in Asiavest
Limited v. Court of Appeals which held that:
x x x:
Although it is desirable that foreign law be proved in
accordance with the above rule, however, the Supreme Court
held in the case of Willamette Iron and Steel Works v. Muzzal,
that Section 41, Rule 123 (Section 25, Rule 132 of the Revised
Rules of Court) does not exclude the presentation of other
competent evidence to prove the existence of a foreign law. In
that case, the Supreme Court considered the testimony under
oath of an attorney-at-law of San Francisco, California, who
quoted verbatim a section of California Civil Code and who
stated that the same was in force at the time the obligations
were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et
al., upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case,
the counsel for respondent testified that as an active member
of the California Bar since 1951, he is familiar with the revenue
and taxation laws of the State of California. When asked by the
lower court to state the pertinent California law as regards
exemption of intangible personal properties, the witness cited
Article 4, Sec. 13851 (a) & (b) of the California Internal and
Revenue Code as published in Derrings California Code, a
publication of Bancroft-Whitney Co., Inc. And as part of his
testimony, a full quotation of the cited section was offered in
evidence by respondents. Likewise, in several naturalization
cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule of
practice, may be allowed and used as basis for favorable
action, if, in the light of all the circumstances, the Court is
satisfied of the authenticity of the written proof offered. Thus, in
a number of decisions, mere authentication of the Chinese
Naturalization Law by the Chinese Consulate General of
Manila was held to be competent proof of that law. (Emphasis
supplied)
The Bank, however, cannot rely on Willamette Iron and Steel
Works v. Muzzal or Collector of Internal Revenue v. Fisher
to support its cause. These cases involved attorneys testifying
in open court during the trial in the Philippines and quoting the
particular foreign laws sought to be established. On the other
hand, the Walden affidavit was taken abroad ex parte and the
affiant never testified in open court. The Walden affidavit
cannot be considered as proof of New York law on damages
not only because it is self-serving but also because it does not
state the specific New York law on damages. We reproduce
portions of the Walden affidavit as follows:
3. In New York, [n]ominal damages are damages in
name only, trivial sums such as six cents or $1. Such damages
are awarded both in tort and contract cases when the plaintiff
establishes a cause of action against the defendant, but is
unable to prove actual damages. Dobbs, Law of Remedies,
3.32 at 294 (1993). Since Guerrero is claiming for actual
damages, he cannot ask for nominal damages.
4. There is no concept of temperate damages in New York law.
I have reviewed Dobbs, a well-respected treatise, which does
not use the phrase temperate damages in its index. I have also
done a computerized search for the phrase in all published
New York cases, and have found no cases that use it. I have
never heard the phrase used in American law.
5. The Uniform Commercial Code (UCC) governs many
aspects of a Banks relationship with its depositors. In this case,
it governs Guerreros claim arising out of the non-payment of
the $18,000 check. Guerrero claims that this was a wrongful
dishonor. However, the UCC states that justifiable refusal to
pay or accept as opposed to dishonor, occurs when a bank
refuses to pay a check for reasons such as a missing
indorsement, a missing or illegible signature or a forgery, 3-
510, Official Comment 2. .. to the Complaint, MHT returned the
check because it had no signature card on . and could not
verify Guerreros signature. In my opinion, consistent with the
UCC, that is a legitimate and justifiable reason not to pay.
6. Consequential damages are not available in the ordinary
case of a justifiable refusal to pay. UCC 1-106 provides that
neither consequential or special or punitive damages may be
had except as specifically provided in the Act or by other rule of
law. UCC 4-103 further provides that consequential damages
can be recovered only where there is bad faith. This is more
restrictive than the New York common law, which may allow
consequential damages in a breach of contract case (as does
the UCC where there is a wrongful dishonor).
7. Under New York law, requests for lost profits, damage to
reputation and mental distress are considered consequential
damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312,
319, 540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif
Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718,
374 N.Y.S..2d 868, 869-70 (4th Dept 1975) damage to
reputation); Dobbs, Law of Remedies 12.4(1) at 63 (emotional
distress).
8. As a matter of New York law, a claim for emotional distress
cannot be recovered for a breach of contract. Geler v. National
Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y.
1991); Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540
N.Y.S.2d 387, 390 (3d Dept 1989) Martin v. Donald Park
Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dept 1976).
Damage to reputation is also not recoverable for a contract.
Motif Construction Corp. v. Buffalo Savings Bank, 374
N.Y.S.2d at 869-70.
9. In cases where the issue is the breach of a contract to
purchase stock, New York courts will not take into
consideration the performance of the stock after the breach.
Rather, damages will be based on the value of the stock at the
time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456
N.Y.S.2d 558, 559 (4th Dept 1982), app. den. 59 N.Y.2d 601,
449 N.E.2d 1276, 463 N.Y.S.2d 1023 (1983).
10. Under New York law, a party can only get consequential
damages if they were the type that would naturally arise from
the breach and if they were brought within the contemplation of
parties as the probable result of the breach at the time of or
prior to contracting. Kenford Co., Inc. v. Country of Erie, 73
N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman
v. Fargo, 223 N.Y. 32, 36 (1918).
11. Under New York law, a plaintiff is not entitled to attorneys
fees unless they are provided by contract or statute. E.g., Geler
v. National Westminster Bank, 770 F. Supp. 210, 213
(S.D.N.Y. 1991); Camatron Sewing Mach, Inc. v. F.M. Ring
Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d 396 (1 st Dept
1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577
N.Y.S.2d 280, 281 (1st Dept 1991). There is no statute that
permits attorneys fees in a case of this type.
12. Exemplary, or punitive damages are not allowed for a
breach of contract, even where the plaintiff claims the
defendant acted with malice. Geler v. National Westminster
Bank, 770 F.Supp. 210, 215 (S.D.N.Y. 1991); Catalogue
Service of chester_v. Insurance Co. of North America, 74
A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dept 1980);
Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833,
488 N.Y.S.2d 241, 242 (2d Dept 1985).
13. Exemplary or punitive damages may be recovered only
where it is alleged and proven that the wrong supposedly
committed by defendant amounts to a fraud aimed at the public
generally and involves a high moral culpability. Walker v.
Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223 N.Y.S.2d 488
(1961).
14. Furthermore, it has been consistently held under New York
law that exemplary damages are not available for a mere
breach of contract for in such a case, as a matter of law, only a
private wrong and not a public right is involved. Thaler v. The
North Insurance Company, 63 A.D.2d 921, 406 N.Y.S.2d 66
(1st Dept 1978).
The Walden affidavit states conclusions from the affiants
personal interpretation and opinion of the facts of the case vis
a vis the alleged laws and jurisprudence without citing any law
in particular. The citations in the Walden affidavit of various
U.S. court decisions do not constitute proof of the official
records or decisions of the U.S. courts. While the Bank
attached copies of some of the U.S. court decisions cited in the
Walden affidavit, these copies do not comply with Section 24 of
Rule 132 on proof of official records or decisions of foreign
courts.
The Banks intention in presenting the Walden affidavit is to
prove New York law and jurisprudence. However, because of
the failure to comply with Section 24 of Rule 132 on how to
prove a foreign law and decisions of foreign courts, the Walden
affidavit did not prove the current state of New York law and
jurisprudence. Thus, the Bank has only alleged, but has not
proved, what New York law and jurisprudence are on the
matters at issue.
Next, the Bank makes much of Guerreros failure to submit an
opposing affidavit to the Walden affidavit. However, the
pertinent provision of Section 3, Rule 35 of the old Rules of
Court did not make the submission of an opposing affidavit
mandatory, thus:
SEC. 3. Motion and proceedings thereon. The motion shall be
served at least ten (10) days before the time specified for the
hearing. The adverse party prior to the day of hearing may
serve opposing affidavits. After the hearing, the judgment
sought shall be rendered forthwith if the pleadings, depositions
and admissions on file, together with the affidavits, show that,
except as to the amount of damages, there is no genuine issue
as to any material fact and that the moving party is entitled to a
judgment as a matter of law. (Emphasis supplied)
It is axiomatic that the term may as used in remedial law, is
only permissive and not mandatory.
Guerrero cannot be said to have admitted the averments in the
Banks motion for partial summary judgment and the Walden
affidavit just because he failed to file an opposing affidavit.
Guerrero opposed the motion for partial summary judgment,
although he did not present an opposing affidavit. Guerrero
may not have presented an opposing affidavit, as there was no
need for one, because the Walden affidavit did not establish
what the Bank intended to prove. Certainly, Guerrero did not
admit, expressly or impliedly, the veracity of the statements in
the Walden affidavit. The Bank still had the burden of proving
New York law and jurisprudence even if Guerrero did not
present an opposing affidavit. As the party moving for summary
judgment, the Bank has the burden of clearly demonstrating
the absence of any genuine issue of fact and that any doubt as
to the existence of such issue is resolved against the movant.
Moreover, it would have been redundant and pointless for
Guerrero to submit an opposing affidavit considering that what
the Bank seeks to be opposed is the very subject matter of the
complaint. Guerrero need not file an opposing affidavit to the
Walden affidavit because his complaint itself controverts the
matters set forth in the Banks motion and the Walden affidavit.
A party should not be made to deny matters already averred in
his complaint.
There being substantial triable issues between the parties, the
courts a quo correctly denied the Banks motion for partial
summary judgment. There is a need to determine by
presentation of evidence in a regular trial if the Bank is guilty of
any wrongdoing and if it is liable for damages under the
applicable laws.
This case has been delayed long enough by the Banks resort
to a motion for partial summary judgment. Ironically, the Bank
has successfully defeated the very purpose for which summary
judgments were devised in our rules, which is, to aid parties in
avoiding the expense and loss of time involved in a trial.
WHEREFORE, the petition is DENIED for lack of merit. The
Decision dated August 24, 1998 and the Resolution dated
December 14, 1998 of the Court of Appeals in CA-G.R. SP No.
42310 is AFFIRMED. SO ORDERED.
ATCI vs Echin (2010)- See previous case
 that he was no longer an employee of the
defendant.
NORTHWEST ORIENT AIRLINES, INC. vs. COURT OF
APPEALS and C.F. SHARP & COMPANY INC.,; G.R. No. After the two attempts of service were
112573 February 9, 1995; PADILLA, JR., J.: unsuccessful, the judge of the Tokyo District
Court decided to have the complaint and the
writs of summons served at the head office
This petition for review on certiorari seeks to set aside the
of the defendant in Manila. On July 11, 1980,
decision of the Court of Appeals affirming the dismissal of the
the Director of the Tokyo District Court
petitioner's complaint to enforce the judgment of a Japanese
requested the Supreme Court of Japan to
court. The principal issue here is whether a Japanese court
serve the summons through diplomatic
can acquire jurisdiction over a Philippine corporation doing
channels upon the defendant's head office in
business in Japan by serving summons through diplomatic
Manila.
channels on the Philippine corporation at its principal office in
Manila after prior attempts to serve summons in Japan had
failed. On August 28, 1980, defendant received
from Deputy Sheriff Rolando Balingit the writ
of summons (p. 276, Records). Despite
Petitioner Northwest Orient Airlines, Inc. (hereinafter
receipt of the same, defendant failed to
NORTHWEST), a corporation organized under the laws of the
appear at the scheduled hearing. Thus, the
State of Minnesota, U.S.A., sought to enforce in Civil Case No.
Tokyo Court proceeded to hear the plaintiff's
83-17637 of the Regional Trial Court (RTC), Branch 54,
complaint and on [January 29, 1981],
Manila, a judgment rendered in its favor by a Japanese court
rendered judgment ordering the defendant to
against private respondent C.F. Sharp & Company, Inc.,
pay the plaintiff the sum of 83,158,195 Yen
(hereinafter SHARP), a corporation incorporated under
and damages for delay at the rate of 6% per
Philippine laws.
annum from August 28, 1980 up to and until
payment is completed (pp. 12-14, Records).
As found by the Court of Appeals in the challenged decision of
10 November 1993, 1 the following are the factual and
On March 24, 1981, defendant received from
procedural antecedents of this controversy:
Deputy Sheriff Balingit copy of the judgment.
Defendant not having appealed the
On May 9, 1974, plaintiff Northwest Airlines judgment, the same became final and
and defendant C.F. Sharp & Company, executory.
through its Japan branch, entered into an
International Passenger Sales Agency
Plaintiff was unable to execute the decision
Agreement, whereby the former authorized
in Japan, hence, on May 20, 1983, a suit for
the latter to sell its air transportation tickets.
enforcement of the judgment was filed by
Unable to remit the proceeds of the ticket
plaintiff before the Regional Trial Court of
sales made by defendant on behalf of the
Manila Branch 54.2
plaintiff under the said agreement, plaintiff on
March 25, 1980 sued defendant in Tokyo,
Japan, for collection of the unremitted On July 16, 1983, defendant filed its answer
proceeds of the ticket sales, with claim for averring that the judgment of the Japanese
damages. Court sought to be enforced is null and void
and unenforceable in this jurisdiction having
been rendered without due and proper notice
On April 11, 1980, a writ of summons was
to the defendant and/or with collusion or
issued by the 36th Civil Department, Tokyo
fraud and/or upon a clear mistake of law and
District Court of Japan against defendant at
fact (pp. 41-45, Rec.).
its office at the Taiheiyo Building, 3rd floor,
132, Yamashita-cho, Naka-ku, Yokohoma,
Kanagawa Prefecture. The attempt to serve Unable to settle the case amicably, the case
the summons was unsuccessful because the was tried on the merits. After the plaintiff
bailiff was advised by a person in the office rested its case, defendant on April 21, 1989,
that Mr. Dinozo, the person believed to be filed a Motion for Judgment on a Demurrer to
authorized to receive court processes was in Evidence based on two grounds:
Manila and would be back on April 24, 1980. (1) the foreign judgment sought to be
enforced is null and void for want of
jurisdiction and (2) the said judgment is
On April 24, 1980, bailiff returned to the
contrary to Philippine law and public policy
defendant's office to serve the summons. Mr.
and rendered without due process of law.
Dinozo refused to accept the same claiming
Plaintiff filed its opposition after which the
court a quo rendered the now assailed
decision dated June 21, 1989 granting the
demurrer motion and dismissing the
complaint (Decision, pp. 376-378, Records).
In granting the demurrer motion, the trial
court held that:
The foreign judgment in
the Japanese Court sought
in this action is null and
void for want of jurisdiction
over the person of the
defendant considering that
this is an action in
personam; the Japanese
Court did not acquire
jurisdiction over the person
of the defendant because
jurisprudence requires that
the defendant be served
with summons in Japan in
order for the Japanese
Court to acquire
jurisdiction over it, the
process of the Court in
Japan sent to the
Philippines which is
outside Japanese
jurisdiction cannot confer
jurisdiction over the
defendant in the case
before the Japanese Court
of the case at bar.
Boudard versus Tait 67
Phil. 170. The plaintiff
contends that the
Japanese Court acquired
jurisdiction because the
defendant is a resident of
Japan, having four (4)
branches doing business
therein and in fact had a
permit from the Japanese
government to conduct
business in Japan (citing
the exhibits presented by
the plaintiff); if this is so
then service of summons
should have been made
upon the defendant in
Japan in any of these
alleged four branches; as
admitted by the plaintiff the
service of the summons
issued by the Japanese
Court was made in the
Philippines thru
Philippine Sheriff. This
Court agrees that if the
defendant in a foreign
court is a resident in the
court of that foreign court
such court could acquire
jurisdiction over the person
of the defendant but it
must be served upon the
defendant in the territorial
jurisdiction of the foreign
court. Such is not the case
here because the
defendant was served with
summons in the
Philippines and not in
Japan.
Unable to accept the said decision, plaintiff
on July 11, 1989 moved for reconsideration
of the decision, filing at the same time a
conditional Notice of Appeal, asking the court
to treat the said notice of appeal "as in effect
after and upon issuance of the court's denial
of the motion for reconsideration."
Defendant opposed the motion for
reconsideration to which a Reply dated
August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court
disregarded the Motion for Reconsideration
and gave due course to the plaintiff's Notice
of Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It
agreed with the latter in its reliance upon Boudard vs. Tait 4
wherein it was held that "the process of the court has no
extraterritorial effect and no jurisdiction is acquired over the
person of the defendant by serving him beyond the boundaries
of the state." To support its position, the Court of Appeals
further stated:
In an action strictly in personam, such as the
instant case, personal service of summons
within the forum is required for the court to
acquire jurisdiction over the defendant
(Magdalena Estate Inc. vs. Nieto, 125 SCRA
230). To confer jurisdiction on the court,
personal or substituted service of summons
on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA
739).
But while plaintiff-appellant concedes that
the collection suit filed is an action in
personam, it is its theory that a distinction
must be made between an action in
a personam against a resident defendant and
an action in personam against a non-resident
defendant. Jurisdiction is acquired over a
non-resident defendant only if he is served
personally within the jurisdiction of the court
and over a resident defendant if by personal,
substituted or constructive service
conformably to statutory authorization.
Plaintiff-appellant argues that since the
defendant-appellee maintains branches in
Japan it is considered a resident defendant.
Corollarily, personal, substituted or
constructive service of summons when made
in compliance with the procedural rules is
sufficient to give the court jurisdiction to
render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court
cannot lawfully be served outside the
territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter; 41
S.E. 2d 532, 201) and this is regardless of
the residence or citizenship of the party thus
served (Iowa-Rahr vs. Rahr, 129 NW 494,
150 Iowa 511, 35 LRC, NS, 292, Am. Case
1912 D680). There must be actual service
within the proper territorial limits on
defendant or someone authorized to accept
service for him. Thus, a defendant, whether
a resident or not in the forum where the
action is filed, must be served with summons
within that forum.
But even assuming a distinction between a
resident defendant and non-resident
defendant were to be adopted, such
distinction applies only to natural persons
and not in the corporations. This finds
support in the concept that "a corporation
has no home or residence in the sense in
which those terms are applied to natural
persons" (Claude Neon Lights vs. Phil.
Advertising Corp., 57 Phil. 607). Thus, as
cited by the defendant-appellee in its brief:
Residence is said to be an attribute of a
natural person, and can be predicated on an
artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a
corporation can have no local residence or
habitation. It has been said that a corporation
is a mere ideal existence, subsisting only in
contemplation of law — an invisible being
which can have, in fact, no locality and can
occupy no space, and therefore cannot have
a dwelling place. (18 Am. Jur. 2d, p. 693
citing Kimmerle v. Topeka, 88 370, 128 p.
367; Wood v. Hartfold F. Ins. Co., 13 Conn
202)
Jurisprudence so holds that the foreign or
domestic character of a corporation is to be
determined by the place of its origin where
its charter was granted and not by the
location of its business activities (Jennings v.
Idaho Rail Light & P. Co., 26 Idaho 703, 146
p. 101), A corporation is a "resident" and an
inhabitant of the state in which it is
incorporated and no other (36 Am. Jur. 2d, p.
49).
Defendant-appellee is a Philippine
Corporation duly organized under the
Philippine laws. Clearly, its residence is the
Philippines, the place of its incorporation,
and not Japan. While defendant-appellee
maintains branches in Japan, this will not
make it a resident of Japan. A corporation
does not become a resident of another by
engaging in business there even though
licensed by that state and in terms given all
the rights and privileges of a domestic
corporation (Galveston H. & S.A.R. Co. vs.
Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct.
401).
On this premise, defendant appellee is a
non-resident corporation. As such, court
processes must be served upon it at a place
within the state in which the action is brought
and not elsewhere (St. Clair vs. Cox, 106 US
350, 27 L ed. 222, 1 S. Ct. 354).5
It then concluded that the service of summons effected in
Manila or beyond the territorial boundaries of Japan was null
and did not confer jurisdiction upon the Tokyo District Court
over the person of SHARP; hence, its decision was void.
Unable to obtain a reconsideration of the decision,
NORTHWEST elevated the case to this Court contending that
the respondent court erred in holding that SHARP was not a
resident of Japan and that summons on SHARP could only be
validly served within that country.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is
also proper to presume the regularity of the proceedings and
the giving of due notice therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in
an action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of
a right as between the parties and their successors-in-interest
by a subsequent title. The judgment may, however, be assailed
by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under
Section 3 of Rule 131, a court, whether of the Philippines or
elsewhere, enjoys the presumption that it was acting in the
lawful exercise of jurisdiction and has regularly performed its
official duty.
Consequently, the party attacking a foreign judgment has the
burden of overcoming the presumption of its validity.7 Being
the party challenging the judgment rendered by the Japanese
court, SHARP had the duty to demonstrate the invalidity of
such judgment. In an attempt to discharge that burden, it
contends that the extraterritorial service of summons effected
at its home office in the Philippines was not only ineffectual but
also void, and the Japanese Court did not, therefore acquire
jurisdiction over it.
It is settled that matters of remedy and procedure such as
those relating to the service of process upon a defendant are
governed by the lex fori or the internal law of the forum.8 In this
case, it is the procedural law of Japan where the judgment was
rendered that determines the validity of the extraterritorial
service of process on SHARP. As to what this law is is a
question of fact, not of law. It may not be taken judicial notice
of and must be pleaded and proved like any other fact.9
Sections 24 and 25, Rule 132 of the Rules of Court provide
that it may be evidenced by an official publication or by a duly
attested or authenticated copy thereof. It was then incumbent
upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of
summons and the decision thereafter rendered by the
Japanese court must stand.
Alternatively in the light of the absence of proof regarding
Japanese
law, the presumption of identity or similarity or the so-called
processual presumption 10 may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule
14 of the Rules of Court provides that if the defendant is a
foreign corporation doing business in the Philippines, service
may be made: (1) on its resident agent designated in
accordance with law for that purpose, or, (2) if there is no such
resident agent, on the government official designated by law to
that effect; or (3) on any of its officers or agents within the
Philippines.
If the foreign corporation has designated an agent to receive
summons, the designation is exclusive, and service of
summons is without force and gives the court no jurisdiction
unless made upon him. 11
Where the corporation has no such agent, service shall be
made on the government official designated by law, to wit: (a)
the Insurance Commissioner in the case of a foreign insurance
company; (b) the Superintendent of Banks, in the case of a
foreign banking corporation; and (c) the Securities and
Exchange Commission, in the case of other foreign
corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government
office or official served shall transmit by mail a copy of the
summons or other legal proccess to the corporation at its home
or principal office. The sending of such copy is a necessary
part of the service. 12
SHARP contends that the laws authorizing service of process
upon the Securities and Exchange Commission, the
Superintendent of Banks, and the Insurance Commissioner, as
the case may be, presuppose a situation wherein the foreign
corporation doing business in the country no longer has any
branches or offices within the Philippines. Such contention is
belied by the pertinent provisions of the said laws. Thus,
Section 128 of the Corporation Code 13 and Section 190 of the
Insurance Code 14 clearly contemplate two situations: (1) if the
corporation had left the Philippines or had ceased to transact
business therein, and (2) if the corporation has no designated
agent. Section 17 of the General Banking Act 15 does not even
speak a corporation which had ceased to transact business in
the Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan.
This silence could only mean, or least create an impression,
that it had none. Hence, service on the designated government
official or on any of SHARP's officers or agents in Japan could
be availed of. The respondent, however, insists that only
service of any of its officers or employees in its branches in
Japan could be resorted to. We do not agree. As found by the
respondent court, two attempts at service were made at
SHARP's Yokohama branch. Both were unsuccessful. On the
first attempt, Mr. Dinozo, who was believed to be the person
authorized to accept court process, was in Manila. On the
second, Mr. Dinozo was present, but to accept the summons
because, according to him, he was no longer an employee of
SHARP. While it may be true that service could have been
made upon any of the officers or agents of SHARP at its three
other branches in Japan, the availability of such a recourse
would not preclude service upon the proper government
official, as stated above.
As found by the Court of Appeals, it was the Tokyo District
Court which ordered that summons for SHARP be served at its
head office in the Philippine's after the two attempts of service
had failed. 16 The Tokyo District Court requested the Supreme
Court of Japan to cause the delivery of the summons and other
legal documents to the Philippines. Acting on that request, the
Supreme Court of Japan sent the summons together with the
other legal documents to the Ministry of Foreign Affairs of
Japan which, in turn, forwarded the same to the Japanese
Embassy in Manila . Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of
the Philippines, then to the Executive Judge of the Court of
First Instance (now Regional Trial Court) of Manila, who
forthwith ordered Deputy Sheriff Rolando Balingit to serve the
same on SHARP at its principal office in Manila. This service is
equivalent to service on the proper government official under
Section 14, Rule 14 of the Rules of Court, in relation to Section
128 of the Corporation Code. Hence, SHARP's contention that
such manner of service is not valid under Philippine laws holds
no water.17
In deciding against the petitioner, the respondent court
sustained the trial court's reliance on Boudard vs. Tait 18
where this Court held:
The fundamental rule is that jurisdiction in
personam over nonresidents, so as to
sustain a money judgment, must be based
upon personal service within the state which
renders the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial
effect, and no jurisdiction is acquired over
the person of the defendant by serving him
beyond the boundaries of the state. Nor has
a judgment of a court of a foreign country
against a resident of this country having no
property in such foreign country based on
process served here, any effect here against
either the defendant personally or his
property situated here.
Process issuing from the courts of one state
or country cannot run into another, and
although a nonresident defendant may have
been personally served with such process in
the state or country of his domicile, it will not
give such jurisdiction as to authorize a
personal judgment against him.
It further availed of the ruling in Magdalena Estate, Inc. vs.
Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle
laid down by the Iowa Supreme Court in the 1911 case of
Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard
involved the enforcement of a judgment of the civil division of
the Court of First Instance of Hanoi, French Indo-China. The
trial court dismissed the case because the Hanoi court never
acquired jurisdiction over the person of the defendant
considering that "[t]he, evidence adduced at the trial
conclusively proves that neither the appellee [the defendant]
nor his agent or employees were ever in Hanoi, French Indo-
China; and that the deceased Marie Theodore Jerome
Boudard had never, at any time, been his employee." In
Magdalena Estate, what was declared invalid resulting in the
failure of the court to acquire jurisdiction over the person of the
defendants in an action in personam was the service of
summons through publication against non-appearing resident
defendants. It was claimed that the latter concealed
themselves to avoid personal service of summons upon them.
In Dial, the defendants were foreign corporations which were
not, domiciled and licensed to engage in business in the
Philippines and which did not have officers or agents, places of
business, or properties here. On the other hand, in the instant
case, SHARP was doing business in Japan and was
maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of
the past. In that case, a divided Supreme Court of Iowa
declared that the principle that there can be no jurisdiction in a
court of a territory to render a personal judgment against
anyone upon service made outside its limits was applicable
alike to cases of residents and non-residents. The principle
was put at rest by the United States Supreme Court when it
ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in
the state is alone sufficient to bring an absent defendant within
the reach of the state's jurisdiction for purposes of a personal
judgment by means of appropriate substituted service or
personal service without the state. This principle is embodied in
section 18, Rule 14 of the Rules of Court which allows service
of summons on residents temporarily out of the Philippines to
be made out of the country. The rationale for this rule was
explained in Milliken as follows:
[T]he authority of a state over one of its
citizens is not terminated by the mere fact of
his absence from the state. The state which
accords him privileges and affords protection
to him and his property by virtue of his
domicile may also exact reciprocal duties.
"Enjoyment of the privileges of residence
within the state, and the attendant right to
invoke the protection of its laws, are
inseparable" from the various incidences of
state citizenship. The responsibilities of that
citizenship arise out of the relationship to the
state which domicile creates. That
relationship is not dissolved by mere
absence from the state. The attendant
duties, like the rights and privileges incident
to domicile, are not dependent on continuous
presence in the state. One such incident of
domicile is amenability to suit within the state
even during sojourns without the state,
where the state has provided and employed
a reasonable method for apprising such an
absent party of the proceedings against him.
23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation
can have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it
has offices and transacts business. This is the rule in our
jurisdiction and apropos thereto, it may be necessery to quote
what we stated in State Investment House, Inc, vs. Citibank,
N.A., 26 to wit:
The issue is whether these Philippine
branches or units may be considered
"residents of the Philippine Islands" as that
term is used in Section 20 of the Insolvency
Law . . . or residents of the state under the
laws of which they were respectively Philippine Advertising Corp., 57 Phil. 607]
incorporated. The answer cannot be found in that a foreign corporation licitly doing
the Insolvency Law itself, which contains no business in the Philippines, which is a
definition of the term, resident, or any clear defendant in a civil suit, may not be
indication of its meaning. There are however considered a non-resident within the scope
other statutes, albeit of subsequent of the legal provision authorizing attachment
enactment and effectivity, from which against a defendant not residing in the
enlightening notions of the term may be Philippine Islands; [Sec. 424, in relation to
derived. Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of
The National Internal Revenue Code 1940, Sec. 1(f), Rule 57, Rules of 1964] in
declares that the term "'resident foreign other words, a preliminary attachment may
corporation' applies to a foreign corporation not be applied for and granted solely on the
engaged in trade or business within the asserted fact that the defendant is a foreign
Philippines," as distinguished from a "'non- corporation authorized to do business in the
resident foreign corporation' . . . (which is Philippines — and is consequently and
one) not engaged in trade or bussiness necessarily, "a party who resides out of the
within the Philippines." [Sec. 20, pars. (h) Philippines." Parenthetically, if it may not be
and (i)]. considered as a party not residing in the
Philippines, or as a party who resides out of
The Offshore Banking Law, Presidential the country, then, logically, it must be
Decree No. 1034, states "that branches, considered a party who does reside in the
subsidiaries, affiliation, extension offices or Philippines, who is a resident of the country.
any other units of corporation or juridical Be this as it may, this Court pointed out that:
person organized under the laws of any
foreign country operating in the Philippines . . . Our laws and
shall be considered residents of the jurisprudence indicate a
Philippines. [Sec. 1(e)]. purpose to assimilate
foreign corporations, duly
The General Banking Act, Republic Act No. licensed to do business
337, places "branches and agencies in the here, to the status of
Philippines of foreign banks . . . (which are) domestic corporations. (Cf.
called Philippine branches," in the same Section 73, Act No. 1459,
category as "commercial banks, savings and Marshall Wells Co. vs.
associations, mortgage banks, development Henry W. Elser & Co., 46
banks, rural banks, stock savings and loan Phil. 70, 76; Yu Cong Eng
associations" (which have been formed and vs. Trinidad, 47 Phil. 385,
organized under Philippine laws), making no 411) We think it would be
distinction between the former and the latter entirely out of line with this
in so far as the terms "banking institutions" policy should we make a
and "bank" are used in the Act [Sec. 2], discrimination against a
declaring on the contrary that in "all matters foreign corporation, like
not specifically covered by special provisions the petitioner, and subject
applicable only to foreign banks, or their its property to the harsh
branches and agencies in the Philippines, writ of seizure by
said foreign banks or their branches and attachment when it has
agencies lawfully doing business in the complied not only with
Philippines "shall be bound by all laws, rules, every requirement of law
and regulations applicable to domestic made specially of foreign
banking corporations of the same class, corporations, but in
except such laws, rules and regulations as addition with every
provided for the creation, formation, requirement of law made
organization, or dissolution of corporations or of domestic corporations. .
as fix the relation, liabilities, responsibilities, ..
or duties of members, stockholders or
officers of corporation. [Sec. 18]. Obviously, the assimilation of foreign
corporations authorized to do business in the
This court itself has already had occasion to Philippines "to the status of domestic
hold [Claude Neon Lights, Fed. Inc. vs. corporations, subsumes their being found
 and operating as corporations, hence,
residing, in the country.
The same principle is recognized in
American law: that the residence of a
corporation, if it can be said to have a
residence, is necessarily where it exercises
corporate functions . . .;" that it is considered
as dwelling "in the place where its business
is done . . .," as being "located where its
franchises are exercised . . .," and as being
"present where it is engaged in the
prosecution of the corporate enterprise;" that
a "foreign corporation licensed to do
business in a state is a resident of any
country where it maintains an office or agent
for transaction of its usual and customary
business for venue purposes;" and that the
"necessary element in its signification is
locality of existence." [Words and Phrases,
Permanent Ed., vol. 37, pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the
collection suit against it was filed, then in the light of the
processual presumption, SHARP may be deemed a resident of
Japan, and, as such, was amenable to the jurisdiction of the
courts therein and may be deemed to have assented to the
said courts' lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity
of performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation
expenses, and exemplary damages to be without merit. We
find no evidence that would justify an award for attorney's fees
and litigation expenses under Article 2208 of the Civil Code of
the Philippines. Nor is an award for exemplary damages
warranted. Under Article 2234 of the Civil Code, before the
court may consider the question of whether or not exemplary
damages should be awarded, the plaintiff must show that he is
entitled to moral, temperate, or compensatory damaged. There
being no such proof presented by NORTHWEST, no
exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses,
and exemplary damages but REVERSED insofar as in
sustained the trial court's dismissal of NORTHWEST's
complaint in Civil Case No. 83-17637 of Branch 54 of the
Regional Trial Court of Manila, and another in its stead is
hereby rendered ORDERING private respondent C.F. SHARP
L COMPANY, INC. to pay to NORTHWEST the amounts
adjudged in the foreign judgment subject of said case, with
interest thereon at the legal rate from the filing of the complaint
therein until the said foreign judgment is fully satisfied.
Costs against the private respondent. SO ORDERED.
MENANDRO B. LAUREANO, petitioner, vs. COURT OF
APPEALS AND SINGAPORE AIRLINES LIMITED,; [G.R. No.
114776. February 2, 2000]; QUISUMBING, J.:
This petition for review on certiorari under Rule 45 of the Rules
of Court seeks to reverse the Decision of the Court of Appeals,
dated October 29, 1993, in C.A. G.R. No. CV 34476, as well as
its Resolution dated February 28, 1994, which denied the
motion for reconsideration.
The facts of the case as summarized by the respondent
appellate court are as follows:
"Sometime in 1978, plaintiff [Menandro B.
Laureano, herein petitioner], then Director of
Flight Operations and Chief Pilot of Air
Manila, applied for employment with
defendant company [herein private
respondent] through its Area Manager in
Manila.
On September 30, 1978, after the usual
personal interview, defendant wrote to
plaintiff, offering a contract of employment as
an expatriate B-707 captain for an original
period of two (2) years commencing on
January 21, 1978, Plaintiff accepted the offer
and commenced working on January 20,
1979. After passing the six-month probation
period, plaintiff's appointment was confirmed
effective July 21, 1979. (Annex "B", p. 30,
Rollo).
On July 21, 1979, defendant offered plaintiff
an extension of his two-year contract to five
(5) years effective January 21, 1979 to
January 20, 1984 subject to the terms and
conditions set forth in the contract of
employment, which the latter accepted
(Annex "C", p. 31, Rec.).
During his service as B-707 captain, plaintiff
on August 24, 1980, while in command of a
flight, committed a noise violation offense at
the Zurich Airport, for which plaintiff
apologized. (Exh. "3", p. 307, Rec.).
Sometime in 1980, plaintiff featured in a tail
scraping incident wherein the tail of the
aircraft scraped or touched the runway
during landing. He was suspended for a few
days until he was investigated by a board
headed by Capt. Choy. He was reprimanded.
Scjuris
On September 25, 1981, plaintiff was invited
to take a course of A-300 conversion training
at Aeroformacion, Toulouse, France at
defendant's expense. Having successfully
completed and passed the training course,
plaintiff was cleared on April 7, 1981 for solo
duty as captain of the Airbus A-300 and
subsequently appointed as captain of the A-
300 fleet commanding an Airbus A-300 in
flights over Southeast Asia. (Annexes "D",
"E" and "F", pp. 34-38, Rec.).
Sometime in 1982, defendant, hit by a
recession, initiated cost-cutting measures.
Seventeen (17) expatriate captains in the
Airbus fleet were found in excess of the
defendant's requirement (t.s.n., July 6, 1988.
p. 11). Consequently, defendant informed its
expatriate pilots including plaintiff of the
situation and advised them to take advance
leaves. (Exh. "15", p. 466, Rec.).
Realizing that the recession would not be for
a short time, defendant decided to terminate
its excess personnel (t.s.n., July 6, 1988, p.
17). It did not, however, immediately
terminate it's A-300 pilots. It reviewed their
qualifications for possible promotion to the B-
747 fleet. Among the 17 excess Airbus pilots
reviewed, twelve were found qualified.
Unfortunately, plaintiff was not one of the
twelve. Jurissc
On October 5, 1982, defendant informed
plaintiff of his termination effective November
1, 1982 and that he will be paid three (3)
months salary in lieu of three months notice
(Annex "I", pp. 41-42, Rec.). Because he
could not uproot his family on such short
notice, plaintiff requested a three-month
notice to afford him time to exhaust all
possible avenues for reconsideration and
retention. Defendant gave only two (2)
months notice and one (1) month salary.
(t.s.n., Nov. 12, 1987. p. 25).
Aggrieved, plaintiff on June 29, 1983,
instituted a case for illegal dismissal before
the Labor Arbiter. Defendant moved to
dismiss on jurisdictional grounds. Before said
motion was resolved, the complaint was
withdrawn. Thereafter, plaintiff filed the
instant case for damages due to illegal
termination of contract of services before the
court a quo (Complaint, pp. 1-10, Rec.).
Again, defendant on February 11, 1987 filed
a motion to dismiss alleging inter alia: (1)
that the court has no jurisdiction over the
subject matter of the case, and (2) that
Philippine courts have no jurisdiction over
the instant case. Defendant contends that
the complaint is for illegal dismissal together
with a money claim arising out of and in the
course of plaintiff's employment "thus it is the
Labor Arbiter and the NLRC who have the
jurisdiction pursuant to Article 217 of the
Labor Code" and that, since plaintiff was
employed in Singapore, all other aspects of
his employment contract and/or documents
executed in Singapore. Thus, defendant
postulates that Singapore laws should apply
and courts thereat shall have jurisdiction.
(pp. 50-69, Rec.). Misjuris
In traversing defendant's arguments, plaintiff
claimed that: (1) where the items demanded
in a complaint are the natural consequences
flowing from a breach of an obligation and
not labor benefits, the case is intrinsically a
civil dispute; (2) the case involves a question
that is beyond the field of specialization of
labor arbiters; and (3) if the complaint is
grounded not on the employee's dismissal
per se but on the manner of said dismissal
and the consequence thereof, the case falls
under the jurisdiction of the civil courts. (pp.
70-73, Rec.)
On March 23, 1987, the court a quo denied
defendant's motion to dismiss (pp. 82-84,
Ibid). The motion for reconsideration was
likewise denied. (p. 95 ibid)
On September 16, 1987, defendant filed its
answer reiterating the grounds relied upon in
its motion to dismiss and further arguing that
plaintiff is barred by laches, waiver, and
estoppel from instituting the complaint and
that he has no cause of action. (pp. 102-
115)"
On April 10, 1991, the trial court handed down its decision in
favor of plaintiff. The dispositive portion of which reads:
"WHEREFORE, judgment is hereby
rendered in favor of plaintiff Menandro
Laureano and against defendant Singapore
Airlines Limited, ordering defendant to pay
plaintiff the amounts of -
SIN$396,104.00, or its equivalent in
Philippine currency at the current rate of
exchange at the time of payment, as and for
unearned compensation with legal interest
from the filing of the complaint until fully paid;
Jjlex
 SIN$154,742.00, or its equivalent in
Philippine currency at the current rate of
exchange at the time of payment; and the
further amounts of P67,500.00 as
consequential damages with legal interest
from the filing of the complaint until fully paid;
P1,000,000.00 as and for moral damages;
P1,000,000.00 as and for exemplary
damages; and P100,000.00 as and for
attorney's fees.
Costs against defendant.
SO ORDERED."
Singapore Airlines timely appealed before the respondent court
and raised the issues of jurisdiction, validity of termination,
estoppel, and damages.
On October 29, 1993, the appellate court set aside the decision
of the trial court, thus,
"...In the instant case, the action for damages
due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982.
Clearly, plaintiff-appellee's action has already
prescribed.
WHEREFORE, the appealed decision is
hereby REVERSED and SET ASIDE. The
complaint is hereby dismissed.
SO ORDERED." Newmiso
Petitioner's and Singapore Airlines' respective motions for
reconsideration were denied.
Now, before the Court, petitioner poses the following queries:
1. IS THE PRESENT ACTION ONE
BASED ON CONTRACT WHICH
PRESCRIBES IN TEN YEARS UNDER
ARTICLE 1144 OF THE NEW CIVIL CODE
OR ONE FOR DAMAGES ARISING FROM
AN INJURY TO THE RIGHTS OF THE
PLAINTIFF WHICH PRESCRIBES IN FOUR
YEARS UNDER ARTICLE 1146 OF THE
NEW CIVIL CODE?
2. CAN AN EMPLOYEE WITH A
FIXED PERIOD OF EMPLOYMENT BE
RETRENCHED BY HIS EMPLOYER?
3. CAN THERE BE VALID
RETRENCHMENT IF AN EMPLOYER
MERELY FAILS TO REALIZE THE
EXPECTED PROFITS EVEN IF IT WERE
NOT, IN FACT, INCURRING LOSSES?
At the outset, we find it necessary to state our concurrence on
the assumption of jurisdiction by the Regional Trial Court of
Manila, Branch 9. The trial court rightly ruled on the application
of Philippine law, thus: Acctmis
"Neither can the Court determine whether
the termination of the plaintiff is legal under
the Singapore Laws because of the
defendant's failure to show which specific
laws of Singapore Laws apply to this case.
As substantially discussed in the preceding
paragraphs, the Philippine Courts do not
take judicial notice of the laws of Singapore.
The defendant that claims the applicability of
the Singapore Laws to this case has the
burden of proof. The defendant has failed to
do so. Therefore, the Philippine law should
be applied."
Respondent Court of Appeals acquired jurisdiction when
defendant filed its appeal before said court. On this matter,
respondent court was correct when it barred defendant-
appellant below from raising further the issue of jurisdiction.
Petitioner now raises the issue of whether his action is one
based on Article 1144 or on Article 1146 of the Civil Code.
According to him, his termination of employment effective
November 1, 1982, was based on an employment contract
which is under Article 1144, so his action should prescribe in
10 years as provided for in said article. Thus he claims the
ruling of the appellate court based on Article 1146 where
prescription is only four (4) years, is an error. The appellate
court concluded that the action for illegal dismissal originally
filed before the Labor Arbiter on June 29, 1983, but which was
withdrawn, then filed again in 1987 before the Regional Trial
Court, had already prescribed.
In our view, neither Article 1144 nor Article 1146 of the Civil
Code is here pertinent. What is applicable is Article 291 of the
Labor Code, viz:
"Article 291. Money claims. - All money
claims arising from employee-employer
relations accruing during the effectivity of this
Code shall be filed within three (3) years
from the time the cause of action accrued;
otherwise they shall be forever barred.
x x x" Misact
What rules on prescription should apply in cases like this one
has long been decided by this Court. In illegal dismissal, it is
settled, that the ten-year prescriptive period fixed in Article
1144 of the Civil Code may not be invoked by petitioners, for
the Civil Code is a law of general application, while the
prescriptive period fixed in Article 292 of the Labor Code [now
Article 291] is a SPECIAL LAW applicable to claims arising
from employee-employer relations.
More recently in De Guzman. vs. Court of Appeals, where the
money claim was based on a written contract, the Collective
Bargaining Agreement, the Court held:
"...The language of Art. 291 of the Labor
Code does not limit its application only to
'money claims specifically recoverable under
said Code' but covers all money claims
arising from an employee-employer
relations" (Citing Cadalin v. POEA
Administrator, 238 SCRA 721, 764 [1994];
and Uy v. National Labor Relations
Commission, 261 SCRA 505, 515 [1996]). ...
It should be noted further that Article 291 of
the Labor Code is a special law applicable to
money claims arising from employer-
employee relations; thus, it necessarily
prevails over Article 1144 of the Civil Code, a
general law. Basic is the rule in statutory
construction that 'where two statutes are of
equal theoretical application to a particular
case, the one designed therefore should
prevail.' (Citing Leveriza v. Intermediate
Appellate Court, 157 SCRA 282, 294.)
Generalia specialibus non derogant."
In the light of Article 291, aforecited, we agree with the
appellate court's conclusion that petitioner's action for
damages due to illegal termination filed again on January 8,
1987 or more than four (4) years after the effective date of his
dismissal on November 1, 1982 has already prescribed.
"In the instant case, the action for damages
due to illegal termination was filed by
plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity
date of his dismissal on November 1, 1982.
Clearly, plaintiff-appellee's action has already
prescribed."
We base our conclusion not on Article 1144 of the Civil Code
but on Article 291 of the Labor Code, which sets the
prescription period at three (3) years and which governs under
this jurisdiction.
Petitioner claims that the running of the prescriptive period was
tolled when he filed his complaint for illegal dismissal before
the Labor Arbiter of the National Labor Relations Commission.
However, this claim deserves scant consideration; it has no
legal leg to stand on. In Olympia International, Inc. vs. Court of
Appeals, we held that "although the commencement of a civil
action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff
leaves the parties in exactly the same position as though no
action had been commenced at all."
Now, as to whether petitioner's separation from the company
due to retrenchment was valid, the appellate court found that
the employment contract of petitioner allowed for pre-
termination of employment. We agree with the Court of
Appeals when it said, Sdjad
"It is a settled rule that contracts have the
force of law between the parties. From the
moment the same is perfected, the parties
are bound not only to the fulfillment of what
has been expressly stipulated but also to all
consequences which, according to their
nature, may be in keeping with good faith,
usage and law. Thus, when plaintiff-appellee
accepted the offer of employment, he was
bound by the terms and conditions set forth
in the contract, among others, the right of
mutual termination by giving three months
written notice or by payment of three months
salary. Such provision is clear and readily
understandable, hence, there is no room for
interpretation."
xxx
Further, plaintiff-appellee's contention that he
is not bound by the provisions of the
Agreement, as he is not a signatory thereto,
deserves no merit. It must be noted that
when plaintiff-appellee's employment was
confirmed, he applied for membership with
the Singapore Airlines Limited (Pilots)
Association, the signatory to the
aforementioned Agreement. As such,
plaintiff-appellee is estopped from
questioning the legality of the said
agreement or any proviso contained therein."
Moreover, the records of the present case clearly show that
respondent court's decision is amply supported by evidence
and it did not err in its findings, including the reason for the
retrenchment:
"When defendant-appellant was faced with
the world-wide recession of the airline
industry resulting in a slow down in the
company's growth particularly in the regional
operation (Asian Area) where the Airbus 300
operates. It had no choice but to adopt cost
cutting measures, such as cutting down
services, number of frequencies of flights,
and reduction of the number of flying points
for the A-300 fleet (t.s.n., July 6, 1988, pp.
17-18). As a result, defendant-appellant had
to layoff A-300 pilots, including plaintiff-
 appellee, which it found to be in excess of
what is reasonably needed."
All these considered, we find sufficient factual and legal basis
to conclude that petitioner's termination from employment was
for an authorized cause, for which he was given ample notice
and opportunity to be heard, by respondent company. No error
nor grave abuse of discretion, therefore, could be attributed to
respondent appellate court. Sppedsc
ACCORDINGLY, the instant petition is DISMISSED. The
decision of the Court of Appeals in C.A. CV No. 34476 is
AFFIRMED.
SO ORDERED.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner, vs. V.P. EUSEBIO
CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.;
VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO
E. SANTOS; ILUMINADA SANTOS; AND FIRST
INTEGRATED BONDING AND INSURANCE COMPANY,
INC., ; [G.R. No. 140047. July 13, 2004]; DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a
Filipino construction firm with the Iraqi Government for the
construction of the Institute of Physical Therapy-Medical
Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq
war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch
58, petitioner Philippine Export and Foreign Loan Guarantee
Corporation (hereinafter Philguarantee) sought reimbursement
from the respondents of the sum of money it paid to Al Ahli
Bank of Kuwait pursuant to a guarantee it issued for
respondent V.P. Eusebio Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as
follows:
On 8 November 1980, the State Organization of Buildings
(SOB), Ministry of Housing and Construction, Baghdad, Iraq,
awarded the construction of the Institute of Physical
TherapyMedical Rehabilitation Center, Phase II, in Baghdad,
Iraq, (hereinafter the Project) to Ajyal Trading and Contracting
Company (hereinafter Ajyal), a firm duly licensed with the
Kuwait Chamber of Commerce for a total contract price of
ID5,416,089/046 (or about US$18,739,668).
On 7 March 1981, respondent spouses Eduardo and Iluminada
Santos, in behalf of respondent 3-Plex International, Inc.
(hereinafter 3-Plex), a local contractor engaged in construction
business, entered into a joint venture agreement with Ajyal
wherein the former undertook the execution of the entire
Project, while the latter would be entitled to a commission of
4% of the contract price. Later, or on 8 April 1981, respondent
3-Plex, not being accredited by or registered with the Philippine
Overseas Construction Board (POCB), assigned and
transferred all its rights and interests under the joint venture
agreement to VPECI, a construction and engineering firm duly
registered with the POCB. However, on 2 May 1981, 3-Plex
and VPECI entered into an agreement that the execution of the
Project would be under their joint management.
The SOB required the contractors to submit (1) a performance
bond of ID271,808/610 representing 5% of the total contract
price and (2) an advance payment bond of ID541,608/901
representing 10% of the advance payment to be released upon
signing of the contract. To comply with these requirements,
respondents 3-Plex and VPECI applied for the issuance of a
guarantee with petitioner Philguarantee, a government financial
institution empowered to issue guarantees for qualified Filipino
contractors to secure the performance of approved service
contracts abroad.
Petitioner Philguarantee approved respondents application.
Subsequently, letters of guarantee were issued by
Philguarantee to the Rafidain Bank of Baghdad covering 100%
of the performance and advance payment bonds, but they
were not accepted by SOB. What SOB required was a letter-
guarantee from Rafidain Bank, the government bank of Iraq.
Rafidain Bank then issued a performance bond in favor of SOB
on the condition that another foreign bank, not Philguarantee,
would issue a counter-guarantee to cover its exposure. Al Ahli
Bank of Kuwait was, therefore, engaged to provide a counter-
guarantee to Rafidain Bank, but it required a similar counter-
guarantee in its favor from the petitioner. Thus, three layers of
guarantees had to be arranged.
Upon the application of respondents 3-Plex and VPECI,
petitioner Philguarantee issued in favor of Al Ahli Bank of
Kuwait Letter of Guarantee No. 81-194-F (Performance Bond
Guarantee) in the amount of ID271,808/610 and Letter of
Guarantee No. 81-195-F (Advance Payment Guarantee) in the
amount of ID541,608/901, both for a term of eighteen months
from 25 May 1981. These letters of guarantee were secured by
(1) a Deed of Undertaking executed by respondents VPECI,
Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex,
and Spouses Eduardo E. Santos and Iluminada Santos; and
(2) a surety bond issued by respondent First Integrated
Bonding and Insurance Company, Inc. (FIBICI). The Surety
Bond was later amended on 23 June 1981 to increase the
amount of coverage from P6.4 million to P6.967 million and to
change the bank in whose favor the petitioners guarantee was
issued, from Rafidain Bank to Al Ahli Bank of Kuwait.
On 11 June 1981, SOB and the joint venture VPECI and Ajyal
executed the service contract for the construction of the
Institute of Physical Therapy Medical Rehabilitation Center,
Phase II, in Baghdad, Iraq, wherein the joint venture contractor
undertook to complete the Project within a period of 547 days
or 18 months. Under the Contract, the Joint Venture would
supply manpower and materials, and SOB would refund to the
former 25% of the project cost in Iraqi Dinar and the 75% in US
dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars.
The construction, which was supposed to start on 2 June 1981,
commenced only on the last week of August 1981. Because of
this delay and the slow progress of the construction work due
to some setbacks and difficulties, the Project was not
completed on 15 November 1982 as scheduled. But in October
1982, upon foreseeing the impossibility of meeting the deadline
and upon the request of Al Ahli Bank, the joint venture
contractor worked for the renewal or extension of the
Performance Bond and Advance Payment Guarantee.
Petitioners Letters of Guarantee Nos. 81-194-F (Performance
Bond) and 81-195-F (Advance Payment Bond) with expiry date
of 25 November 1982 were then renewed or extended to 9
February 1983 and 9 March 1983, respectively. The surety
bond was also extended for another period of one year, from
12 May 1982 to 12 May 1983. The Performance Bond was
further extended twelve times with validity of up to 8 December
1986, while the Advance Payment Guarantee was extended
three times more up to 24 May 1984 when the latter was
cancelled after full refund or reimbursement by the joint venture
contractor. The surety bond was likewise extended to 8 May
1987.
As of March 1986, the status of the Project was 51%
accomplished, meaning the structures were already finished.
The remaining 47% consisted in electro-mechanical works and
the 2%, sanitary works, which both required importation of
equipment and materials.
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to
the petitioner demanding full payment of its performance bond
counter-guarantee.
Upon receiving a copy of that telex message on 27 October
1986, respondent VPECI requested Iraq Trade and Economic
Development Minister Mohammad Fadhi Hussein to recall the
telex call on the performance guarantee for being a drastic
action in contravention of its mutual agreement with the latter
that (1) the imposition of penalty would be held in abeyance
until the completion of the project; and (2) the time extension
would be open, depending on the developments on the
negotiations for a foreign loan to finance the completion of the
project. It also wrote SOB protesting the call for lack of factual
or legal basis, since the failure to complete the Project was due
to (1) the Iraqi governments lack of foreign exchange with
which to pay its (VPECIs) accomplishments and (2) SOBs
noncompliance for the past several years with the provision in
the contract that 75% of the billings would be paid in US
dollars. Subsequently, or on 19 November 1986, respondent
VPECI advised the petitioner not to pay yet Al Ahli Bank
because efforts were being exerted for the amicable settlement
of the Project.
On 14 April 1987, the petitioner received another telex
message from Al Ahli Bank stating that it had already paid to
Rafidain Bank the sum of US$876,564 under its letter of
guarantee, and demanding reimbursement by the petitioner of
what it paid to the latter bank plus interest thereon and related
expenses.
Both petitioner Philguarantee and respondent VPECI sought
the assistance of some government agencies of the
Philippines. On 10 August 1987, VPECI requested the Central
Bank to hold in abeyance the payment by the petitioner to
allow the diplomatic machinery to take its course, for otherwise,
the Philippine government , through the Philguarantee and the
Central Bank, would become instruments of the Iraqi
Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor.
On 27 August 1987, the Central Bank authorized the
remittance for its account of the amount of US$876,564
(equivalent to ID271, 808/610) to Al Ahli Bank representing full
payment of the performance counter-guarantee for VPECIs
project in Iraq.
On 6 November 1987, Philguarantee informed VPECI that it
would remit US$876,564 to Al Ahli Bank, and reiterated the
joint and solidary obligation of the respondents to reimburse
the petitioner for the advances made on its counter-guarantee.
The petitioner thus paid the amount of US$876,564 to Al Ahli
Bank of Kuwait on 21 January 1988. Then, on 6 May 1988, the
petitioner paid to Al Ahli Bank of Kuwait US$59,129.83
representing interest and penalty charges demanded by the
latter bank.
On 19 June 1991, the petitioner sent to the respondents
separate letters demanding full payment of the amount of
P47,872,373.98 plus accruing interest, penalty charges, and
10% attorneys fees pursuant to their joint and solidary
obligations under the deed of undertaking and surety bond.
When the respondents failed to pay, the petitioner filed on 9
July 1991 a civil case for collection of a sum of money against
the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and
held that the latter had no valid cause of action against the
respondents. It opined that at the time the call was made on
the guarantee which was executed for a specific period, the
guarantee had already lapsed or expired. There was no valid
renewal or extension of the guarantee for failure of the
petitioner to secure respondents express consent thereto. The
trial court also found that the joint venture contractor incurred
no delay in the execution of the Project. Considering the
Project owners violations of the contract which rendered
impossible the joint venture contractors performance of its
undertaking, no valid call on the guarantee could be made.
Furthermore, the trial court held that no valid notice was first
made by the Project owner SOB to the joint venture contractor
before the call on the guarantee. Accordingly, it dismissed the
complaint, as well as the counterclaims and cross-claim, and
ordered the petitioner to pay attorneys fees of P100,000 to
respondents VPECI and Eusebio Spouses and P100,000 to 3-
Plex and the Santos Spouses, plus costs.
In its 14 June 1999 Decision, the Court of Appeals affirmed the
trial courts decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of
the status of project implementation as well as the problems
besetting the contractors, between 1982 to 1985, having sent
some of its people to Baghdad during that period. The
successive renewals/extensions of the guarantees in fact, was
prompted by delays, not solely attributable to the contractors,
and such extension understandably allowed by the SOB
(project owner) which had not anyway complied with its
contractual commitment to tender 75% of payment in US
Dollars, and which still retained overdue amounts collectible by
VPECI.
Second, appellant was very much aware of the violations
committed by the SOB of its contractual undertakings with
VPECI, principally, the payment of foreign currency (US$) for
75% of the total contract price, as well as of the complications
and injustice that will result from its payment of the full amount
of the performance guarantee, as evident in
PHILGUARANTEEs letter dated 13 May 1987 .
Third, appellant was fully aware that SOB was in fact still
obligated to the Joint Venture and there was still an amount
collectible from and still being retained by the project owner,
which amount can be set-off with the sum covered by the
performance guarantee.
Fourth, well-apprised of the above conditions obtaining at the
Project site and cognizant of the war situation at the time in
Iraq, appellant, though earlier has made representations with
the SOB regarding a possible amicable termination of the
Project as suggested by VPECI, made a complete turn-around
and insisted on acting in favor of the unjustified call by the
foreign banks.
The petitioner then came to this Court via Rule 45 of the Rules
of Court claiming that the Court of Appeals erred in affirming
the trial courts ruling that
I. RESPONDENTS ARE NOT LIABLE UNDER
THE DEED OF UNDERTAKING THEY
EXECUTED IN FAVOR OF PETITIONER IN
CONSIDERATION FOR THE ISSUANCE OF ITS
COUNTER-GUARANTEE AND THAT
PETITIONER CANNOT PASS ON TO
RESPONDENTS WHAT IT HAD PAID UNDER
THE SAID COUNTER-GUARANTEE.
II. PETITIONER CANNOT CLAIM SUBROGATION.
III. IT IS INIQUITOUS AND UNJUST FOR
PETITIONER TO HOLD RESPONDENTS
LIABLE UNDER THEIR DEED OF
UNDERTAKING.
The main issue in this case is whether the petitioner is entitled
to reimbursement of what it paid under Letter of Guarantee No.
81-194-F it issued to Al Ahli Bank of Kuwait based on the deed
of undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was
absolute, unconditional, and irrevocable the nature and extent
of its liability are analogous to those of suretyship. Its liability
accrued upon the failure of the respondents to finish the
construction of the Institute of Physical Therapy Buildings in
Baghdad.
By guaranty a person, called the guarantor, binds himself to
the creditor to fulfill the obligation of the principal debtor in case
the latter should fail to do so. If a person binds himself
solidarily with the principal debtor, the contract is called
suretyship.
Strictly speaking, guaranty and surety are nearly related, and
many of the principles are common to both. In both contracts,
there is a promise to answer for the debt or default of another.
However, in this jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is
the guarantor's own separate undertaking often supported by a
consideration separate from that supporting the contract of the
principal; the original contract of his principal is not his contract.
2. A surety assumes liability as a regular party to the
undertaking; while the liability of a guarantor is conditional
depending on the failure of the primary debtor to pay the
obligation.
3. The obligation of a surety is primary, while that of a
guarantor is secondary.
4. A surety is an original promissor and debtor from the
beginning, while a guarantor is charged on his own
undertaking.
5. A surety is, ordinarily, held to know every default of his
principal; whereas a guarantor is not bound to take notice of
the non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere
indulgence of the creditor to the principal or by want of notice
of the default of the principal, no matter how much he may be
injured thereby. A guarantor is often discharged by the mere
indulgence of the creditor to the principal, and is usually not
liable unless notified of the default of the principal.
In determining petitioners status, it is necessary to read Letter
of Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay
you on your first written or telex demand Iraq Dinars Two
Hundred Seventy One Thousand Eight Hundred Eight and fils
six hundred ten (ID271,808/610) representing 100% of the
performance bond required of V.P. EUSEBIO for the
construction of the Physical Therapy Institute, Phase II,
Baghdad, Iraq, plus interest and other incidental expenses
related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you
100% of the obligation unpaid but in no case shall such
amount exceed Iraq Dinars (ID) 271,808/610 plus interest and
other incidental expenses. (Emphasis supplied)
Guided by the abovementioned distinctions between a surety
and a guaranty, as well as the factual milieu of this case, we
find that the Court of Appeals and the trial court were correct in
ruling that the petitioner is a guarantor and not a surety. That
the guarantee issued by the petitioner is unconditional and
irrevocable does not make the petitioner a surety. As a
guaranty, it is still characterized by its subsidiary and
conditional quality because it does not take effect until the
fulfillment of the condition, namely, that the principal obligor
should fail in his obligation at the time and in the form he bound
himself. In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default
in his obligation first before resort to the guarantor could be
had. A conditional guaranty, as opposed to an unconditional
guaranty, is one which depends upon some extraneous event,
beyond the mere default of the principal, and generally upon
notice of the principals default and reasonable diligence in
exhausting proper remedies against the principal.
It appearing that Letter of Guarantee No. 81-194-F merely
stated that in the event of default by respondent VPECI the
petitioner shall pay, the obligation assumed by the petitioner
was simply that of an unconditional guaranty, not conditional
guaranty. But as earlier ruled the fact that petitioners guaranty
is unconditional does not make it a surety. Besides, surety is
never presumed. A party should not be considered a surety
where the contract itself stipulates that he is acting only as a
guarantor. It is only when the guarantor binds himself solidarily
with the principal debtor that the contract becomes one of
suretyship.
Having determined petitioners liability as guarantor, the next
question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify
resort to the guaranty. This is a mixed question of fact and law
that is better addressed by the lower courts, since this Court is
not a trier of facts.
It is a fundamental and settled rule that the findings of fact of
the trial court and the Court of Appeals are binding or
conclusive upon this Court unless they are not supported by
the evidence or unless strong and cogent reasons dictate
otherwise. The factual findings of the Court of Appeals are
normally not reviewable by us under Rule 45 of the Rules of
Court except when they are at variance with those of the trial
court. The trial court and the Court of Appeals were in unison
that the respondent contractor cannot be considered to have
defaulted in its obligations because the cause of the delay was
not primarily attributable to it.
A corollary issue is what law should be applied in determining
whether the respondent contractor has defaulted in the
performance of its obligations under the service contract. The
question of whether there is a breach of an agreement, which
includes default or mora, pertains to the essential or intrinsic
validity of a contract.
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal
systems, however, is that the intrinsic validity of a contract
must be governed by the lex contractus or proper law of the
contract. This is the law voluntarily agreed upon by the parties
(the lex loci voluntatis) or the law intended by them either
expressly or implicitly (the lex loci intentionis). The law selected
may be implied from such factors as substantial connection
with the transaction, or the nationality or domicile of the parties.
Philippine courts would do well to adopt the first and most
basic rule in most legal systems, namely, to allow the parties to
select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy
of the forum and that the chosen law must bear a substantive
relationship to the transaction.
It must be noted that the service contract between SOB and
VPECI contains no express choice of the law that would
govern it. In the United States and Europe, the two rules that
now seem to have emerged as kings of the hill are (1) the
parties may choose the governing law; and (2) in the absence
of such a choice, the applicable law is that of the State that has
the most significant relationship to the transaction and the
parties. Another authority proposed that all matters relating to
the time, place, and manner of performance and valid excuses
for non-performance are determined by the law of the place of
performance or lex loci solutionis, which is useful because it is
undoubtedly always connected to the contract in a significant
way.
In this case, the laws of Iraq bear substantial connection to the
transaction, since one of the parties is the Iraqi Government
and the place of performance is in Iraq. Hence, the issue of
whether respondent VPECI defaulted in its obligations may be
determined by the laws of Iraq. However, since that foreign law
was not properly pleaded or proved, the presumption of identity
or similarity, otherwise known as the processual presumption,
comes into play. Where foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that foreign law is
the same as ours.
Our law, specifically Article 1169, last paragraph, of the Civil
Code, provides: In reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not ready to
comply in a proper manner with what is incumbent upon him.
Default or mora on the part of the debtor is the delay in the
fulfillment of the prestation by reason of a cause imputable to
the former. It is the non-fulfillment of an obligation with respect
to time.
It is undisputed that only 51.7% of the total work had been
accomplished. The 48.3% unfinished portion consisted in the
purchase and installation of electro-mechanical equipment and
materials, which were available from foreign suppliers, thus
requiring US Dollars for their importation. The monthly billings
and payments made by SOB reveal that the agreement
between the parties was a periodic payment by the Project
owner to the contractor depending on the percentage of
accomplishment within the period. The payments were, in turn,
to be used by the contractor to finance the subsequent phase
of the work. However, as explained by VPECI in its letter to
the Department of Foreign Affairs (DFA), the payment by SOB
purely in Dinars adversely affected the completion of the
project; thus:
4. Despite protests from the plaintiff, SOB continued paying the
accomplishment billings of the Contractor purely in Iraqi Dinars
and which payment came only after some delays.
5. SOB is fully aware of the following:
5.2 That Plaintiff is a foreign contractor in Iraq and as such,
would need foreign currency (US$), to finance the purchase of
various equipment, materials, supplies, tools and to pay for the
cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or
obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the
Philippines requires the remittance into the Philippines of 70%
of the salaries of Filipino workers working abroad in US
Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency
such that the same cannot be used to purchase equipment,
materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the
CONTRACT are not available in Iraq and therefore have to be
imported;
5.7 That the government of Iraq prohibits the bringing of
local currency (Iraqui Dinars) out of Iraq and hence,
imported materials, equipment, etc., cannot be
purchased or obtained using Iraqui Dinars as medium of
acquisition.
8. Following the approved construction program of the
CONTRACT, upon completion of the civil works portion of the
installation of equipment for the building, should immediately
follow, however, the CONTRACT specified that these
equipment which are to be installed and to form part of the
PROJECT have to be procured outside Iraq since these are
not being locally manufactured. Copy f the relevant portion of
the Technical Specification is hereto attached as Annex C and
made an integral part hereof;
10. Due to the lack of Foreign currency in Iraq for this
purpose, and if only to assist the Iraqi government in
completing the PROJECT, the Contractor without any
obligation on its part to do so but with the knowledge
and consent of SOB and the Ministry of Housing &
Construction of Iraq, offered to arrange on behalf of SOB, a
foreign currency loan, through the facilities of Circle
International S.A., the Contractors Sub-contractor and SACE
MEDIO CREDITO which will act as the guarantor for this
foreign currency loan.
Arrangements were first made with Banco di Roma.
Negotiation started in June 1985. SOB is informed of the
developments of this negotiation, attached is a copy of the draft
of the loan Agreement between SOB as the Borrower and
Agent. The Several Banks, as Lender, and counter-guaranteed
by Istituto Centrale Per II Credito A Medio Termine
(Mediocredito) Sezione Speciale Per LAssicurazione Del
Credito AllExportazione (Sace). Negotiations went on and
continued until it suddenly collapsed due to the reported default
by Iraq in the payment of its obligations with Italian
government, copy of the news clipping dated June 18, 1986 is
hereto attached as Annex D to form an integral part hereof;
15. On September 15, 1986, Contractor received information
from Circle International S.A. that because of the news report
that Iraq defaulted in its obligations with European banks, the
approval by Banco di Roma of the loan to SOB shall be
deferred indefinitely, a copy of the letter of Circle International
together with the news clippings are hereto attached as
Annexes F and F-1, respectively.
As found by both the Court of Appeals and the trial court, the
delay or the non-completion of the Project was caused by
factors not imputable to the respondent contractor. It was
rather due mainly to the persistent violations by SOB of the
terms and conditions of the contract, particularly its failure to
pay 75% of the accomplished work in US Dollars. Indeed,
where one of the parties to a contract does not perform in a
proper manner the prestation which he is bound to perform
under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay
if the other party fails to perform the obligation incumbent upon
him.
The petitioner, however, maintains that the payments by SOB
of the monthly billings in purely Iraqi Dinars did not render
impossible the performance of the Project by VPECI. Such
posture is quite contrary to its previous representations. In his
26 March 1987 letter to the Office of the Middle Eastern and
African Affairs (OMEAA), DFA, Manila, petitioners Executive
Vice-President Jesus M. Taedo stated that while VPECI had
taken every possible measure to complete the Project, the war
situation in Iraq, particularly the lack of foreign exchange, was
proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of
the project but the war situation in Iraq particularly the lack of
foreign exchange is proving to be a great obstacle. Our
performance counterguarantee was called last 26 October
1986 when the negotiations for a foreign currency loan with the
Italian government through Banco de Roma bogged down
following news report that Iraq has defaulted in its obligation
with major European banks. Unless the situation in Iraq is
improved as to allay the banks apprehension, there is no
assurance that the project will ever be completed.
In order that the debtor may be in default it is necessary that
the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of
the creditor must have ended.
As stated earlier, SOB cannot yet demand complete
performance from VPECI because it has not yet itself
performed its obligation in a proper manner, particularly the
payment of the 75% of the cost of the Project in US Dollars.
The VPECI cannot yet be said to have incurred in delay. Even
assuming that there was delay and that the delay was
attributable to VPECI, still the effects of that delay ceased upon
the renunciation by the creditor, SOB, which could be implied
when the latter granted several extensions of time to the
former. Besides, no demand has yet been made by SOB
against the respondent contractor. Demand is generally
necessary even if a period has been fixed in the obligation.
And default generally begins from the moment the creditor
demands judicially or extra-judicially the performance of the
obligation. Without such demand, the effects of default will not
arise.
Moreover, the petitioner as a guarantor is entitled to the benefit
of excussion, that is, it cannot be compelled to pay the creditor
SOB unless the property of the debtor VPECI has been
exhausted and all legal remedies against the said debtor have
been resorted to by the creditor. It could also set up
compensation as regards what the creditor SOB may owe the
principal debtor VPECI. In this case, however, the petitioner
has clearly waived these rights and remedies by making the
payment of an obligation that was yet to be shown to be
rightfully due the creditor and demandable of the principal
debtor.
As found by the Court of Appeals, the petitioner fully knew that
the joint venture contractor had collectibles from SOB which
could be set off with the amount covered by the performance
guarantee. In February 1987, the OMEAA transmitted to the
petitioner a copy of a telex dated 10 February 1987 of the
Philippine Ambassador in Baghdad, Iraq, informing it of the
note verbale sent by the Iraqi Ministry of Foreign Affairs stating
that the past due obligations of the joint venture contractor from
the petitioner would be deducted from the dues of the two
contractors.
Also, in the project situationer attached to the letter to the
OMEAA dated 26 March 1987, the petitioner raised as among
the arguments to be presented in support of the cancellation of
the counter-guarantee the fact that the amount of
ID281,414/066 retained by SOB from the Project was more
than enough to cover the counter-guarantee of ID271,808/610;
thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
The Iraqi Government does not have the
foreign exchange to fulfill its contractual
obligations of paying 75% of progress
billings in US dollars.
It could also be argued that the amount of
ID281,414/066 retained by SOB from the
proposed project is more than the amount
of the outstanding counterguarantee.
In a nutshell, since the petitioner was aware of the contractors
outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the
predicament of the respondents. In fact, in its 13 May 1987
letter to the OMEAA, DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the
project was mainly due to SOBs violation of contract terms and
as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be
an instrument in any case of inequity committed against a
Filipino contractor. It is for this reason that we are constrained
to seek your assistance not only in ascertaining the veracity of
Al Ahli Banks claim that it has paid Rafidain Bank but possibly
averting such an event. As any payment effected by the banks
will complicate matters, we cannot help underscore the
urgency of VPECIs bid for government intervention for the
amicable termination of the contract and release of the
performance guarantee.
But surprisingly, though fully cognizant of SOBs violations of
the service contract and VPECIs outstanding receivables from
SOB, as well as the situation obtaining in the Project site
compounded by the Iran-Iraq war, the petitioner opted to pay
the second layer guarantor not only the full amount of the
performance bond counter-guarantee but also interests and
penalty charges.
This brings us to the next question: May the petitioner as a
guarantor secure reimbursement from the respondents for
what it has paid under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be
indemnified by the latter and would be legally subrogated to the
rights which the creditor has against the debtor. However, a
person who makes payment without the knowledge or against
the will of the debtor has the right to recover only insofar as the
payment has been beneficial to the debtor. If the obligation was
subject to defenses on the part of the debtor, the same
defenses which could have been set up against the creditor
can be set up against the paying guarantor.
From the findings of the Court of Appeals and the trial court, it
is clear that the payment made by the petitioner guarantor did
not in any way benefit the principal debtor, given the project
status and the conditions obtaining at the Project site at that
time. Moreover, the respondent contractor was found to have
valid defenses against SOB, which are fully supported by
evidence and which have been meritoriously set up against the
paying guarantor, the petitioner in this case. And even if the
deed of undertaking and the surety bond secured petitioners
guaranty, the petitioner is precluded from enforcing the same
by reason of the petitioners undue payment on the guaranty.
Rights under the deed of undertaking and the surety bond do
not arise because these contracts depend on the validity of the
enforcement of the guaranty.
The petitioner guarantor should have waited for the natural
course of guaranty: the debtor VPECI should have, in the first
place, defaulted in its obligation and that the creditor SOB
should have first made a demand from the principal debtor. It is
only when the debtor does not or cannot pay, in whole or in
part, that the guarantor should pay. When the petitioner
guarantor in this case paid against the will of the debtor VPECI,
the debtor VPECI may set up against it defenses available
against the creditor SOB at the time of payment. This is the
hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing
the necessary support and assistance in order to enable
[Filipino exporters and contractors to operate viably under the
prevailing economic and business conditions, the petitioner
should have exercised prudence and caution under the
circumstances. As aptly put by the Court of Appeals, it would
be the height of inequity to allow the petitioner to pass on its
losses to the Filipino contractor VPECI which had sternly
warned against paying the Al Ahli Bank and constantly
apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby
DENIED for lack of merit, and the decision of the Court of
appeals in CA-G.R. CV No. 39302 is AFFIRMED.
No pronouncement as to costs. SO ORDERED.
EDI-STAFFBUILDERS INTERNATIONAL, INC., vs.
NATIONAL LABOR RELATIONS COMMISSION and
ELEAZAR S. GRAN; G.R. No. 145587; October 26, 2007;
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari1 seeks to set aside the
October 18, 2000 Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 56120 which affirmed the January 15, 1999
Decision3 and September 30, 1999 Resolution4 rendered by
the National Labor Relations Commission (NLRC) (Third
Division) in POEA ADJ (L) 94-06-2194, ordering Expertise
Search International (ESI), EDI-Staffbuilders International, Inc.
(EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and
severally to pay Eleazar S. Gran (Gran) the amount of USD
16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and
placement of Overseas Filipino Workers (OFWs).5 ESI is
another recruitment agency which collaborated with EDI to
process the documentation and deployment of private
respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and
deployed by ESI to work for OAB, in Riyadh, Kingdom of Saudi
Arabia.6
It appears that OAB asked EDI through its October 3, 1993
letter for curricula vitae of qualified applicants for the position of
"Computer Specialist."7 In a facsimile transmission dated
November 29, 1993, OAB informed EDI that, from the
applicants' curricula vitae submitted to it for evaluation, it
selected Gran for the position of "Computer Specialist." The
faxed letter also stated that if Gran agrees to the terms and
conditions of employment contained in it, one of which was a
monthly salary of SR (Saudi Riyal) 2,250.00 (USD 600.00), EDI
may arrange for Gran's immediate dispatch.8
After accepting OAB's offer of employment, Gran signed an
employment contract9 that granted him a monthly salary of
USD 850.00 for a period of two years. Gran was then deployed
to Riyadh, Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his
monthly salary—his employment contract stated USD 850.00;
while his Philippine Overseas Employment Agency (POEA)
Information Sheet indicated USD 600.00 only. However,
through the assistance of the EDI office in Riyadh, OAB agreed
to pay Gran USD 850.00 a month.10
After Gran had been working for about five months for OAB,
his employment was terminated through OAB's July 9, 1994
letter,11 on the following grounds:
1. Non-compliance to contract requirements by the
recruitment agency primarily on your salary and
contract duration.
2. Non-compliance to pre-qualification requirements
by the recruitment agency[,] vide OAB letter ref. F-
5751-93, dated October 3, 1993.12
3. Insubordination or disobedience to Top
Management Order and/or instructions (non-submittal
of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of
SR 2,948.00 representing his final pay, and on the same day,
he executed a Declaration13 releasing OAB from any financial
obligation or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint,
on July 21, 1994, against ESI/EDI, OAB, Country Bankers
Insurance Corporation, and Western Guaranty Corporation
with the NLRC, National Capital Region, Quezon City, which
was docketed as POEA ADJ (L) 94-06-2194 for underpayment
of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R.
Caday, to whom Gran's case was assigned, ruled that there
was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of
salaries since according to the POEA-Overseas Contract
Worker (OCW) Information Sheet, Gran's monthly salary was
USD 600.00, and in his Confirmation of Appointment as
Computer Specialist, his monthly basic salary was fixed at SR
2,500.00, which was equivalent to USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to
justify that Gran had no claim for unpaid salaries or wages
against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter
found that Gran failed to refute EDI's allegations; namely, (1)
that Gran did not submit a single activity report of his daily
activity as dictated by company policy; (2) that he was not
qualified for the job as computer specialist due to his
insufficient knowledge in programming and lack of knowledge
in ACAD system; (3) that Gran refused to follow management's
instruction for him to gain more knowledge of the job to prove
his worth as computer specialist; (4) that Gran's employment
contract had never been substituted; (5) and that Gran was
paid a monthly salary of USD 850.00, and USD 350.00 monthly
as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly
dismissed from his work due to insubordination, disobedience,
and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's
complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the
NLRC, Third Division. However, it appears from the records
that Gran failed to furnish EDI with a copy of his Appeal
Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of
Gran's contract to ESI is actually "reprocessing," which is a
prohibited transaction under Article 34 (b) of the Labor Code.
This scheme constituted misrepresentation through the
conspiracy between EDI and ESI in misleading Gran and even
POEA of the actual terms and conditions of the OFW's
employment. In addition, it was found that Gran did not commit
any act that constituted a legal ground for dismissal. The
alleged non-compliance with contractual stipulations relating to
Gran's salary and contract duration, and the absence of pre-
qualification requirements cannot be attributed to Gran but to
EDI, which dealt directly with OAB. In addition, the charge of
insubordination was not substantiated, and Gran was not even
afforded the required notice and investigation on his alleged
offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and
rendered a new one, the dispositive portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE.
Respondents Expertise Search International, Inc., EDI
Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr
Est. (OAB) are hereby ordered jointly and severally
liable to pay the complainant Eleazar Gran the
Philippine peso equivalent at the time of actual
payment of SIXTEEN THOUSAND ONE HUNDRED
FIFTY US DOLLARS (US$16,150.00) representing
his salaries for the unexpired portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment 17 on March
29, 1999 with the NLRC and petitioner receiving a copy of this
motion on the same date.18
To prevent the execution, petitioner filed an Opposition19 to
Gran's motion arguing that the Writ of Execution cannot issue
because it was not notified of the appellate proceedings before
the NLRC and was not given a copy of the memorandum of
appeal nor any opportunity to participate in the appeal.
Seeing that the NLRC did not act on Gran's motion after EDI
had filed its Opposition, petitioner filed, on August 26, 1999, a
Motion for Reconsideration of the NLRC Decision after
receiving a copy of the Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioner's
Motion for Reconsideration, ratiocinating that the issues and
arguments raised in the motion "had already been amply
discussed, considered, and ruled upon" in the Decision, and
that there was "no cogent reason or patent or palpable error
that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for
Certiorari before the CA. Petitioner claimed in its petition that
the NLRC committed grave abuse of discretion in giving due
course to the appeal despite Gran's failure to perfect the
appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive
issues of EDI's petition.
On the procedural issue, the appellate court held that "Gran's
failure to furnish a copy of his appeal memorandum [to EDI
was] a mere formal lapse, an excusable neglect and not a
jurisdictional defect which would justify the dismissal of his
appeal."22 The court also held that petitioner EDI failed to prove
that private respondent was terminated for a valid cause and in
accordance with due process; and that Gran's Declaration
releasing OAB from any monetary obligation had no force and
effect. The appellate court ratiocinated that EDI had the burden
of proving Gran's incompetence; however, other than the
termination letter, no evidence was presented to show how and
why Gran was considered to be incompetent. The court held
that since the law requires the recruitment agencies to subject
OFWs to trade tests before deployment, Gran must have been
competent and qualified; otherwise, he would not have been
hired and deployed abroad.
As for the charge of insubordination and disobedience due to
Gran's failure to submit a "Daily Activity Report," the appellate
court found that EDI failed to show that the submission of the
"Daily Activity Report" was a part of Gran's duty or the
company's policy. The court also held that even if Gran was
guilty of insubordination, he should have just been suspended
or reprimanded, but not dismissed.
The CA also held that Gran was not afforded due process,
given that OAB did not abide by the twin notice requirement.
The court found that Gran was terminated on the same day he
received the termination letter, without having been apprised of
the bases of his dismissal or afforded an opportunity to explain
his side.
Finally, the CA held that the Declaration signed by Gran did not
bar him from demanding benefits to which he was entitled. The
appellate court found that the Declaration was in the form of a
quitclaim, and as such is frowned upon as contrary to public
policy especially where the monetary consideration given in the
Declaration was very much less than what he was legally
entitled to—his backwages amounting to USD 16,150.00.
As a result of these findings, on October 18, 2000, the
appellate court denied the petition to set aside the NLRC
Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH
A COPY OF HIS APPEAL MEMORANDUM TO
PETITIONER EDI WOULD CONSTITUTE A
JURISDICTIONAL DEFECT AND A DEPRIVATION
OF PETITIONER EDI'S RIGHT TO DUE PROCESS
AS WOULD JUSTIFY THE DISMISSAL OF GRAN'S
APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED
BY WAY OF SUBSTANTIAL EVIDENCE THAT
GRAN'S TERMINATION WAS JUSTIFIABLE BY
REASON OF INCOMPETENCE. COROLLARY
HERETO, WHETHER THE PRIETO VS. NLRC
RULING, AS APPLIED BY THE COURT OF
APPEALS, IS APPLICABLE IN THE INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY
WAY OF SUBSTANTIAL EVIDENCE THAT GRAN'S
TERMINATION WAS JUSTIFIABLE BY REASON OF
INSUBORDINATION AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE
PROCESS PRIOR TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO
BACKWAGES FOR THE UNEXPIRED PORTION OF
HIS CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to
furnish EDI with his Appeal Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to
Provide Petitioner a Copy of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of
the Appeal Memorandum constitutes a jurisdictional defect and
a deprivation of due process that would warrant a rejection of
the appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to
furnish a copy of the appeal to the adverse party is not
fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this
Court set aside the order of the NLRC which dismissed an
appeal on the sole ground that the appellant did not furnish the
appellee a memorandum of appeal contrary to the
requirements of Article 223 of the New Labor Code and
Section 9, Rule XIII of its Implementing Rules and Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the
order of dismissal of an appeal to the NLRC based on the
ground that "there is no showing whatsoever that a copy of the
appeal was served by the appellant on the appellee"25 was
annulled. The Court ratiocinated as follows:
The failure to give a copy of the appeal to the adverse
party was a mere formal lapse, an excusable neglect.
Time and again We have acted on petitions to review
 decisions of the Court of Appeals even in the absence
of proof of service of a copy thereof to the Court of
Appeals as required by Section 1 of Rule 45, Rules of
Court. We act on the petitions and simply require
the petitioners to comply with the rule.26
(Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation
Philippines Employees Labor Union-FFW v. National Labor
Relations Commission,27 Pagdonsalan v. NLRC,28 and in
Sunrise Manning Agency, Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure
to furnish the adverse party with a copy of the appeal is treated
only as a formal lapse, an excusable neglect, and hence, not a
jurisdictional defect. Accordingly, in such a situation, the appeal
should not be dismissed; however, it should not be given due
course either. As enunciated in J.D. Magpayo, the duty that is
imposed on the NLRC, in such a case, is to require the
appellant to comply with the rule that the opposing party
should be provided with a copy of the appeal
memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal
Memorandum is excusable, the abject failure of the NLRC to
order Gran to furnish EDI with the Appeal Memorandum
constitutes grave abuse of discretion.
The records reveal that the NLRC discovered that Gran failed
to furnish EDI a copy of the Appeal Memorandum. The NLRC
then ordered Gran to present proof of service. In compliance
with the order, Gran submitted a copy of Camp Crame Post
Office's list of mail/parcels sent on April 7, 1998.30 The post
office's list shows that private respondent Gran sent two pieces
of mail on the same date: one addressed to a certain Dan O.
de Guzman of Legaspi Village, Makati; and the other appears
to be addressed to Neil B. Garcia (or Gran), 31 of Ermita,
Manila—both of whom are not connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI
indeed received a copy of the Appeal Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the
proof and completeness of service in proceedings before the
NLRC:
Section 5.32 Proof and completeness of service.—The
return is prima facie proof of the facts indicated
therein. Service by registered mail is complete
upon receipt by the addressee or his agent; but if
the addressee fails to claim his mail from the post
office within five (5) days from the date of first notice
of the postmaster, service shall take effect after such
time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only
deemed complete when the addressee or his agent received
the mail or after five (5) days from the date of first notice of the
postmaster. However, the NLRC Rules do not state what would
constitute proper proof of service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of
service:
Section 13. Proof of service.—Proof of personal
service shall consist of a written admission of the
party served or the official return of the server, or the
affidavit of the party serving, containing a full
statement of the date, place and manner of service. If
the service is by ordinary mail, proof thereof shall
consist of an affidavit of the person mailing of facts
showing compliance with section 7 of this Rule. If
service is made by registered mail, proof shall be
made by such affidavit and registry receipt issued
by the mailing office. The registry return card
shall be filed immediately upon its receipt by the
sender, or in lieu thereof the unclaimed letter
together with the certified or sworn copy of the
notice given by the postmaster to the addressee
(emphasis supplied).
Based on the foregoing provision, it is obvious that the list
submitted by Gran is not conclusive proof that he had served a
copy of his appeal memorandum to EDI, nor is it conclusive
proof that EDI received its copy of the Appeal Memorandum.
He should have submitted an affidavit proving that he mailed
the Appeal Memorandum together with the registry receipt
issued by the post office; afterwards, Gran should have
immediately filed the registry return card.
Hence, after seeing that Gran failed to attach the proof of
service, the NLRC should not have simply accepted the post
office's list of mail and parcels sent; but it should have
required Gran to properly furnish the opposing parties
with copies of his Appeal Memorandum as prescribed in
J.D. Magpayo and the other cases. The NLRC should not
have proceeded with the adjudication of the case, as this
constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have
furnished petitioner EDI a copy of the Appeal Memorandum
before rendering judgment reversing the dismissal of Gran's
complaint constitutes an evasion of the pertinent NLRC Rules
and established jurisprudence. Worse, this failure deprived EDI
of procedural due process guaranteed by the Constitution
which can serve as basis for the nullification of proceedings in
the appeal before the NLRC. One can only surmise the shock
and dismay that OAB, EDI, and ESI experienced when they
thought that the dismissal of Gran's complaint became final,
only to receive a copy of Gran's Motion for Execution of
Judgment which also informed them that Gran had obtained a
favorable NLRC Decision. This is not level playing field and
absolutely unfair and discriminatory against the employer and
the job recruiters. The rights of the employers to procedural
due process cannot be cavalierly disregarded for they too have
rights assured under the Constitution.
However, instead of annulling the dispositions of the NLRC and
remanding the case for further proceedings we will resolve the
petition based on the records before us to avoid a protracted
litigation.33
The second and third issues have a common matter—whether
there was just cause for Gran's dismissal—hence, they will be
discussed jointly.
Second and Third Issues: Whether Gran's dismissal is
justifiable by reason of incompetence, insubordination,
and disobedience
In cases involving OFWs, the rights and obligations among and
between the OFW, the local recruiter/agent, and the foreign
employer/principal are governed by the employment contract.
A contract freely entered into is considered law between the
parties; and hence, should be respected. In formulating the
contract, the parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public
order, or public policy.34
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters
not provided for in the contract (e.g. specific causes for
termination, termination procedures, etc.). Being the law
intended by the parties (lex loci intentiones) to apply to the
contract, Saudi Labor Laws should govern all matters relating
to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the
foreign law. The foreign law is treated as a question of fact to
be properly pleaded and proved as the judge or labor arbiter
cannot take judicial notice of a foreign law. He is presumed to
know only domestic or forum law.35
Unfortunately for petitioner, it did not prove the pertinent Saudi
laws on the matter; thus, the International Law doctrine of
presumed-identity approach or processual presumption comes
into play.36 Where a foreign law is not pleaded or, even if
pleaded, is not proved, the presumption is that foreign law is
the same as ours.37 Thus, we apply Philippine labor laws in
determining the issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally
dismissed due to incompetence and insubordination or
disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine
law and jurisprudence that the employer should prove that the
dismissal of employees or personnel is legal and just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to
security of tenure and their right to be protected
against dismissal except for a just and authorized
cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought
to be terminated a written notice containing a
statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to
defend himself with the assistance of his
representative if he so desires in accordance with
company rules and regulations promulgated pursuant
to guidelines set by the Department of Labor and
Employment. Any decision taken by the employer
shall be without prejudice to the right of the workers to
contest the validity or legality of his dismissal by filing
a complaint with the regional branch of the National
Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized
cause shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or
illegal dismissal cases, the employer has the burden of proving
that the dismissal is for just and valid causes; and failure to do
so would necessarily mean that the dismissal was not justified
and therefore illegal.40 Taking into account the character of the
charges and the penalty meted to an employee, the employer
is bound to adduce clear, accurate, consistent, and convincing
evidence to prove that the dismissal is valid and legal.41 This is
consistent with the principle of security of tenure as guaranteed
by the Constitution and reinforced by Article 277 (b) of the
Labor Code of the Philippines.42
In the instant case, petitioner claims that private respondent
Gran was validly dismissed for just cause, due to
incompetence and insubordination or disobedience. To prove
its allegations, EDI submitted two letters as evidence. The first
is the July 9, 1994 termination letter,43 addressed to Gran, from
Andrea E. Nicolaou, Managing Director of OAB. The second is
an unsigned April 11, 1995 letter44 from OAB addressed to EDI
and ESI, which outlined the reasons why OAB had terminated
Gran's employment.
Petitioner claims that Gran was incompetent for the Computer
Specialist position because he had "insufficient knowledge in
programming and zero knowledge of [the] ACAD system." 45
Petitioner also claims that Gran was justifiably dismissed due
to insubordination or disobedience because he continually
failed to submit the required "Daily Activity Reports."46
However, other than the abovementioned letters, no other
evidence was presented to show how and why Gran was
considered incompetent, insubordinate, or disobedient.
Petitioner EDI had clearly failed to overcome the burden of
proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent
due to his "insufficient knowledge in programming and zero
knowledge of the ACAD system" based only on the above
mentioned letters, without any other evidence, cannot be given
credence.
An allegation of incompetence should have a factual
foundation. Incompetence may be shown by weighing it
against a standard, benchmark, or criterion. However, EDI
failed to establish any such bases to show how petitioner found
Gran incompetent.
In addition, the elements that must concur for the charge of
insubordination or willful disobedience to prosper were not
present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for
dismissal, the following twin elements must concur:
(1) the employee's assailed conduct must have been
willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must
have been reasonable, lawful, made known to the
employee and must pertain to the duties which he had
been engaged to discharge.47
EDI failed to discharge the burden of proving Gran's
insubordination or willful disobedience. As indicated by the
second requirement provided for in Micro Sales Operation
Network, in order to justify willful disobedience, we must
determine whether the order violated by the employee is
reasonable, lawful, made known to the employee, and pertains
to the duties which he had been engaged to discharge. In the
case at bar, petitioner failed to show that the order of the
company which was violated—the submission of "Daily Activity
Reports"—was part of Gran's duties as a Computer Specialist.
Before the Labor Arbiter, EDI should have provided a copy of
the company policy, Gran's job description, or any other
document that would show that the "Daily Activity Reports"
were required for submission by the employees, more
particularly by a Computer Specialist.
Even though EDI and/or ESI were merely the local employment
or recruitment agencies and not the foreign employer, they
should have adduced additional evidence to convincingly show
that Gran's employment was validly and legally terminated. The
burden devolves not only upon the foreign-based employer but
also on the employment or recruitment agency for the latter is
not only an agent of the former, but is also solidarily liable with
the foreign principal for any claims or liabilities arising from the
dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably
dismissed due to incompetence, insubordination, or willful
disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used
by the CA in its Decision, is not applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their
deployment, the petitioners were subjected to trade tests
required by law to be conducted by the recruiting agency to
insure employment of only technically qualified workers for the
foreign principal."50 The CA, using the ruling in the said case,
ruled that Gran must have passed the test; otherwise, he would
not have been hired. Therefore, EDI was at fault when it
deployed Gran who was allegedly "incompetent" for the job.
According to petitioner, the Prieto ruling is not applicable
because in the case at hand, Gran misrepresented himself in
his curriculum vitae as a Computer Specialist; thus, he was not
qualified for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the
required trade test is to weed out incompetent applicants from
the pool of available workers. It is supposed to reveal
applicants with false educational backgrounds, and expose
bogus qualifications. Since EDI deployed Gran to Riyadh, it
can be presumed that Gran had passed the required trade test
and that Gran is qualified for the job. Even if there was no
objective trade test done by EDI, it was still EDI's responsibility
to subject Gran to a trade test; and its failure to do so only
weakened its position but should not in any way prejudice
Gran. In any case, the issue is rendered moot and academic
because Gran's incompetency is unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws,
Philippine Labor laws and regulations shall govern the
relationship between Gran and EDI. Thus, our laws and rules
on the requisites of due process relating to termination of
employment shall apply.
Petitioner EDI claims that private respondent Gran was
afforded due process, since he was allowed to work and
improve his capabilities for five months prior to his
termination.51 EDI also claims that the requirements of due
process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya
Shipping Services, Inc. v. NLRC,53 cited by the CA in its
Decision, were properly observed in the present case.
This position is untenable.
In Agabon v. NLRC,54 this Court held that:
Procedurally, (1) if the dismissal is based on a just
cause under Article 282, the employer must give the
employee two written notices and a hearing or
opportunity to be heard if requested by the employee
before terminating the employment: a notice
specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based
on authorized causes under Articles 283 and 284, the
 employer must give the employee and the
Department of Labor and Employment written notices
30 days prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be
given two (2) notices before their employment could be
terminated: (1) a first notice to apprise the employees of their
fault, and (2) a second notice to communicate to the
employees that their employment is being terminated. In
between the first and second notice, the employees should be
given a hearing or opportunity to defend themselves personally
or by counsel of their choice.55
A careful examination of the records revealed that, indeed,
OAB's manner of dismissing Gran fell short of the two notice
requirement. While it furnished Gran the written notice
informing him of his dismissal, it failed to furnish Gran the
written notice apprising him of the charges against him, as
prescribed by the Labor Code.56 Consequently, he was denied
the opportunity to respond to said notice. In addition, OAB did
not schedule a hearing or conference with Gran to defend
himself and adduce evidence in support of his defenses.
Moreover, the July 9, 1994 termination letter was effective on
the same day. This shows that OAB had already condemned
Gran to dismissal, even before Gran was furnished the
termination letter. It should also be pointed out that OAB failed
to give Gran the chance to be heard and to defend himself with
the assistance of a representative in accordance with Article
277 of the Labor Code. Clearly, there was no intention to
provide Gran with due process. Summing up, Gran was
notified and his employment arbitrarily terminated on the same
day, through the same letter, and for unjustified grounds.
Obviously, Gran was not afforded due process.
Pursuant to the doctrine laid down in Agabon,57 an employer is
liable to pay nominal damages as indemnity for violating the
employee's right to statutory due process. Since OAB was in
breach of the due process requirements under the Labor Code
and its regulations, OAB, ESI, and EDI, jointly and solidarily,
are liable to Gran in the amount of PhP 30,000.00 as
indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a
fixed period of employment, in cases arising before the
effectivity of R.A. No. 804258 (Migrant Workers and Overseas
Filipinos Act) on August 25, 1995, that when the contract is for
a fixed term and the employees are dismissed without just
cause, they are entitled to the payment of their salaries
corresponding to the unexpired portion of their contract. 59 On
the other hand, for cases arising after the effectivity of R.A. No.
8042, when the termination of employment is without just, valid
or authorized cause as defined by law or contract, the worker
shall be entitled to the full reimbursement of his placement fee
with interest of twelve percent (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term
whichever is less.60
In the present case, the employment contract provides that the
employment contract shall be valid for a period of two (2) years
from the date the employee starts to work with the employer. 61
Gran arrived in Riyadh, Saudi Arabia and started to work on
February 7, 1994;62 hence, his employment contract is until
February 7, 1996. Since he was illegally dismissed on July 9,
1994, before the effectivity of R.A. No. 8042, he is therefore
entitled to backwages corresponding to the unexpired portion
of his contract, which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages
and mainly relies on the Declaration which is claimed to have
been freely and voluntarily executed by Gran. The relevant
portions of the Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST)
AFTER RECEIVING MY FINAL SETTLEMENT ON
THIS DATE THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND
NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT
(COMPENSATION) FOR THE SERVICES I
RENDERED TO OAB ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO
FINANCIAL OBLIGATION IN MY FAVOUR AFTER
RECEIVING THE ABOVE MENTIONED AMOUNT IN
CASH.
I STATE FURTHER THAT OAB EST. HAS NO
OBLIGATION TOWARDS ME IN WHATEVER FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS
STATEMENT BY AFFIXING MY SIGNATURE
VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of
quitclaims or waivers, more particularly those executed by
employees. This requirement was clearly articulated by Chief
Justice Artemio V. Panganiban in Land and Housing
Development Corporation v. Esquillo:
Quitclaims, releases and other waivers of benefits
granted by laws or contracts in favor of workers
should be strictly scrutinized to protect the weak and
the disadvantaged. The waivers should be carefully
examined, in regard not only to the words and
terms used, but also the factual circumstances
under which they have been executed.63 (Emphasis
supplied.)
This Court had also outlined in Land and Housing
Development Corporation, citing Periquet v. NLRC,64 the
parameters for valid compromise agreements, waivers, and
quitclaims:
Not all waivers and quitclaims are invalid as against
public policy. If the agreement was voluntarily entered
into and represents a reasonable settlement, it is
binding on the parties and may not later be disowned
simply because of a change of mind. It is only where
there is clear proof that the waiver was wangled from
an unsuspecting or gullible person, or the terms of
settlement are unconscionable on its face, that the
law will step in to annul the questionable transaction.
But where it is shown that the person making the
waiver did so voluntarily, with full understanding
of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding
undertaking. (Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is
not.
The Court finds the waiver and quitclaim null and void for the
following reasons:
1. The salary paid to Gran upon his termination, in the amount
of SR 2,948.00, is unreasonably low. As correctly pointed out
by the court a quo, the payment of SR 2,948.00 is even lower
than his monthly salary of SR 3,190.00 (USD 850.00). In
addition, it is also very much less than the USD 16,150.00
which is the amount Gran is legally entitled to get from
petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is
actually the payment for Gran's salary for the services he
rendered to OAB as Computer Specialist. If the Declaration is a
quitclaim, then the consideration should be much much more
than the monthly salary of SR 3,190.00 (USD 850.00)—
although possibly less than the estimated Gran's salaries for
the remaining duration of his contract and other benefits as
employee of OAB. A quitclaim will understandably be lower
than the sum total of the amounts and benefits that can
possibly be awarded to employees or to be earned for the
remainder of the contract period since it is a compromise
where the employees will have to forfeit a certain portion of the
amounts they are claiming in exchange for the early payment
of a compromise amount. The court may however step in when
such amount is unconscionably low or unreasonable although
the employee voluntarily agreed to it. In the case of the
Declaration, the amount is unreasonably small compared to the
future wages of Gran.
3. The factual circumstances surrounding the execution of the
Declaration would show that Gran did not voluntarily and freely
execute the document. Consider the following chronology of
events:
a. On July 9, 1994, Gran received a copy of his letter
of termination;
b. On July 10, 1994, Gran was instructed to depart
Saudi Arabia and required to pay his plane ticket; 65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh,
Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before
the NLRC.
The foregoing events readily reveal that Gran was "forced" to
sign the Declaration and constrained to receive the amount of
SR 2,948.00 even if it was against his will—since he was told
on July 10, 1994 to leave Riyadh on July 12, 1994. He had no
other choice but to sign the Declaration as he needed the
amount of SR 2,948.00 for the payment of his ticket. He could
have entertained some apprehensions as to the status of his
stay or safety in Saudi Arabia if he would not sign the quitclaim.
4. The court a quo is correct in its finding that the Declaration is
a contract of adhesion which should be construed against the
employer, OAB. An adhesion contract is contrary to public
policy as it leaves the weaker party—the employee—in a "take-
it-or-leave-it" situation. Certainly, the employer is being unjust
to the employee as there is no meaningful choice on the part of
the employee while the terms are unreasonably favorable to
the employer.66
Thus, the Declaration purporting to be a quitclaim and waiver is
unenforceable under Philippine laws in the absence of proof of
the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of
quitclaims and waivers of employees under Philippine laws,
said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the
corresponding amounts, which the employees are giving up in
consideration of the fixed compromise amount;
3. A statement that the employer has clearly explained to the
employee in English, Filipino, or in the dialect known to the
employees—that by signing the waiver or quitclaim, they are
forfeiting or relinquishing their right to receive the benefits
which are due them under the law; and
4. A statement that the employees signed and executed the
document voluntarily, and had fully understood the contents of
the document and that their consent was freely given without
any threat, violence, duress, intimidation, or undue influence
exerted on their person.
It is advisable that the stipulations be made in English and
Tagalog or in the dialect known to the employee. There
should be two (2) witnesses to the execution of the quitclaim
who must also sign the quitclaim. The document should be
subscribed and sworn to under oath preferably before any
administering official of the Department of Labor and
Employment or its regional office, the Bureau of Labor
Relations, the NLRC or a labor attaché in a foreign country.
Such official shall assist the parties regarding the execution of
the quitclaim and waiver.67 This compromise settlement
becomes final and binding under Article 227 of the Labor Code
which provides that:
[A]ny compromise settlement voluntarily agreed upon
with the assistance of the Bureau of Labor Relations
or the regional office of the DOLE, shall be final and
binding upon the parties and the NLRC or any court
"shall not assume jurisdiction over issues involved
therein except in case of non-compliance thereof or if
there is prima facie evidence that the settlement was
obtained through fraud, misrepresentation, or
coercion.
It is made clear that the foregoing rules on quitclaim or waiver
shall apply only to labor contracts of OFWs in the absence of
proof of the laws of the foreign country agreed upon to govern
said contracts. Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000
Decision in CA-G.R. SP No. 56120 of the Court of Appeals
affirming the January 15, 1999 Decision and September 30,
1999 Resolution of the NLRC
is AFFIRMED with the MODIFICATION that petitioner EDI-
Staffbuilders International, Inc. shall pay the amount of PhP
30,000.00 to respondent Gran as nominal damages for non-
compliance with statutory due process. No costs. SO
ORDERED.
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO
B. EVANGELISTA, and the rest of 1,767 NAMED-
COMPLAINANTS, thru and by their Attorney-in-fact, Atty.
GERARDO A. DEL MUNDO vs. PHILIPPINE OVERSEAS
EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS COMMISSION, BROWN &
ROOT INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS CORPORATION; QUIASON,
J.:
The petition in G.R. No. 104776, entitled "Bienvenido M.
Cadalin, et. al. v. Philippine Overseas Employment
Administration's Administrator, et. al.," was filed under Rule 65
of the Revised Rules of Court:
(1) to modify the Resolution dated
September 2, 1991 of the National Labor
Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460; (2) to render a new decision: (i)
declaring private respondents as in default;
(ii) declaring the said labor cases as a class
suit; (iii) ordering Asia International Builders
Corporation (AIBC) and Brown and Root
International Inc. (BRII) to pay the claims of
the 1,767 claimants in said labor cases; (iv)
declaring Atty. Florante M. de Castro guilty of
forum-shopping; and (v) dismissing POEA
Case No. L-86-05-460; and
(3) to reverse the Resolution dated March
24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M.
Cadalin, et. al., v. Hon. National Labor Relations Commission,
et. al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated
September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-799
and
L-86-05-460 insofar as it: (i) applied the
three-year prescriptive period under the
Labor Code of the Philippines instead of the
ten-year prescriptive period under the Civil
Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the
computation of petitioners' overtime pay; and
(2) to reverse the Resolution dated March
24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia
International Builders Corporation, et. al., v. National Labor
Relations Commission, et. al." was filed under Rule 65 of the
Revised Rules of Court:
(1) to reverse the Resolution dated
September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-779
and
L-86-05-460, insofar as it granted the claims
of 149 claimants; and
(2) to reverse the Resolution dated March
21, 1992 of NLRC insofar as it denied the
motions for reconsideration of AIBC and BRII
(Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which
modified the decision of POEA in four labor cases: (1) awarded
monetary benefits only to 149 claimants and (2) directed Labor
Arbiter Fatima J. Franco to conduct hearings and to receive
evidence on the claims dismissed by the POEA for lack of
substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the
Third Division while G.R. Nos. 104911-14 were raffled to the
Second Division. In the Resolution dated July 26, 1993, the
Second Division referred G.R. Nos. 104911-14 to the Third
Division (G.R. Nos. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division
granted the motion filed in G.R. Nos. 104911-14 for the
consolidation of said cases with G.R. Nos. 104776 and
105029-32, which were assigned to the First Division (G.R.
Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30,
Rollo, pp. 369-377, 426-432). In the Resolution dated October
27, 1993, the First Division granted the motion to consolidate
G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos.
104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p.
1562).
I which the case should be deemed submitted for decision. On
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul
and Donato B. Evangelista, in their own behalf and on behalf of
728 other overseas contract workers (OCWs) instituted a class
suit by filing an "Amended Complaint" with the Philippine
Overseas Employment Administration (POEA) for money
claims arising from their recruitment by AIBC and employment
by BRII (POEA Case No. L-84-06-555). The claimants were
represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston,
Texas, and is engaged in construction; while AIBC is a
domestic corporation licensed as a service contractor to recruit,
mobilize and deploy Filipino workers for overseas employment
on behalf of its foreign principals.
The amended complaint principally sought the payment of the
unexpired portion of the employment contracts, which was
terminated prematurely, and secondarily, the payment of the
interest of the earnings of the Travel and Reserved Fund,
interest on all the unpaid benefits; area wage and salary
differential pay; fringe benefits; refund of SSS and premium not
remitted to the SSS; refund of withholding tax not remitted to
the BIR; penalties for committing prohibited practices; as well
as the suspension of the license of AIBC and the accreditation
of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of
the complaint and was given, together with BRII, up to July 5,
1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC
and BRII, ordered the claimants to file a bill of particulars within
ten days from receipt of the order and the movants to file their
answers within ten days from receipt of the bill of particulars.
The POEA Administrator also scheduled a pre-trial conference
on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance
and Manifestation." On July 23, 1984, AIBC filed a "Motion to
Strike Out of the Records", the "Complaint" and the
"Compliance and Manifestation." On July 25, 1984, the
claimants filed their "Rejoinder and Comments," averring,
among other matters, the failure of AIBC and BRII to file their
answers and to attend the pre-trial conference on July 25,
1984. The claimants alleged that AIBC and BRII had waived
their right to present evidence and had defaulted by failing to
file their answers and to attend the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the
"Motion to Strike Out of the Records" filed by AIBC but required
the claimants to correct the deficiencies in the complaint
pointed out in the order.
On October 10, 1984, claimants asked for time within which to
comply with the Order of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA Administrator direct the
parties to submit simultaneously their position papers, after
the same day, Atty. Florante de Castro filed another complaint
for the same money claims and benefits in behalf of several
claimants, some of whom were also claimants in POEA Case
No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with
the Order dated October 2, 1984 and an "Urgent
Manifestation," praying that the POEA direct the parties to
submit simultaneously their position papers after which the
case would be deemed submitted for decision. On the same
day, AIBC asked for time to file its comment on the
"Compliance" and "Urgent Manifestation" of claimants. On
November 6, 1984, it filed a second motion for extension of
time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC
that its motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the
motions for extension of time and asked that AIBC and BRII be
declared in default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment"
praying, among other reliefs, that claimants should be ordered
to amend their complaint.
On December 27, 1984, the POEA Administrator issued an
order directing AIBC and BRII to file their answers within ten
days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC
seeking the reversal of the said order of the POEA
Administrator. Claimants opposed the appeal, claiming that it
was dilatory and praying that AIBC and BRII be declared in
default.
On April 2, 1985, the original claimants filed an "Amended
Complaint and/or Position Paper" dated March 24, 1985,
adding new demands: namely, the payment of overtime pay,
extra night work pay, annual leave differential pay, leave
indemnity pay, retirement and savings benefits and their share
of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15,
1985, the POEA Administrator directed AIBC to file its answer
to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for
Summary Judgment." On the same day, the POEA issued an
order directing AIBC and BRII to file their answers to the
"Amended Complaint," otherwise, they would be deemed to
have waived their right to present evidence and the case would
be resolved on the basis of complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as
Improper Class Suit and Motion for Bill of Particulars Re:
Amended Complaint dated March 24, 1985." Claimants
opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his
directive to AIBC and BRII to file their answers in POEA Case
No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the
NLRC, together with a petition for the issuance of a writ of
injunction. On September 19, 1985, NLRC enjoined the POEA
Administrator from hearing the labor cases and suspended the
period for the filing of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA
Administrator to include additional claimants in the case and to
investigate alleged wrongdoings of BRII, AIBC and their
respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed
a complaint (POEA Case No. L-85-10-777) against AIBC and
BRII with the POEA, demanding monetary claims similar to
those subject of POEA Case No. L-84-06-555. In the same
month, Solomon Reyes also filed his own complaint (POEA
Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro &
Associates asked for the substitution of the original counsel of
record and the cancellation of the special powers of attorney
given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice
of the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money
claims (POEA Case No. 86-05-460) in behalf of 11 claimants
including Bienvenido Cadalin, a claimant in POEA Case No.
84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals
filed on February 27, 1985 and September 18, 1985 by AIBC
and BRII.
In narrating the proceedings of the labor cases before the
POEA Administrator, it is not amiss to mention that two cases
were filed in the Supreme Court by the claimants, namely —
G.R. No. 72132 on September 26, 1985 and Administrative
Case No. 2858 on March 18, 1986. On May 13, 1987, the
Supreme Court issued a resolution in Administrative Case No.
2858 directing the POEA Administrator to resolve the issues
raised in the motions and oppositions filed in POEA Cases
Nos. L-84-06-555 and L-86-05-460 and to decide the labor
cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No.
78489), questioning the Order dated September 4, 1985 of the
POEA Administrator. Said order required BRII and AIBC to
answer the amended complaint in POEA Case No. L-84-06-
555. In a resolution dated November 9, 1987, we dismissed the
petition by informing AIBC that all its technical objections may
properly be resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first
was filed on September 22, 1988 by claimant Hermie Arguelles
and 18 co-claimants against the POEA Administrator and
several NLRC Commissioners. The Ombudsman merely
referred the complaint to the Secretary of Labor and
Employment with a request for the early disposition of POEA
Case No. L-84-06-555. The second was filed on April 28, 1989
by claimants Emigdio P. Bautista and Rolando R. Lobeta
charging AIBC and BRII for violation of labor and social
legislations. The third was filed by Jose R. Santos, Maximino
N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration
of the NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA
Administrator its motion for suspension of the period for filing
an answer or motion for extension of time to file the same until
the resolution of its motion for reconsideration of the order of
the NLRC dismissing the two appeals. On April 28, 1987,
NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to
the complaint. At the same hearing, the parties were given a
period of 15 days from said date within which to submit their
respective position papers. On June 24, 1987 claimants filed
their "Urgent Motion to Strike Out Answer," alleging that the
answer was filed out of time. On June 29, 1987, claimants filed
their "Supplement to Urgent Manifestational Motion" to comply
with the POEA Order of June 19, 1987. On February 24, 1988,
AIBC and BRII submitted their position paper. On March 4,
1988, claimants filed their "Ex-Parte Motion to Expunge from
the Records" the position paper of AIBC and BRII, claiming that
it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De 1. The claims of the 94
Castro filed their memorandum in POEA Case No. L-86-05- complainants identified
460. On September 6, 1988, AIBC and BRII submitted their and listed in Annex "A"
Supplemental Memorandum. On September 12, 1988, BRII hereof are dismissed for
filed its "Reply to Complainant's Memorandum." On October having prescribed;
26, 1988, claimants submitted their "Ex-Parte Manifestational
Motion and Counter-Supplemental Motion," together with 446 2. Respondents AIBC and
individual contracts of employments and service records. On Brown & Root are hereby
October 27, 1988, AIBC and BRII filed a "Consolidated Reply." ordered, jointly and
severally, to pay the 149
On January 30, 1989, the POEA Administrator rendered his complainants, identified
decision in POEA Case No. L-84-06-555 and the other and listed in Annex "B"
consolidated cases, which awarded the amount of $824,652.44 hereof, the peso
in favor of only 324 complainants. equivalent, at the time of
payment, of the total
On February 10, 1989, claimants submitted their "Appeal amount in US dollars
Memorandum For Partial Appeal" from the decision of the indicated opposite their
POEA. On the same day, AIBC also filed its motion for respective names;
reconsideration and/or appeal in addition to the "Notice of
Appeal" filed earlier on February 6, 1989 by another counsel 3. The awards given by the
for AIBC. POEA to the 19
complainants classified
On February 17, 1989, claimants filed their "Answer to Appeal," and listed in Annex "C"
praying for the dismissal of the appeal of AIBC and BRII. hereof, who appear to
have worked elsewhere
On March 15, 1989, claimants filed their "Supplement to than in Bahrain are hereby
Complainants' Appeal Memorandum," together with their set aside.
"newly discovered evidence" consisting of payroll records.
4. All claims other than
On April 5, 1989, AIBC and BRII submitted to NLRC their those indicated in Annex
"Manifestation," stating among other matters that there were "B", including those for
only 728 named claimants. On April 20, 1989, the claimants overtime work and
filed their "Counter-Manifestation," alleging that there were favorably granted by the
1,767 of them. POEA, are hereby
dismissed for lack of
substantial evidence in
On July 27, 1989, claimants filed their "Urgent Motion for
support thereof or are
Execution" of the Decision dated January 30, 1989 on the
beyond the competence of
grounds that BRII had failed to appeal on time and AIBC had
this Commission to pass
not posted the supersedeas bond in the amount of
upon.
$824,652.44.

In addition, this Commission, in the exercise

On December 23, 1989, claimants filed another motion to
resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational
Motion," praying that all the 1,767 claimants be awarded their
monetary claims for failure of private respondents to file their
answers within the reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution,
disposing as follows:
of its powers and authority under Article
218(c) of the Labor Code, as amended by
R.A. 6715, hereby directs Labor Arbiter
Fatima J. Franco of this Commission to
summon parties, conduct hearings and
receive evidence, as expeditiously as
possible, and thereafter submit a written
report to this Commission (First Division) of
the proceedings taken, regarding the claims
of the following:

WHEREFORE, premises considered, the (a) complainants identified

Decision of the POEA in these consolidated and listed in Annex "D"
cases is modified to the extent and in attached and made an
accordance with the following dispositions: integral part of this
Resolution, whose claims
were dismissed by the
 POEA for lack of proof of 1) Joint Manifestation and Motion involving
employment in Bahrain claimant Emigdio Abarquez and 47 co-
(these complainants claimants dated September 2, 1992 (G.R.
numbering 683, are listed Nos. 104911-14, Rollo, pp. 263-406; G.R.
in pages 13 to 23 of the Nos. 105029-32, Rollo, pp.
decision of POEA, subject 470-615);
of the appeals) and,
2) Joint Manifestation and Motion involving
(b) complainants identified petitioner Bienvenido Cadalin and 82 co-
and listed in Annex "E" petitioners dated September 3, 1992 (G.R.
attached and made an No. 104776, Rollo, pp. 364-507);
integral part of this
Resolution, whose awards 3) Joint Manifestation and Motion involving
decreed by the POEA, to claimant Jose
Our mind, are not M. Aban and 36 co-claimants dated
supported by substantial September 17, 1992 (G.R. Nos. 105029-32,
evidence" (G.R. No. Rollo, pp. 613-722; G.R. No. 104776, Rollo,
104776; Rollo, pp. 113- pp. 518-626; G.R. Nos. 104911-14, Rollo,
115; G.R. Nos. 104911-14, pp. 407-516);
pp. 85-87; G.R. Nos.
105029-31, pp. 120-122). 4) Joint Manifestation and Motion involving
claimant Antonio T. Anglo and 17 co-
On November 27, 1991, claimant Amado S. Tolentino and 12 claimants dated October 14, 1992 (G.R. Nos.
co-claimants, who were former clients of Atty. Del Mundo, filed 105029-32, Rollo, pp. 778-843; G.R. No.
a petition for certiorari with the Supreme Court (G.R. Nos. 104776, Rollo, pp. 650-713; G.R. Nos.
120741-44). The petition was dismissed in a resolution dated 104911-14, Rollo, pp. 530-590);
January 27, 1992.
5) Joint Manifestation and Motion involving
Three motions for reconsideration of the September 2, 1991 claimant Dionisio Bobongo and 6 co-
Resolution of the NLRC were filed. The first, by the claimants claimants dated January 15, 1993 (G.R. No.
represented by Atty. Del Mundo; the second, by the claimants 104776, Rollo, pp. 813-836; G.R. Nos.
represented by Atty. De Castro; and the third, by AIBC and 104911-14, Rollo, pp. 629-652);
BRII.
6) Joint Manifestation and Motion involving
In its Resolution dated March 24, 1992, NLRC denied all the claimant Valerio A. Evangelista and 4 co-
motions for reconsideration. claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No.
Hence, these petitions filed by the claimants represented by 104776, Rollo, pp. 1815-1829);
Atty. Del Mundo (G.R. No. 104776), the claimants represented
by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and 7) Joint Manifestation and Motion involving
BRII (G.R. Nos. 105029-32). claimants Palconeri Banaag and 5 co-
claimants dated March 17, 1993 (G.R. No.
II 104776, Rollo, pp. 1657-1703; G.R. Nos.
104911-14, Rollo, pp. 655-675);
Compromise Agreements
8) Joint Manifestation and Motion involving
Before this Court, the claimants represented by Atty. De Castro claimant Benjamin Ambrosio and 15 other
and AIBC and BRII have submitted, from time to time, co-claimants dated May 4, 1993 (G.R. Nos.
compromise agreements for our approval and jointly moved for 105029-32, Rollo, pp. 906-956; G.R. Nos.
the dismissal of their respective petitions insofar as the 104911-14, Rollo, pp. 679-729; G.R. No.
claimants-parties to the compromise agreements were 104776, Rollo, pp. 1773-1814);
concerned (See Annex A for list of claimants who signed
quitclaims). 9) Joint Manifestation and Motion involving
Valerio Evangelista and 3 co-claimants dated
Thus the following manifestations that the parties had arrived May 10, 1993 (G.R. No. 104776, Rollo, pp.
at a compromise agreement and the corresponding motions for 1815-1829);
the approval of the agreements were filed by the parties and
approved by the Court: 10) Joint Manifestation and Motion involving
petitioner Quiterio R. Agudo and 36 co-
 claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos.
104911-14, Rollo, pp. 748-864; G.R. No.
104776, Rollo, pp. 1066-1183);
11) Joint Manifestation and Motion involving
claimant Arnaldo J. Alonzo and 19 co-
claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos.
105029-32, Rollo, pp. 1193-1256; G.R. Nos.
104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving
claimant Ricardo C. Dayrit and 2 co-
claimants dated September 7, 1993 (G.R.
Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No.
104776, Rollo, pp. 1243-1254; G.R. Nos.
104911-14, Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving
claimant Dante C. Aceres and 37 co-
claimants dated September 8, 1993 (G.R.
No. 104776, Rollo, pp. 1257-1375; G.R. Nos.
104911-14, Rollo, pp. 987-1105; G.R. Nos.
105029-32, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving
Vivencio V. Abella and 27 co-claimants
dated January 10, 1994 (G.R. Nos. 105029-
32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving
Domingo B. Solano and six co-claimants
dated August 25, 1994 (G.R. Nos. 105029-
32; G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over
the more than fifty volumes now comprising
the records of these cases. From the
records, it appears that the complainants-
appellants allege that they were recruited by
respondent-appellant AIBC for its accredited
foreign principal, Brown & Root, on various
dates from 1975 to 1983. They were all
deployed at various projects undertaken by
Brown & Root in several countries in the
Middle East, such as Saudi Arabia, Libya,
United Arab Emirates and Bahrain, as well
as in Southeast Asia, in Indonesia and
Malaysia.
Having been officially processed as overseas
contract workers by the Philippine
Government, all the individual complainants
signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter,
reference to the records would be sparingly
made, considering their chaotic
arrangement) with AIBC before their
departure from the Philippines. These
overseas employment contracts invariably
contained the following relevant terms and
conditions.
PART B —
(1) Employment Position Classification :——
———————
(Code) :—————————
(2) Company Employment Status :————
—————
(3) Date of Employment to Commence on :—
————————
(4) Basic Working Hours Per Week :———
——————
(5) Basic Working Hours Per Month :———
——————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :———————
——
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :———————
——
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND
COMPENSATION
a) The Employee is employed at the hourly
rate and overtime rate as set out in Part B of
this Document.
b) The hours of work shall be those set forth
by the Employer, and Employer may, at his
sole option, change or adjust such hours as
maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and
conditions of this agreement, the Employer
may, at his sole discretion, terminate
employee's service with cause, under this
agreement at any time. If the Employer
terminates the services of the Employee
under this Agreement because of the
completion or termination, or suspension of
the work on which the Employee's services
were being utilized, or because of a
reduction in force due to a decrease in scope extra hour equivalent to his
of such work, or by change in the type of wage entitlement
construction of such work. The Employer will increased by a minimum of
be responsible for his return transportation to twenty-five per centum
his country of origin. Normally on the most thereof for hours worked
expeditious air route, economy class during the day; and by a
accommodation. minimum of fifty per
centum thereof for hours
xxx xxx xxx worked during the night
which shall be deemed to
10. VACATION/SICK LEAVE BENEFITS being from seven o'clock in
the evening until seven
o'clock in the morning. . . .
a) After one (1) year of continuous service
and/or satisfactory completion of contract,
employee shall be entitled to 12-days Art. 80: Friday shall be
vacation leave with pay. This shall be deemed to be a weekly
computed at the basic wage rate. Fractions day of rest on full pay.
of a year's service will be computed on a pro-
rata basis. . . . an employer may
require a worker, with his
b) Sick leave of 15-days shall be granted to consent, to work on his
the employee for every year of service for weekly day of rest if
non-work connected injuries or illness. If the circumstances so require
employee failed to avail of such leave and in respect of which an
benefits, the same shall be forfeited at the additional sum equivalent
end of the year in which said sick leave is to 150% of his normal
granted. wage shall be paid to him.
...

11. BONUS
A bonus of 20% (for offshore work) of gross
income will be accrued and payable only
upon satisfactory completion of this contract.
12. OFFDAY PAY
Art. 81: . . . When
conditions of work require
the worker to work on any
official holiday, he shall be
paid an additional sum
equivalent to 150% of his
normal wage.

The seventh day of the week shall be Art. 84: Every worker who
observed as a day of rest with 8 hours has completed one year's
regular pay. If work is performed on this day, continuous service with his
all hours work shall be paid at the premium employer shall be entitled
rate. However, this offday pay provision is to leave on full pay for a
applicable only when the laws of the Host period of not less than 21
Country require payments for rest day. days for each year
increased to a period not
In the State of Bahrain, where some of the less than 28 days after five
individual complainants were deployed, His continuous years of
Majesty Isa Bin Salman Al Kaifa, Amir of service.
Bahrain, issued his Amiri Decree No. 23 on
June 16, 1976, otherwise known as the A worker shall be entitled
Labour Law for the Private Sector (Records, to such leave upon a
Vol. 18). This decree took effect on August quantum meruit in respect
16, 1976. Some of the provisions of Amiri of the proportion of his
Decree No. 23 that are relevant to the claims service in that year.
of the complainants-appellants are as follows
(italics supplied only for emphasis):
Art. 107: A contract of
employment made for a
Art. 79: . . . A worker shall period of indefinite
receive payment for each duration may be
 terminated by either party
thereto after giving the
other party thirty days'
prior notice before such
termination, in writing, in
respect of monthly paid
workers and fifteen days'
notice in respect of other
workers. The party
terminating a contract
without giving the required
notice shall pay to the
other party compensation
equivalent to the amount
of wages payable to the
worker for the period of
such notice or the
unexpired portion thereof.
Art. 111: . . . the employer
concerned shall pay to
such worker, upon
termination of
employment, a leaving
indemnity for the period of
his employment calculated
on the basis of fifteen
days' wages for each year
of the first three years of
service and of one month's
wages for each year of
service thereafter. Such
worker shall be entitled to
payment of leaving
indemnity upon a quantum
meruit in proportion to the
period of his service
completed within a year.
All the individual
complainants-appellants
have already been
repatriated to the
Philippines at the time of
the filing of these cases
(R.R. No. 104776, Rollo,
pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: — Whether or not complainants are
entitled to the benefits provided by Amiri
Decree No. 23 of Bahrain;
(a) Whether or not the
complainants who have
worked in Bahrain are
entitled to the above-
mentioned benefits.
(b) Whether or not Art. 44
of the same Decree
(allegedly prescribing a
more favorable treatment
of alien employees) bars
complainants from
enjoying its benefits.
Second: — Assuming that Amiri Decree No.
23 of Bahrain is applicable in these cases,
whether or not complainants' claim for the
benefits provided therein have prescribed.
Third: — Whether or not the instant cases
qualify as a class suit.
Fourth: — Whether or not the proceedings
conducted by the POEA, as well as the
decision that is the subject of these appeals,
conformed with the requirements of due
process;
(a) Whether or not the
respondent-appellant was
denied its right to due
process;
(b) Whether or not the
admission of evidence by
the POEA after these
cases were submitted for
decision was valid;
(c) Whether or not the
POEA acquired jurisdiction
over Brown & Root
International, Inc.;
(d) Whether or not the
judgment awards are
supported by substantial
evidence;
(e) Whether or not the
awards based on the
averages and formula
presented by the
complainants-appellants
are supported by
substantial evidence;
(f) Whether or not the
POEA awarded sums
beyond what the
complainants-appellants
 prayed for; and, if so,
whether or not these
awards are valid.
Fifth: — Whether or not the POEA erred in
holding respondents AIBC and Brown & Root
jointly are severally liable for the judgment
awards despite the alleged finding that the
former was the employer of the
complainants;
(a) Whether or not the
POEA has acquired
jurisdiction over Brown &
Root;
(b) Whether or not the
undisputed fact that AIBC
was a licensed
construction contractor
precludes a finding that
Brown & Root is liable for
complainants claims.
Sixth: — Whether or not the POEA
Administrator's failure to hold respondents in
default constitutes a reversible error.
Seventh: — Whether or not the POEA
Administrator erred in dismissing the
following claims:
a. Unexpired portion of
contract;
b. Interest earnings of
Travel and Reserve Fund;
c. Retirement and Savings
Plan benefits;
d. War Zone bonus or
premium pay of at least
100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all
the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS
premiums not remitted to
SSS;
j. Refund of withholding tax
not remitted to BIR;
k. Fringe benefits under B
& R's "A Summary of
Employee Benefits"
(Annex "Q" of Amended
Complaint);
l. Moral and exemplary
damages;
m. Attorney's fees of at
least ten percent of the
judgment award;
n. Other reliefs, like
suspending and/or
cancelling the license to
recruit of AIBC and the
accreditation of B & R
issued by POEA;
o. Penalty for violations of
Article 34 (prohibited
practices), not excluding
reportorial requirements
thereof.
Eighth: — Whether or not the POEA
Administrator erred in not dismissing POEA
Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14,
Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of
the 1989 Revised Rules on Evidence governing the pleading
and proof of a foreign law and admitted in evidence a simple
copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour
Law for the Private Sector). NLRC invoked Article 221 of the
Labor Code of the Philippines, vesting on the Commission
ample discretion to use every and all reasonable means to
ascertain the facts in each case without regard to the
technicalities of law or procedure. NLRC agreed with the POEA
Administrator that the Amiri Decree No. 23, being more
favorable and beneficial to the workers, should form part of the
overseas employment contract of the complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only
to the claimants, who worked in Bahrain, and set aside awards
of the POEA Administrator in favor of the claimants, who
worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period
for the filing of the claims of the complainants was three years,
as provided in Article 291 of the Labor Code of the Philippines,
and not ten years as provided in Article 1144 of the Civil Code
of the Philippines nor one year as provided in the Amiri Decree
No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator
that the labor cases cannot be treated as a class suit for the
simple reason that not all the complainants worked in Bahrain
and therefore, the subject matter of the action, the claims
arising from the Bahrain law, is not of common or general
interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of
the cardinal rules of administrative due process: namely, (1)
the failure of the POEA Administrator to consider the evidence
presented by AIBC and BRII; (2) some findings of fact were not
supported by substantial evidence; and (3) some of the
evidence upon which the decision was based were not
disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA
Administrator that BRII and AIBC are solidarily liable for the
claims of the complainants and held that BRII was the actual
employer of the complainants, or at the very least, the indirect
employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the
POEA Administrator through the summons served on AIBC, its
local agent.
On the sixth issue, NLRC held that the POEA Administrator
was correct in denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not
based on the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no
jurisdiction over the claims for refund of the
SSS premiums and refund of withholding
taxes and the claimants should file their
claims for said refund with the appropriate
government agencies;
(2) the claimants failed to establish that they
are entitled to the claims which are not
based on the overseas employment
contracts nor the Amiri Decree No. 23 of
1976;
(3) that the POEA Administrator has no
jurisdiction over claims for moral and
exemplary damages and nonetheless, the
basis for granting said damages was not
established;
(4) that the claims for salaries corresponding
to the unexpired portion of their contract may
be allowed if filed within the three-year
prescriptive period;
(5) that the allegation that complainants were
prematurely repatriated prior to the expiration
of their overseas contract was not
established; and
(6) that the POEA Administrator has no
jurisdiction over the complaint for the
suspension or cancellation of the AIBC's
recruitment license and the cancellation of
the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA
Case No. (L) 86-65-460 should have been dismissed on the
ground that the claimants in said case were also claimants in
POEA Case No. (L) 84-06-555. Instead of dismissing POEA
Case No. (L) 86-65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In
other words, the POEA did not pass upon the same claims
twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari
on the following grounds:
(1) that they were deprived by NLRC and the
POEA of their right to a speedy disposition of
their cases as guaranteed by Section 16,
Article III of the 1987 Constitution. The
POEA Administrator allowed private
respondents to file their answers in two years
(on June 19, 1987) after the filing of the
original complaint (on April 2, 1985) and
NLRC, in total disregard of its own rules,
affirmed the action of the POEA
Administrator;
(2) that NLRC and the POEA Administrator
should have declared AIBC and BRII in
default and should have rendered summary
judgment on the basis of the pleadings and
evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred
in not holding that the labor cases filed by
AIBC and BRII cannot be considered a class
suit;
(4) that the prescriptive period for the filing of
the claims is ten years; and
(5) that NLRC and the POEA Administrator
should have dismissed POEA Case No. L-
86-05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No.
104776, argued:
 (1) that they were not responsible for the
delay in the disposition of the labor cases,
considering the great difficulty of getting all
the records of the more than 1,500
claimants, the piece-meal filing of the
complaints and the addition of hundreds of
new claimants by petitioners;
(2) that considering the number of
complaints and claimants, it was impossible
to prepare the answers within the ten-day
period provided in the NLRC Rules, that
when the motion to declare AIBC in default
was filed on July 19, 1987, said party had
already filed its answer, and that considering
the staggering amount of the claims (more
than US$50,000,000.00) and the
complicated issues raised by the parties, the
ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's
finding that
there was no common or general interest in
the subject matter of the controversy —
which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the
claims varied, some being based on salaries
pertaining to the unexpired portion of the
contracts while others being for pure money
claims. Each claimant demanded separate
claims peculiar only to himself and
depending upon the particular circumstances
obtaining in his case;
(4) that the prescriptive period for filing the
claims is that prescribed by Article 291 of the
Labor Code of the Philippines (three years)
and not the one prescribed by Article 1144 of
the Civil Code of the Philippines (ten years);
and
(5) that they are not concerned with the issue
of whether POEA Case No. L-86-05-460
should be dismissed, this being a private
quarrel between the two labor lawyers (Rollo,
pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to
strike out the joint manifestations and motions of AIBC and
BRII dated September 2 and 11, 1992, claiming that all the
claimants who entered into the compromise agreements
subject of said manifestations and motions were his clients and
that Atty. Florante M. de Castro had no right to represent them
in said agreements. He also claimed that the claimants were
paid less than the award given them by NLRC; that Atty. De
Castro collected additional attorney's fees on top of the 25%
which he was entitled to receive; and that the consent of the
claimants to the compromise agreements and quitclaims were
procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In
the Resolution dated November 23, 1992, the Court denied the
motion to strike out the Joint Manifestations and Motions dated
September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.
608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and
Claim to Enforce Attorney's Lien," alleging that the claimants
who entered into compromise agreements with AIBC and BRII
with the assistance of Atty. De Castro, had all signed a retainer
agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-
624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty.
Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for
contempt of court and for violation of Canons 1, 15 and 16 of
the Code of Professional Responsibility. The said lawyers
allegedly misled this Court, by making it appear that the
claimants who entered into the compromise agreements were
represented by Atty. De Castro, when in fact they were
represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp.
1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his
charges against Atty. De Castro for unethical practices and
moved for the voiding of the quitclaims submitted by some of
the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for
certiorari on the grounds that NLRC gravely abused its
discretion when it: (1) applied the three-year prescriptive period
under the Labor Code of the Philippines; and (2) it denied the
claimant's formula based on an average overtime pay of three
hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII
itself during the negotiation for an amicable settlement of their
money claims in Bahrain as shown in the Memorandum dated
April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-
22).
BRII and AIBC, in their Comment, reiterated their contention in
G.R. No. 104776 that the prescriptive period in the Labor Code
of the Philippines, a special law, prevails over that provided in
the Civil Code of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on
the method of computing the overtime pay, BRII and AIBC
claimed that they were not bound by what appeared therein,
because such memorandum was proposed by a subordinate
Bahrain official and there was no showing that it was approved
by the Bahrain Minister of Labor. Likewise, they claimed that
the averaging method was discussed in the course of the
negotiation for the amicable settlement of the dispute and any
offer made by a party therein could not be used as an
admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC
gravely abused its discretion when it: (1) enforced the
provisions of the Amiri Decree No. 23 of 1976 and not the
terms of the employment contracts; (2) granted claims for
holiday, overtime and leave indemnity pay and other benefits,
on evidence admitted in contravention of petitioner's
constitutional right to due process; and (3) ordered the POEA
Administrator to hold new hearings for the 683 claimants
whose claims had been dismissed for lack of proof by the
POEA Administrator or NLRC itself. Lastly, they allege that
assuming that the Amiri Decree No. 23 of 1976 was applicable,
NLRC erred when it did not apply the one-year prescription
provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription
although they disagreed as to the time that should be
embraced within the prescriptive period.
To the POEA Administrator, the prescriptive period was ten
years, applying Article 1144 of the Civil Code of the
Philippines. NLRC believed otherwise, fixing the prescriptive
period at three years as provided in Article 291 of the Labor
Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14,
invoking different grounds, insisted that NLRC erred in ruling
that the prescriptive period applicable to the claims was three
years, instead of ten years, as found by the POEA
Administrator.
The Solicitor General expressed his personal view that the
prescriptive period was one year as prescribed by the Amiri
Decree No. 23 of 1976 but he deferred to the ruling of NLRC
that Article 291 of the Labor Code of the Philippines was the
operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of
the Labor Code) refer to those arising from
the employer's violation of the employee's
right as provided by the Labor Code.
In the instant case, what the respondents
violated are not the rights of the workers as
provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued
in Bahrain, which ipso facto amended the
worker's contracts of employment.
Respondents consciously failed to conform
to these provisions which specifically provide
for the increase of the worker's rate. It was
only after June 30, 1983, four months after
the brown builders brought a suit against B &
R in Bahrain for this same claim, when
respondent AIBC's contracts have
undergone amendments in Bahrain for the
new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable
law of prescription to this instant case is
Article 1144 of the Civil Code of the
Philippines, which provides:
Art. 1144. The following
actions may be brought
within ten years from the
time the cause of action
accrues:
(1) Upon a written
contract;
(2) Upon an obligation
created by law;
Thus, herein money claims of the
complainants against the respondents shall
prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the
ten-year prescriptive period, no claim
suffered the infirmity of being prescribed
(G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the
prescriptive period is three years as provided in Article 291 of
the Labor Code of the Philippines, the NLRC argued as
follows:
The Labor Code provides that "all money
claims arising from employer-employee
relations . . . shall be filed within three years
from the time the cause of action accrued;
otherwise they shall be forever barred" (Art.
291, Labor Code, as amended). This three-
year prescriptive period shall be the one
applied here and which should be reckoned
from the date of repatriation of each
individual complainant, considering the fact
that the case is having (sic) filed in this
country. We do not agree with the POEA
Administrator that this three-year prescriptive
period applies only to money claims
specifically recoverable under the Philippine
Labor Code. Article 291 gives no such
indication. Likewise, We can not consider
complainants' cause/s of action to have
 accrued from a violation of their employment
contracts. There was no violation; the claims
arise from the benefits of the law of the
country where they worked. (G.R. No.
104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as
provided by the Amiri Decree No. 23 of 1976, NLRC opined
that the applicability of said law was one of characterization,
i.e., whether to characterize the foreign law on prescription or
statute of limitation as "substantive" or "procedural." NLRC
cited the decision in Bournias v. Atlantic Maritime Company
(220 F. 2d. 152, 2d Cir. [1955], where the issue was the
applicability of the Panama Labor Code in a case filed in the
State of New York for claims arising from said Code. In said
case, the claims would have prescribed under the Panamanian
Law but not under the Statute of Limitations of New York. The
U.S. Circuit Court of Appeals held that the Panamanian Law
was procedural as it was not "specifically intended to be
substantive," hence, the prescriptive period provided in the law
of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with
a statute of limitations of a foreign country,
and it is not clear on the face of the statute
that its purpose was to limit the
enforceability, outside as well as within the
foreign country concerned, of the substantive
rights to which the statute pertains, we think
that as a yardstick for determining whether
that was the purpose this test is the most
satisfactory one. It does not lead American
courts into the necessity of examining into
the unfamiliar peculiarities and refinements
of different foreign legal systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that
the libelant is entitled to succeed, for the
respondents have failed to satisfy us that the
Panamanian period of limitation in question
was specifically aimed against the particular
rights which the libelant seeks to enforce.
The Panama Labor Code is a statute having
broad objectives, viz: "The present Code
regulates the relations between capital and
labor, placing them on a basis of social
justice, so that, without injuring any of the
parties, there may be guaranteed for labor
the necessary conditions for a normal life
and to capital an equitable return to its
investment." In pursuance of these
objectives the Code gives laborers various
rights against their employers. Article 623
establishes the period of limitation for all
such rights, except certain ones which are
enumerated in Article 621. And there is
nothing in the record to indicate that the
Panamanian legislature gave special
consideration to the impact of Article 623
upon the particular rights sought to be
enforced here, as distinguished from the
other rights to which that Article is also
applicable. Were we confronted with the
question of whether the limitation period of
Article 621 (which carves out particular rights
to be governed by a shorter limitation period)
is to be regarded as "substantive" or
"procedural" under the rule of "specifity" we
might have a different case; but here on the
surface of things we appear to be dealing
with a "broad," and not a "specific," statute of
limitations (G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article
291 of the Labor Code of the Philippines, which was applied by
NLRC, refers only to claims "arising from the employer's
violation of the employee's right as provided by the Labor
Code." They assert that their claims are based on the violation
of their employment contracts, as amended by the Amiri
Decree No. 23 of 1976 and therefore the claims may be
brought within ten years as provided by Article 1144 of the Civil
Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v.
Philippine Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have
prescribed under the Amiri Decree No. 23 of 1976, argue that
there is in force in the Philippines a "borrowing law," which is
Section 48 of the Code of Civil Procedure and that where such
kind of law exists, it takes precedence over the common-law
conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on
prescription of action based on the Amiri Decree No. 23 of
1976 or a Philippine law on prescription that shall be the
governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of
employment shall not be actionable after the
lapse of one year from the date of the expiry
of the contract. (G.R. Nos. 105029-31, Rollo,
p. 226).
As a general rule, a foreign procedural law will not be applied
in the forum. Procedural matters, such as service of process,
joinder of actions, period and requisites for appeal, and so
forth, are governed by the laws of the forum. This is true even if
the action is based upon a foreign substantive law
(Restatement of the Conflict of Laws, Sec. 685; Salonga,
Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of
Laws in the sense that it may be viewed either as procedural or
substantive, depending on the characterization given such a
law.
Thus in Bournias v. Atlantic Maritime Company, supra, the
American court applied the statute of limitations of New York,
instead of the Panamanian law, after finding that there was no
showing that the Panamanian law on prescription was intended
to be substantive. Being considered merely a procedural law
even in Panama, it has to give way to the law of the forum on
prescription of actions.
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the
forum has a "borrowing statute." Said statute has the practical
effect of treating the foreign statute of limitation as one of
substance (Goodrich, Conflict of Laws 152-153 [1938]). A
"borrowing statute" directs the state of the forum to apply the
foreign statute of limitations to the pending claims based on a
foreign law (Siegel, Conflicts, 183 [1975]). While there are
several kinds of "borrowing statutes," one form provides that an
action barred by the laws of the place where it accrued, will not
be enforced in the forum even though the local statute has not
run against it (Goodrich and Scoles, Conflict of Laws, 152-153
[1938]). Section 48 of our Code of Civil Procedure is of this
kind. Said Section provides:
If by the laws of the state or country where
the cause of action arose, the action is
barred, it is also barred in the Philippines
Islands.
Section 48 has not been repealed or amended by the Civil
Code of the Philippines. Article 2270 of said Code repealed
only those provisions of the Code of Civil Procedures as to
which were inconsistent with it. There is no provision in the
Civil Code of the Philippines, which is inconsistent with or
contradictory to Section 48 of the Code of Civil Procedure
(Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48
cannot be enforced ex proprio vigore insofar as it ordains the
application in this jurisdiction of Section 156 of the Amiri
Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim
obnoxious to the forum's public policy (Canadian Northern
Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed.
713 [1920]). To enforce the one-year prescriptive period of the
Amiri Decree No. 23 of 1976 as regards the claims in question
would contravene the public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987
Constitution emphasized that:
The state shall promote social justice in all
phases of national development. (Sec. 10).
The state affirms labor as a primary social
economic force. It shall protect the rights of
workers and promote their welfare (Sec. 18).
In article XIII on Social Justice and Human Rights, the 1987
Constitution provides:
Sec. 3. The State shall afford full protection
to labor, local and overseas, organized and
unorganized, and promote full employment
and equality of employment opportunities for
all.
Having determined that the applicable law on prescription is
the Philippine law, the next question is whether the prescriptive
period governing the filing of the claims is three years, as
provided by the Labor Code or ten years, as provided by the
Civil Code of the Philippines.
The claimants are of the view that the applicable provision is
Article 1144 of the Civil Code of the Philippines, which
provides:
The following actions must be brought within
ten years from the time the right of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision
is Article 291 of the Labor Code of the Philippines, which in
pertinent part provides:
Money claims-all money claims arising from
employer-employee relations accruing during
the effectivity of this Code shall be filed
within three (3) years from the time the
cause of action accrued, otherwise they shall
be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v.
Philippine Air Lines, Inc., 70 SCRA 244 (1976) invoked by the
claimants in G.R. Nos. 104911-14 is inapplicable to the cases
at bench (Rollo, p. 21). The said case involved the correct
computation of overtime pay as provided in the collective
bargaining agreements and not the Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not
make any reference as to the computation for overtime work
under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494)
and instead insisted that work computation provided in the
collective bargaining agreements between the parties be
observed. Since the claim for pay differentials is primarily
anchored on the written contracts between the litigants, the
ten-year prescriptive period provided by Art. 1144(1) of the
New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as
amended by R.A. No. 19933) provides:
Any action to enforce any cause of action
under this Act shall be commenced within
three years after the cause of action accrued
otherwise such action shall be forever
barred, . . . .
The court further explained:
The three-year prescriptive period fixed in
the Eight-Hour Labor Law (CA No. 444 as
amended) will apply, if the claim for
differentials for overtime work is solely based
on said law, and not on a collective
bargaining agreement or any other contract.
In the instant case, the claim for overtime
compensation is not so much because of
Commonwealth Act No. 444, as amended
but because the claim is demandable right of
the employees, by reason of the above-
mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the
prescriptive period for filing "actions to enforce any cause of
action under said law." On the other hand, Article 291 of the
Labor Code of the Philippines provides the prescriptive period
for filing "money claims arising from employer-employee
relations." The claims in the cases at bench all arose from the
employer-employee relations, which is broader in scope than
claims arising from a specific law or from the collective
bargaining agreement.
The contention of the POEA Administrator, that the three-year
prescriptive period under Article 291 of the Labor Code of the
Philippines applies only to money claims specifically
recoverable under said Code, does not find support in the plain
language of the provision. Neither is the contention of the
claimants in G.R. Nos. 104911-14 that said Article refers only
to claims "arising from the employer's violation of the
employee's right," as provided by the Labor Code supported by
the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No.
104776, claimants aver: (1) that while their complaints were
filed on June 6, 1984 with POEA, the case was decided only
on January 30, 1989, a clear denial of their right to a speedy
disposition of the case; and (2) that NLRC and the POEA
Administrator should have declared AIBC and BRII in default
(Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987
Constitution, which provides:
Sec. 16. All persons shall have the right to a
speedy disposition of their cases before all
judicial, quasi-judicial, or administrative
bodies.
It is true that the constitutional right to "a speedy disposition of
cases" is not limited to the accused in criminal proceedings but
extends to all parties in all cases, including civil and
administrative cases, and in all proceedings, including judicial
and quasi-judicial hearings. Hence, under the Constitution, any
party to a case may demand expeditious action on all officials
who are tasked with the administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153
(1987), "speedy disposition of cases" is a relative term. Just
like the constitutional guarantee of "speedy trial" accorded to
the accused in all criminal proceedings, "speedy disposition of
cases" is a flexible concept. It is consistent with delays and
depends upon the circumstances of each case. What the
Constitution prohibits are unreasonable, arbitrary and
oppressive delays which render rights nugatory.
Caballero laid down the factors that may be taken into
consideration in determining whether or not the right to a
"speedy disposition of cases" has been violated, thus:
In the determination of whether or not the
right to a "speedy trial" has been violated,
certain factors may be considered and
balanced against each other. These are
length of delay, reason for the delay,
assertion of the right or failure to assert it,
and prejudice caused by the delay. The
same factors may also be considered in
answering judicial inquiry whether or not a
person officially charged with the
administration of justice has violated the
speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298,
(1991), we held:
It must be here emphasized that the right to
a speedy disposition of a case, like the right
to speedy trial, is deemed violated only when
the proceeding is attended by vexatious,
capricious, and oppressive delays; or when
unjustified postponements of the trial are
asked for and secured, or when without
cause or justified motive a long period of
time is allowed to elapse without the party
having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were
served with a copy of the amended complaint, claimants had
been asking that AIBC and BRII be declared in default for
failure to file their answers within the ten-day period provided in
Section 1, Rule III of Book VI of the Rules and Regulations of
the POEA. At that time, there was a pending motion of AIBC
and BRII to strike out of the records the amended complaint
and the "Compliance" of claimants to the order of the POEA,
requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such
that their final disposition in the administrative level after seven
years from their inception, cannot be said to be attended by
unreasonable, arbitrary and oppressive delays as to violate the
constitutional rights to a speedy disposition of the cases of
complainants.
The amended complaint filed on June 6, 1984 involved a total
of 1,767 claimants. Said complaint had undergone several
amendments, the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983.
They were deployed in different areas, one group in and the
other groups outside of, Bahrain. The monetary claims totalling
more than US$65 million according to Atty. Del Mundo,
included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at
least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to
Social Security System;
10. Refund of Withholding Tax not remitted
to Bureau of Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A
Summary of Employees Benefits consisting
of 43 pages (Annex "Q" of Amended
Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of
amounts;
14. Other reliefs, like suspending and/or
cancelling the license to recruit of AIBC and
issued by the POEA; and
15. Penalty for violation of Article 34
(Prohibited practices) not excluding
reportorial requirements thereof (NLRC
Resolution, September 2, 1991, pp. 18-19;
G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient
definiteness and clarity of some facts, the claimants were
ordered to comply with the motion of AIBC for a bill of
particulars. When claimants filed their "Compliance and
Manifestation," AIBC moved to strike out the complaint from
the records for failure of claimants to submit a proper bill of
particulars. While the POEA Administrator denied the motion to
strike out the complaint, he ordered the claimants "to correct
the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the
complaint, the records of employment of the more than 1,700
claimants had to be retrieved from various countries in the
Middle East. Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA
Administrator were interrupted several times by the various
appeals, first to NLRC and then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases
were filed against AIBC and BRII on October 10, 1985 (POEA
Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on
May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in
exasperation, noted that the exact number of claimants had
never been completely established (Resolution, Sept. 2, 1991,
G.R. No. 104776, Rollo, p. 57). All the three new cases were
consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in
terminating the proceedings, thus:
These cases could have been spared the
long and arduous route towards resolution
had the parties and their counsel been more
interested in pursuing the truth and the
merits of the claims rather than exhibiting a
fanatical reliance on technicalities. Parties
and counsel have made these cases a
litigation of emotion. The intransigence of
parties and counsel is remarkable. As late as
last month, this Commission made a last and
final attempt to bring the counsel of all the
parties (this Commission issued a special
order directing respondent Brown & Root's
resident agent/s to appear) to come to a
 more conciliatory stance. Even this failed
(Rollo,
p. 58).
The squabble between the lawyers of claimants added to the
delay in the disposition of the cases, to the lament of NLRC,
which complained:
It is very evident from the records that the
protagonists in these consolidated cases
appear to be not only the individual
complainants, on the one hand, and AIBC
and Brown & Root, on the other hand. The
two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De
Castro, have yet to settle the right of
representation, each one persistently
claiming to appear in behalf of most of the
complainants. As a result, there are two
appeals by the complainants. Attempts by
this Commission to resolve counsels'
conflicting claims of their respective authority
to represent the complainants prove futile.
The bickerings by these two counsels are
reflected in their pleadings. In the charges
and countercharges of falsification of
documents and signatures, and in the
disbarment proceedings by one against the
other. All these have, to a large extent,
abetted in confounding the issues raised in
these cases, jumble the presentation of
evidence, and even derailed the prospects of
an amicable settlement. It would not be far-
fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for
the complainants, with the proverbial pot of
gold at its end containing more than US$100
million, the aggregate of the claims in these
cases. It is, likewise, not improbable that
their misplaced zeal and exuberance caused
them to throw all caution to the wind in the
matter of elementary rules of procedure and
evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the
listing of some of the complainants in both petitions filed by the
two lawyers. As noted by NLRC, "the problem created by this
situation is that if one of the two petitions is dismissed, then the
parties and the public respondents would not know which claim
of which petitioner was dismissed and which was not."
B. Claimants insist that all their claims could properly be
consolidated in a "class suit" because "all the named
complainants have similar money claims and similar rights
sought irrespective of whether they worked in Bahrain, United
Arab Emirates or in Abu Dhabi, Libya or in any part of the
Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the
controversy is one of common or general interest to many and
the parties are so numerous that it is impracticable to bring
them all before the court (Revised Rules of Court, Rule 3, Sec.
12).
While all the claims are for benefits granted under the Bahrain
Law, many of the claimants worked outside Bahrain. Some of
the claimants were deployed in Indonesia and Malaysia under
different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance
that inasmuch as the first requirement of a class suit is not
present (common or general interest based on the Amiri
Decree of the State of Bahrain), it is only logical that only those
who worked in Bahrain shall be entitled to file their claims in a
class suit.
While there are common defendants (AIBC and BRII) and the
nature of the claims is the same (for employee's benefits),
there is no common question of law or fact. While some claims
are based on the Amiri Law of Bahrain, many of the claimants
never worked in that country, but were deployed elsewhere.
Thus, each claimant is interested only in his own demand and
not in the claims of the other employees of defendants. The
named claimants have a special or particular interest in specific
benefits completely different from the benefits in which the
other named claimants and those included as members of a
"class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]).
It appears that each claimant is only interested in collecting his
own claims. A claimants has no concern in protecting the
interests of the other claimants as shown by the fact, that
hundreds of them have abandoned their co-claimants and have
entered into separate compromise settlements of their
respective claims. A principle basic to the concept of "class
suit" is that plaintiffs brought on the record must fairly represent
and protect the interests of the others (Dimayuga v. Court of
Industrial Relations, 101 Phil. 590 [1957]). For this matter, the
claimants who worked in Bahrain can not be allowed to sue in
a class suit in a judicial proceeding. The most that can be
accorded to them under the Rules of Court is to be allowed to
join as plaintiffs in one complaint (Revised Rules of Court, Rule
3, Sec. 6).
The Court is extra-cautious in allowing class suits because
they are the exceptions to the condition sine qua non, requiring
the joinder of all indispensable parties.
In an improperly instituted class suit, there would be no
problem if the decision secured is favorable to the plaintiffs.
The problem arises when the decision is adverse to them, in
which case the others who were impleaded by their self-
appointed representatives, would surely claim denial of due
process.
C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante
De Castro guilty of "forum shopping, ambulance chasing
activities, falsification, duplicity and other unprofessional
activities" and his appearances as counsel for some of the
claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is
intended to put a stop to the practice of some parties of filing
multiple petitions and complaints involving the same issues,
with the result that the courts or agencies have to resolve the
same issues. Said Rule, however, applies only to petitions filed
with the Supreme Court and the Court of Appeals. It is entitled
"Additional Requirements For Petitions Filed with the Supreme
Court and the Court of Appeals To Prevent Forum Shopping or
Multiple Filing of Petitioners and Complainants." The first
sentence of the circular expressly states that said circular
applies to an governs the filing of petitions in the Supreme
Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the
application of the anti-forum shopping rule to the lower courts
and administrative agencies, said circular took effect only on
April 1, 1994.
POEA and NLRC could not have entertained the complaint for
unethical conduct against Atty. De Castro because NLRC and
POEA have no jurisdiction to investigate charges of unethical
conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated
December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to
protect his claim for attorney's fees for legal services rendered
in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the
court or administrative agency which renders and executes the
money judgment secured by the lawyer for his clients. The
lawyer shall cause written notice thereof to be delivered to his
clients and to the adverse party (Revised Rules of Court, Rule
138, Sec. 37). The statement of the claim for the charging lien
of Atty. Del Mundo should have been filed with the
administrative agency that rendered and executed the
judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty.
Florante De Castro and Atty. Katz Tierra for violation of the
Code of Professional Responsibility should be filed in a
separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not
accepting their formula of "Three Hours Average Daily
Overtime" in computing the overtime payments. They claim
that it was BRII itself which proposed the formula during the
negotiations for the settlement of their claims in Bahrain and
therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-
22).
Claimants presented a Memorandum of the Ministry of Labor of
Bahrain dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the
Vice President and the Area Manager,
Middle East, of Brown & Root Co. and the
Summary of the compensation offered by the
Company to the employees in respect of the
difference of pay of the wages of the
overtime and the difference of vacation leave
and the perusal of the documents attached
thereto i.e., minutes of the meetings between
the Representative of the employees and the
management of the Company, the complaint
filed by the employees on 14/2/83 where
they have claimed as hereinabove stated,
sample of the Service Contract executed
between one of the employees and the
company through its agent in (sic)
Philippines, Asia International Builders
Corporation where it has been provided for
48 hours of work per week and an annual
leave of 12 days and an overtime wage of 1
& 1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the
following averages:
A. 1. The average duration of the actual
service of the employee is 35 months for the
Philippino (sic) employees . . . .
2. The average wage per hour for the
Philippino (sic) employee is US$2.69 . . . .
3. The average hours for the overtime is 3
hours plus in all public holidays and
weekends.
4. Payment of US$8.72 per months (sic) of
service as compensation for the difference of
the wages of the overtime done for each
Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not
prepared by them but by a subordinate official in the Bahrain
Department of Labor; (2) that there was no showing that the
Bahrain Minister of Labor had approved said memorandum;
and (3) that the offer was made in the course of the negotiation
for an amicable settlement of the claims and therefore it was
not admissible in evidence to prove that anything is due to the
claimants.
While said document was presented to the POEA without
observing the rule on presenting official documents of a foreign
government as provided in Section 24, Rule 132 of the 1989
Revised Rules on Evidence, it can be admitted in evidence in
proceedings before an administrative body. The opposing
parties have a copy of the said memorandum, and they could
easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as
contained in the memorandum is another matter. Under
Section 27, Rule 130 of the 1989 Revised Rules on Evidence,
an offer to settle a claim is not an admission that anything is
due.
Said Rule provides:
Offer of compromise not admissible. — In
civil cases, an offer of compromise is not an
admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering
of the record with unwanted evidence but a statement of public
policy. There is great public interest in having the protagonists
settle their differences amicable before these ripen into
litigation. Every effort must be taken to encourage them to
arrive at a settlement. The submission of offers and counter-
offers in the negotiation table is a step in the right direction. But
to bind a party to his offers, as what claimants would make this
Court do, would defeat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which
provides for greater benefits than those stipulated in the
overseas-employment contracts of the claimants. It was of the
belief that "where the laws of the host country are more
favorable and beneficial to the workers, then the laws of the
host country shall form part of the overseas employment
contract." It quoted with approval the observation of the POEA
Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor"
(Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and
whimsically when it refused to enforce the overseas-
employment contracts, which became the law of the parties.
They contend that the principle that a law is deemed to be a
part of a contract applies only to provisions of Philippine law in
relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by
AIBC and BRII themselves, provided that the laws of the host
country became applicable to said contracts if they offer terms
and conditions more favorable that those stipulated therein. It
was stipulated in said contracts that:
The Employee agrees that while in the
employ of the Employer, he will not engage
in any other business or occupation, nor
seek employment with anyone other than the
Employer; that he shall devote his entire time
and attention and his best energies, and
abilities to the performance of such duties as
may be assigned to him by the Employer;
that he shall at all times be subject to the
direction and control of the Employer; and
that the benefits provided to Employee
hereunder are substituted for and in lieu of
all other benefits provided by any applicable
law, provided of course, that total
remuneration and benefits do not fall below
that of the host country regulation or custom,
it being understood that should applicable
laws establish that fringe benefits, or other
such benefits additional to the compensation
herein agreed cannot be waived, Employee
agrees that such compensation will be
adjusted downward so that the total
compensation hereunder, plus the non-
waivable benefits shall be equivalent to the
compensation herein agreed (Rollo, pp. 352-
353).
The overseas-employment contracts could have been drafted
more felicitously. While a part thereof provides that the
compensation to the employee may be "adjusted downward so
that the total computation (thereunder) plus the non-waivable
benefits shall be equivalent to the compensation" therein
agreed, another part of the same provision categorically states
"that total remuneration and benefits do not fall below that of
the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should
be interpreted against AIBC and BRII, the parties that drafted it
(Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93
SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or
stipulations in a contract shall not favor the
party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion
where there is already a prepared form containing the
stipulations of the employment contract and the employees
merely "take it or leave it." The presumption is that there was
an imposition by one party against the other and that the
employees signed the contracts out of necessity that reduced
their bargaining power (Fieldmen's Insurance Co., Inc. v.
Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-
employment contracts in question as adopting the provisions of
the Amiri Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be
governed (Cheshire, Private International Law, 187 [7th ed.]).
In such a case, the foreign law is adopted as a "system" to
regulate the relations of the parties, including questions of their
capacity to enter into the contract, the formalities to be
observed by them, matters of performance, and so forth (16
Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the
parties may just agree that specific provisions of a foreign
statute shall be deemed incorporated into their contract "as a
set of terms." By such reference to the provisions of the foreign
law, the contract does not become a foreign contract to be
governed by the foreign law. The said law does not operate as
a statute but as a set of contractual terms deemed written in
the contract (Anton, Private International Law, 197 [1967];
Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the
parties (Reese, Choice of Law in Torts and Contracts, 16
Columbia Journal of Transnational Law 1, 21 [1977]). Such
party expectation is protected by giving effect to the parties'
own choice of the applicable law (Fricke v. Isbrandtsen Co.,
Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must,
however, bear some relationship to the parties or their
transaction (Scoles and Hayes, Conflict of Law 644-647
[1982]). There is no question that the contracts sought to be
enforced by claimants have a direct connection with the
Bahrain law because the services were rendered in that
country.
In Norse Management Co. (PTE) v. National Seamen Board,
117 SCRA 486 (1982), the "Employment Agreement," between
Norse Management Co. and the late husband of the private
respondent, expressly provided that in the event of illness or
injury to the employee arising out of and in the course of his
employment and not due to his own misconduct,
"compensation shall be paid to employee in accordance with
and subject to the limitation of the Workmen's Compensation
Act of the Republic of the Philippines or the Worker's Insurance
Act of registry of the vessel, whichever is greater." Since the
laws of Singapore, the place of registry of the vessel in which
the late husband of private respondent served at the time of his
death, granted a better compensation package, we applied
said foreign law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National
Labor Relations Commission, 135 SCRA 278 (1985), relied
upon by AIBC and BRII is inapposite to the facts of the cases
at bench. The issue in that case was whether the amount of
the death compensation of a Filipino seaman should be
determined under the shipboard employment contract
executed in the Philippines or the Hongkong law. Holding that
the shipboard employment contract was controlling, the court
differentiated said case from Norse Management Co. in that in
the latter case there was an express stipulation in the
employment contract that the foreign law would be applicable if
it afforded greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their
right to due process when said administrative agency granted
Friday-pay differential, holiday-pay differential, annual-leave
differential and leave indemnity pay to the claimants listed in
Annex B of the Resolution. At first, NLRC reversed the
resolution of the POEA Administrator granting these benefits
on a finding that the POEA Administrator failed to consider the
evidence presented by AIBC and BRII, that some findings of
fact of the POEA Administrator were not supported by the
evidence, and that some of the evidence were not disclosed to
AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of
remanding the case to the POEA Administrator for a new
hearing, which means further delay in the termination of the
case, NLRC decided to pass upon the validity of the claims
itself. It is this procedure that AIBC and BRII complain of as
being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence
submitted on appeal, the same evidence which NLRC found to
have been "unilaterally submitted by the claimants and not
disclosed to the adverse parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were
submitted to the POEA administrator by the claimants after the
cases were deemed submitted for resolution and which were
taken cognizance of by the POEA Administrator in resolving
the cases. While AIBC and BRII had no opportunity to refute
said evidence of the claimants before the POEA Administrator,
they had all the opportunity to rebut said evidence and to
present their
counter-evidence before NLRC. As a matter of fact, AIBC and
BRII themselves were able to present before NLRC additional
evidence which they failed to present before the POEA
Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC
is enjoined to "use every and all reasonable means to ascertain
the facts in each case speedily and objectively and without
regard to technicalities of law or procedure, all in the interest of
due process."
In deciding to resolve the validity of certain claims on the basis
of the evidence of both parties submitted before the POEA
Administrator and NLRC, the latter considered that it was not
expedient to remand the cases to the POEA Administrator for
that would only prolong the already protracted legal
controversies.
Even the Supreme Court has decided appealed cases on the
merits instead of remanding them to the trial court for the
reception of evidence, where the same can be readily
determined from the uncontroverted facts on record
(Development Bank of the Philippines v. Intermediate Appellate
Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor
Relations Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion
when it ordered the POEA Administrator to hold new hearings
for 683 claimants listed in Annex D of the Resolution dated
September 2, 1991 whose claims had been denied by the
POEA Administrator "for lack of proof" and for 69 claimants
listed in Annex E of the same Resolution, whose claims had
been found by NLRC itself as not "supported by evidence"
(Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of
the Philippines, which empowers it "[to] conduct investigation
for the determination of a question, matter or controversy,
within its jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority
under Article 218(c) to remand a case involving claims which
had already been dismissed because such provision
contemplates only situations where there is still a question or
controversy to be resolved (Rollo, pp. 41-42).
A principle well embedded in Administrative Law is that the
technical rules of procedure and evidence do not apply to the
proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542
[1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA
219 [1987]). This principle is enshrined in Article 221 of the
Labor Code of the Philippines and is now the bedrock of
proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of
procedure and evidence in administrative proceedings, there
are cardinal rules which must be observed by the hearing
officers in order to comply with the due process requirements
of the Constitution. These cardinal rules are collated in Ang
Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII
The three petitions were filed under Rule 65 of the Revised
Rules of Court on the grounds that NLRC had committed grave
abuse of discretion amounting to lack of jurisdiction in issuing
the questioned orders. We find no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED. SO
ORDERED.
G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES CORPORATION vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor;
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy
Minister; ETHELYNNE B. FARRALES and MARIA
MOONYEEN MAMASIG; FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines
Corporation ("PIA"), a foreign corporation licensed to do
business in the Philippines, executed in Manila two (2)
separate contracts of employment, one with private respondent
Ethelynne B. Farrales and the other with private respondent
Ma. M.C. Mamasig. 1 The contracts, which became effective
on 9 January 1979, provided in pertinent portion as follows:
5. DURATION OF EMPLOYMENT AND
PENALTY
This agreement is for a period of three (3)
years, but can be extended by the mutual
consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as
herein provided, PIA reserves the right to
terminate this agreement at any time by
giving the EMPLOYEE notice in writing in
advance one month before the intended
termination or in lieu thereof, by paying the
EMPLOYEE wages equivalent to one
month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and
governed under and by the laws of Pakistan,
and only the Courts of Karachi, Pakistan
shall have the jurisdiction to consider any
matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their
training period, they began discharging their job functions as
flight attendants, with base station in Manila and flying
assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months
prior to the expiration of the contracts of employment, PIA
through Mr. Oscar Benares, counsel for and official of the local
branch of PIA, sent separate letters both dated 1 August 1980
to private respondents Farrales and Mamasig advising both
that their services as flight stewardesses would be terminated
"effective 1 September 1980, conformably to clause 6 (b) of the
employment agreement [they had) executed with [PIA]."2
On 9 September 1980, private respondents Farrales and
Mamasig jointly instituted a complaint, docketed as NCR-STF-
95151-80, for illegal dismissal and non-payment of company
benefits and bonuses, against PIA with the then Ministry of
Labor and Employment ("MOLE"). After several unfruitful
attempts at conciliation, the MOLE hearing officer Atty. Jose M.
Pascual ordered the parties to submit their position papers and
evidence supporting their respective positions. The PIA
submitted its position paper, 3 but no evidence, and there
claimed that both private respondents were habitual
absentees; that both were in the habit of bringing in from
abroad sizeable quantities of "personal effects"; and that PIA
personnel at the Manila International Airport had been
discreetly warned by customs officials to advise private
respondents to discontinue that practice. PIA further claimed
that the services of both private respondents were terminated
pursuant to the provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director
Francisco L. Estrella ordered the reinstatement of private
respondents with full backwages or, in the alternative, the
payment to them of the amounts equivalent to their salaries for
the remainder of the fixed three-year period of their
employment contracts; the payment to private respondent
Mamasig of an amount equivalent to the value of a round trip
ticket Manila-USA Manila; and payment of a bonus to each of
the private respondents equivalent to their one-month salary. 4
The Order stated that private respondents had attained the
status of regular employees after they had rendered more than
a year of continued service; that the stipulation limiting the
period of the employment contract to three (3) years was null
and void as violative of the provisions of the Labor Code and
its implementing rules and regulations on regular and casual
employment; and that the dismissal, having been carried out
without the requisite clearance from the MOLE, was illegal and
entitled private respondents to reinstatement with full
backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente
Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of
fact and conclusions of the Regional Director and affirmed the
latter's award save for the portion thereof giving PIA the option,
in lieu of reinstatement, "to pay each of the complainants
[private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the
award of the Regional Director and the Order of the Deputy
Minister as having been rendered without jurisdiction; for
having been rendered without support in the evidence of record
since, allegedly, no hearing was conducted by the hearing
officer, Atty. Jose M. Pascual; and for having been issued in
disregard and in violation of petitioner's rights under the
employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director,
MOLE, had no jurisdiction over the subject matter of the
complaint initiated by private respondents for illegal dismissal,
jurisdiction over the same being lodged in the Arbitration
Branch of the National Labor Relations Commission ("NLRC")
It appears to us beyond dispute, however, that both at the time
the complaint was initiated in September 1980 and at the time
the Orders assailed were rendered on January 1981 (by
Regional Director Francisco L. Estrella) and August 1982 (by
Deputy Minister Vicente Leogardo, Jr.), the Regional Director
had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the
termination of the services of employees with at least one (1)
year of service without prior clearance from the Department of
Labor and Employment:
Art. 278. Miscellaneous Provisions — . . .
(b) With or without a collective agreement,
no employer may shut down his
establishment or dismiss or terminate the
employment of employees with at least one
year of service during the last two (2) years,
whether such service is continuous or
broken, without prior written authority issued
in accordance with such rules and
regulations as the Secretary may promulgate
. . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations
Implementing the Labor Code, made clear that in
case of a termination without the necessary
clearance, the Regional Director was authorized to
order the reinstatement of the employee concerned
and the payment of backwages; necessarily,
therefore, the Regional Director must have been given
jurisdiction over such termination cases:
Sec. 2. Shutdown or dismissal without
clearance. — Any shutdown or dismissal
without prior clearance shall be conclusively
presumed to be termination of employment
without a just cause. The Regional Director
shall, in such case order the immediate
reinstatement of the employee and the
payment of his wages from the time of the
shutdown or dismissal until the time of
reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of
Labor, dated 23 April 1976, was similarly very explicit
about the jurisdiction of the Regional Director over
termination of employment cases:
Under PD 850, termination cases — with or
without CBA — are now placed under the
original jurisdiction of the Regional Director.
Preventive suspension cases, now made
cognizable for the first time, are also placed
under the Regional Director. Before PD 850,
termination cases where there was a CBA
were under the jurisdiction of the grievance
machinery and voluntary arbitration, while
termination cases where there was no CBA
were under the jurisdiction of the Conciliation
Section.
In more details, the major innovations
introduced by PD 850 and its implementing
rules and regulations with respect to
termination and preventive suspension cases
are:
1. The Regional Director is now required to
rule on every application for clearance,
 whether there is opposition or not, within ten
days from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the
Regional Director had jurisdiction, still his order was null and
void because it had been issued in violation of petitioner's right
to procedural due process .6 This claim, however, cannot be
given serious consideration. Petitioner was ordered by the
Regional Director to submit not only its position paper but also
such evidence in its favor as it might have. Petitioner opted to
rely solely upon its position paper; we must assume it had no
evidence to sustain its assertions. Thus, even if no formal or
oral hearing was conducted, petitioner had ample opportunity
to explain its side. Moreover, petitioner PIA was able to appeal
his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due
process must be rejected. At the time the complaint was filed
by private respondents on 21 September 1980 and at the time
the Regional Director issued his questioned order on 22
January 1981, applicable regulation, as noted above, specified
that a "dismissal without prior clearance shall be conclusively
presumed to be termination of employment without a cause",
and the Regional Director was required in such case to" order
the immediate reinstatement of the employee and the payment
of his wages from the time of the shutdown or dismiss until . . .
reinstatement." In other words, under the then applicable rule,
the Regional Director did not even have to require submission
of position papers by the parties in view of the conclusive (juris
et de jure) character of the presumption created by such
applicable law and regulation. In Cebu Institute of Technology
v. Minister of Labor and Employment, 8 the Court pointed out
that "under Rule 14, Section 2, of the Implementing Rules and
Regulations, the termination of [an employee] which was
without previous clearance from the Ministry of Labor is
conclusively presumed to be without [just] cause . . . [a
presumption which] cannot be overturned by any contrary proof
however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5
and 6 of its contract of employment with private respondents
Farrales and Mamasig, arguing that its relationship with them
was governed by the provisions of its contract rather than by
the general provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for
that relationship, extendible by agreement between the parties;
while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the
employment agreement at any time by giving one-month's
notice to the employee or, in lieu of such notice, one-months
salary.
A contract freely entered into should, of course, be respected,
as PIA argues, since a contract is the law between the parties.
10 The principle of party autonomy in contracts is not,
however, an absolute principle. The rule in Article 1306, of our
Civil Code is that the contracting parties may establish such
stipulations as they may deem convenient, "provided they are
not contrary to law, morals, good customs, public order or
public policy." Thus, counter-balancing the principle of
autonomy of contracting parties is the equally general rule that
provisions of applicable law, especially provisions relating to
matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is
that parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with
each other. It is thus necessary to appraise the contractual
provisions invoked by petitioner PIA in terms of their
consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy
Minister, MOLE, in effect held that paragraph 5 of that
employment contract was inconsistent with Articles 280 and
281 of the Labor Code as they existed at the time the contract
of employment was entered into, and hence refused to give
effect to said paragraph 5. These Articles read as follows:
Art. 280. Security of Tenure. — In cases of
regular employment, the employer shall not
terminate the services of an employee
except for a just cause or when authorized
by this Title An employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights
and to his backwages computed from the
time his compensation was withheld from
him up to the time his reinstatement.
Art. 281. Regular and Casual Employment.
The provisions of written agreement to the
contrary notwithstanding and regardless of
the oral agreements of the parties, an
employment shall be deemed to be regular
where the employee has been engaged to
perform activities which are usually
necessary or desirable in the usual business
or trade of the employer, except where the
employment has been fixed for a specific
project or undertaking the completion or
termination of which has been determined at
the time of the engagement of the employee
or where the work or services to be
performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be
casual if it is not covered by the preceding
paragraph: provided, that, any employee
who has rendered at least one year of
 service, whether such service is continuous
or broken, shall be considered as regular
employee with respect to the activity in which
he is employed and his employment shall
continue while such actually exists.
(Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12
the Court had occasion to examine in detail the question of
whether employment for a fixed term has been outlawed under
the above quoted provisions of the Labor Code. After an
extensive examination of the history and development of
Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not
necessarily unlawful:
There can of course be no quarrel with the
proposition that where from the
circumstances it is apparent that periods
have been imposed to preclude acquisition
of tenurial security by the employee, they
should be struck down or disregarded as
contrary to public policy, morals, etc. But
where no such intent to circumvent the law is
shown, or stated otherwise, where the
reason for the law does not exist e.g. where
it is indeed the employee himself who insists
upon a period or where the nature of the
engagement is such that, without being
seasonal or for a specific project, a definite
date of termination is a sine qua non would
an agreement fixing a period be essentially
evil or illicit, therefore anathema Would such
an agreement come within the scope of
Article 280 which admittedly was enacted "to
prevent the circumvention of the right of the
employee to be secured in . . . (his)
employment?"
As it is evident from even only the three
examples already given that Article 280 of
the Labor Code, under a narrow and literal
interpretation, not only fails to exhaust the
gamut of employment contracts to which the
lack of a fixed period would be an anomaly,
but would also appear to restrict, without
reasonable distinctions, the right of an
employee to freely stipulate with his
employer the duration of his engagement, it
logically follows that such a literal
interpretation should be eschewed or
avoided. The law must be given reasonable
interpretation, to preclude absurdity in its
application. Outlawing the whole concept of
term employment and subverting to boot the
principle of freedom of contract to remedy
the evil of employers" using it as a means to
prevent their employees from obtaining
security of tenure is like cutting off the nose
to spite the face or, more relevantly, curing a
headache by lopping off the head.
xxx xxx xxx
Accordingly, and since the entire purpose
behind the development of legislation
culminating in the present Article 280 of the
Labor Code clearly appears to have been, as
already observed, to prevent circumvention
of the employee's right to be secure in his
tenure, the clause in said article
indiscriminately and completely ruling out all
written or oral agreements conflicting with
the concept of regular employment as
defined therein should be construed to refer
to the substantive evil that the Code itself
has singled out: agreements entered into
precisely to circumvent security of tenure. It
should have no application to instances
where a fixed period of employment was
agreed upon knowingly and voluntarily by the
parties, without any force, duress or
improper pressure being brought to bear
upon the employee and absent any other
circumstances vitiating his consent, or where
it satisfactorily appears that the employer
and employee dealt with each other on more
or less equal terms with no moral dominance
whatever being exercised by the former over
the latter. Unless thus limited in its purview,
the law would be made to apply to purposes
other than those explicitly stated by its
framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead
to absurd and unintended consequences.
(emphasis supplied)
It is apparent from Brent School that the critical
consideration is the presence or absence of a
substantial indication that the period specified in an
employment agreement was designed to circumvent
the security of tenure of regular employees which is
provided for in Articles 280 and 281 of the Labor
Code. This indication must ordinarily rest upon some
aspect of the agreement other than the mere
specification of a fixed term of the ernployment
agreement, or upon evidence aliunde of the intent to
evade.
Examining the provisions of paragraphs 5 and 6 of the
employment agreement between petitioner PIA and private
respondents, we consider that those provisions must be read
together and when so read, the fixed period of three (3) years
specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement.
Paragraph 6 in effect took back from the employee the fixed
three (3)-year period ostensibly granted by paragraph 5 by
rendering such period in effect a facultative one at the option of
the employer PIA. For petitioner PIA claims to be authorized to
shorten that term, at any time and for any cause satisfactory to
itself, to a one-month period, or even less by simply paying the
employee a month's salary. Because the net effect of
paragraphs 5 and 6 of the agreement here involved is to render
the employment of private respondents Farrales and Mamasig
basically employment at the pleasure of petitioner PIA, the
Court considers that paragraphs 5 and 6 were intended to
prevent any security of tenure from accruing in favor of private
respondents even during the limited period of three (3)
years,13 and thus to escape completely the thrust of Articles
280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its
employment agreement which specifies, firstly, the law of
Pakistan as the applicable law of the agreement and, secondly,
lays the venue for settlement of any dispute arising out of or in
connection with the agreement "only [in] courts of Karachi
Pakistan". The first clause of paragraph 10 cannot be invoked
to prevent the application of Philippine labor laws and
regulations to the subject matter of this case, i.e., the
employer-employee relationship between petitioner PIA and
private respondents. We have already pointed out that the
relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law
to govern their relationship. Neither may petitioner invoke the
second clause of paragraph 10, specifying the Karachi courts
as the sole venue for the settlement of dispute; between the
contracting parties. Even a cursory scrutiny of the relevant
circumstances of this case will show the multiple and
substantive contacts between Philippine law and Philippine
courts, on the one hand, and the relationship between the
parties, upon the other: the contract was not only executed in
the Philippines, it was also performed here, at least partially;
private respondents are Philippine citizens and respondents,
while petitioner, although a foreign corporation, is licensed to
do business (and actually doing business) and hence resident
in the Philippines; lastly, private respondents were based in the
Philippines in between their assigned flights to the Middle East
and Europe. All the above contacts point to the Philippine
courts and administrative agencies as a proper forum for the
resolution of contractual disputes between the parties. Under
these circumstances, paragraph 10 of the employment
agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by
Philippine law. Finally, and in any event, the petitioner PIA did
not undertake to plead and prove the contents of Pakistan law
on the matter; it must therefore be presumed that the
applicable provisions of the law of Pakistan are the same as
the applicable provisions of Philippine law.14
We conclude that private respondents Farrales and Mamasig
were illegally dismissed and that public respondent Deputy
Minister, MOLE, had not committed any grave abuse of
discretion nor any act without or in excess of jurisdiction in
ordering their reinstatement with backwages. Private
respondents are entitled to three (3) years backwages without
qualification or deduction. Should their reinstatement to their
former or other substantially equivalent positions not be
feasible in view of the length of time which has gone by since
their services were unlawfully terminated, petitioner should be
required to pay separation pay to private respondents
amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service
putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby
DISMISSED for lack of merit, and the Order dated 12 August
1982 of public respondent is hereby AFFIRMED, except that
(1) private respondents are entitled to three (3) years
backwages, without deduction or qualification; and (2) should
reinstatement of private respondents to their former positions
or to substantially equivalent positions not be feasible, then
petitioner shall, in lieu thereof, pay to private respondents
separation pay amounting to one (1)-month's salary for every
year of service actually rendered by them and for the three (3)
years putative service by private respondents. The Temporary
Restraining Order issued on 13 September 1982 is hereby
LIFTED. Costs against petitioner. SO ORDERED.
[G.R. No. 133876. December 29, 1999]
BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN
REALTY CORPORATION and COURT OF APPEALS,
respondents.; BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the
real estate mortgage constituted over a third party mortgagors
property situated in the Philippines by filing an action for the
collection of the principal loan before foreign courts?
Sought to be reversed in the instant petition for review on
certiorari under Rule 45 of the Rules of Court are the decision
of public respondent Court of Appeals in CA G.R. CV No.
51094, promulgated on 30 September 1997 and its resolution,
dated 22 May 1998, denying petitioners motion for
reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an
international banking and financing institution duly licensed to
do business in the Philippines, organized and existing under
and by virtue of the laws of the State of California, United
States of America while private respondent American Realty
Corporation (ARC) is a domestic corporation.
Bank of America International Limited (BAIL), on the other
hand, is a limited liability company organized and existing
under the laws of England.
As borne by the records, BANTSA and BAIL on several
occasions granted three major multi-million United States (US)
Dollar loans to the following corporate borrowers: (1) Liberian
Transport Navigation, S.A.; (2) El Challenger S.A. and (3)
Eshley Compania Naviera S.A. (hereinafter collectively referred
to as borrowers), all of which are existing under and by virtue
of the laws of the Republic of Panama and are foreign affiliates
of private respondent.
Due to the default in the payment of the loan amortizations,
BANTSA and the corporate borrowers signed and entered into
restructuring agreements. As additional security for the
restructured loans, private respondent ARC as third party
mortgagor executed two real estate mortgages, dated 17
February 1983 and 20 July 1984, over its parcels of land
including improvements thereon, located at Barrio Sto. Cristo,
San Jose Del Monte, Bulacan, and which are covered by
Transfer Certificate of Title Nos. T-78759, T-78760, T-78761,
T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment
of the restructured loans prompting petitioner BANTSA to file
civil actions before foreign courts for the collection of the
principal loan, to wit:
a) In England, in its High Court of Justice, Queens Bench
Division, Commercial Court (1992-Folio No. 2098) against
Liberian Transport Navigation S.A., Eshley Compania Naviera
S.A., El Challenger S.A., Espriona Shipping Company S.A.,
Eddie Navigation Corp., S.A., Eduardo Katipunan Litonjua and
Aurelio Katipunan Litonjua on June 17, 1992.
b) In England, in its High Court of Justice, Queens Bench
Division, Commercial Court (1992-Folio No. 2245) against El
Challenger S.A., Espriona Shipping Company S.A., Eduardo
Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court
(Action No. 4039 of 1992) against Eshley Compania Naviera
S.A., El Challenger S.A., Espriona Shipping Company S.A.
Pacific Navigators Corporation, Eddie Navigation Corporation
S.A., Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan
Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19,
1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court
(Action No. 4040 of 1992) against Eshley Compania Naviera
S.A., El Challenger S.A., Espriona Shipping Company, S.A.,
Pacific Navigators Corporation, Eddie Navigation Corporation
S.A., Litonjua Chartering (Edyship) Co., Jr. and Eduardo
Katipunan Litonjua on November 21, 1992.
In the civil suits instituted before the foreign courts, private
respondent ARC, being a third party mortgagor, was not
impleaded as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the
Office of the Provincial Sheriff of Bulacan, Philippines, an
application for extrajudicial foreclosure of real estate mortgage.
On 22 January 1993, after due publication and notice, the
mortgaged real properties were sold at public auction in an
extrajudicial foreclosure sale, with Integrated Credit and
Corporation Services Co. (ICCS) as the highest bidder for the
sum of Twenty Four Million Pesos (P24,000,000.00).
On 12 February 1993, private respondent filed before the Pasig
Regional Trial Court, Branch 159, an action for damages
against the petitioner, for the latters act of foreclosing
extrajudicially the real estate mortgages despite the pendency
of civil suits before foreign courts for the collection of the
principal loan.
In its answer petitioner alleged that the rule prohibiting the
mortgagee from foreclosing the mortgage after an ordinary suit
for collection has been filed, is not applicable in the present
case, claiming that:
a) The plaintiff, being a mere third party mortgagor and not a
party to the principal restructuring agreements, was never
made a party defendant in the civil cases filed in Hongkong
and England;
b) There is actually no civil suit for sum of money filed in the
Philippines since the civil actions were filed in Hongkong and
England. As such, any decisions (sic) which may be rendered
in the abovementioned courts are not (sic) enforceable in the
Philippines unless a separate action to enforce the foreign
judgments is first filed in the Philippines, pursuant to Rule 39,
Section 50 of the Revised Rules of Court.
c) Under English Law, which is the governing law under the
principal agreements, the mortgagee does not lose its security
interest by filing civil actions for sums of money.
On 14 December 1993, private respondent filed a motion for
suspension of the redemption period on the ground that it
cannot exercise said right of redemption without at the same
time waiving or contradicting its contentions in the case that the
foreclosure of the mortgage on its properties is legally improper
and therefore invalid.
In an order dated 28 January 1994, the trial court granted the
private respondents motion for suspension after which a copy
of said order was duly received by the Register of Deeds of
Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged
properties at the foreclosure sale, consolidated its ownership
over the real properties, resulting to the issuance of Transfer
Certificate of Title Nos. T-18627, T-186272, T-186273, T-
16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its
favor, ICCS sold the real properties to Stateland Investment
Corporation for the amount of Thirty Nine Million Pesos
(P39,000,000.00). Accordingly, Transfer Certificate of Title
Nos. T-187781(m), T-187782(m), T-187783(m), T-16653P(m)
and T-16652P(m) were issued in the latters name.
After trial, the lower court rendered a decision in favor of
private respondent ARC dated 12 May 1993, the decretal
portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the
filing in foreign courts by the defendant of collection suits
against the principal debtors operated as a waiver of the
security of the mortgages. Consequently, the plaintiffs rights as
owner and possessor of the properties then covered by
Transfer Certificates of Title Nos. T-78759, T-78762, T-78763,
T-78760 and T-78761, all of the Register of Deeds of
Meycauayan, Bulacan, Philippines, were violated when the
defendant caused the extrajudicial foreclosure of the
mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff
the following sums, all with legal interest thereon from the date
of the filing of the complaint up to the date of actual payment:
1) Actual or compensatory damages in the amount of Ninety
Nine Million Pesos (P99,000,000.00);
2) Exemplary damages in the amount of Five Million Pesos
(P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision
of the lower court prompting petitioner to file a motion for
reconsideration which the appellate court denied.
Hence, the instant petition for review on certiorari where herein
petitioner BANTSA ascribes to the Court of Appeals the
following assignment of errors:
1. The Honorable Court of Appeals disregarded the doctrines
laid down by this Hon. Supreme Court in the cases of Caltex
Philippines, Inc. vs. Intermediate Appellate Court docketed
as G.R. No. 74730 promulgated on August 25, 1989 and
Philippine Commercial International Bank vs. IAC, 196
SCRA 29 (1991 case), although said cases were duly cited,
extensively discussed and specifically mentioned, as one of the
issues in the assignment of errors found on page 5 of the
decision dated September 30, 1997.
2. The Hon. Court of Appeals acted with grave abuse of
discretion when it awarded the private respondent actual and
exemplary damages totalling P171,600,000.00, as of July 12,
1998 although such huge amount was not asked nor prayed for
in private respondents complaint, is contrary to law and is
totally unsupported by evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioners act of filing a collection suit
against the principal debtors for the recovery of the loan before
foreign courts constituted a waiver of the remedy of
foreclosure.
2. Whether or not the award by the lower court of actual and
exemplary damages in favor of private respondent ARC, as
third-party mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner
submits that a waiver of the remedy of foreclosure requires the
concurrence of two requisites: an ordinary civil action for
collection should be filed and subsequently a final judgment be
correspondingly rendered therein.
According to petitioner, the mere filing of a personal action to
collect the principal loan does not suffice; a final judgment must
be secured and obtained in the personal action so that waiver
of the remedy of foreclosure may be appreciated. To put it
differently, absent any of the two requisites, the mortgagee-
creditor is deemed not to have waived the remedy of
foreclosure.
We do not agree.
Certainly, this Court finds petitioners arguments untenable and
upholds the jurisprudence laid down in Bachrach and similar
cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage
creditor may institute against the mortgage debtor either a
personal action for debt or a real action to foreclose the
mortgage. In other words, he may pursue either of the two
remedies, but not both. By such election, his cause of action
can by no means be impaired, for each of the two remedies is
complete in itself. Thus, an election to bring a personal action
will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged
property itself. And, if he waives such personal action and
pursues his remedy against the mortgaged property, an
unsatisfied judgment thereon would still give him the right to
sue for a deficiency judgment, in which case, all the properties
of the defendant, other than the mortgaged property, are again
open to him for the satisfaction of the deficiency. In either case,
his remedy is complete, his cause of action undiminished, and
any advantages attendant to the pursuit of one or the other
remedy are purely accidental and are all under his right of
election. On the other hand, a rule that would authorize the
plaintiff to bring a personal action against the debtor and
simultaneously or successively another action against the
mortgaged property, would result not only in multiplicity of suits
so offensive to justice (Soriano vs. Enriques, 24 Phil. 584) and
obnoxious to law and equity (Osorio vs. San Agustin, 25 Phil.,
404), but also in subjecting the defendant to the vexation of
being sued in the place of his residence or of the residence of
the plaintiff, and then again in the place where the property
lies.
In Danao vs. Court of Appeals, this Court, reiterating
jurisprudence enunciated in Manila Trading and Supply Co.
vs. Co Kimand Movido vs. RFC, invariably held:
x x x The rule is now settled that a mortgage creditor may elect
to waive his security and bring, instead, an ordinary action to
recover the indebtedness with the right to execute a judgment
thereon on all the properties of the debtor, including the subject
matter of the mortgage x x x, subject to the qualification that if
he fails in the remedy by him elected, he cannot pursue further
the remedy he has waived. (Underscoring Ours)
Anent real properties in particular, the Court has laid down the
rule that a mortgage creditor may institute against the
mortgage debtor either a personal action for debt or a real
action to foreclose the mortgage.
In our jurisdiction, the remedies available to the mortgage
creditor are deemed alternative and not cumulative. Notably,
an election of one remedy operates as a waiver of the other.
For this purpose, a remedy is deemed chosen upon the filing of
the suit for collection or upon the filing of the complaint in an
action for foreclosure of mortgage, pursuant to the provision of
Rule 68 of the 1997 Rules of Civil Procedure. As to
extrajudicial foreclosure, such remedy is deemed elected by
the mortgage creditor upon filing of the petition not with any
court of justice but with the Office of the Sheriff of the province
where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real
estate mortgages over its properties as security for the debt of
the principal debtors. By doing so, private respondent
subjected itself to the liabilities of a third party mortgagor.
Under the law, third persons who are not parties to a loan may
secure the latter by pledging or mortgaging their own property.
Notwithstanding, there is no legal provision nor jurisprudence
in our jurisdiction which makes a third person who secures the
fulfillment of anothers obligation by mortgaging his own
property, to be solidarily bound with the principal obligor. The
signatory to the principal contractloanremains to be primarily
bound. It is only upon default of the latter that the creditor may
have recourse on the mortgagors by foreclosing the mortgaged
properties in lieu of an action for the recovery of the amount of
the loan.
In the instant case, petitioners contention that the requisites of
filing the action for collection and rendition of final judgment
therein should concur, is untenable.
Thus, in Cerna vs. Court of Appeals, we agreed with the
petitioner in said case, that the filing of a collection suit barred
the foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the
remedy of foreclosure of the chattel mortgage constituted over
the personal property as security for the debt or value of the
promissory note when he seeks to recover in the said
collection suit.
x x x When the mortgagee elects to file a suit for collection, not
foreclosure, thereby abandoning the chattel mortgage as basis
for relief, he clearly manifests his lack of desire and interest to
go after the mortgaged property as security for the promissory
note x x x.
Contrary to petitioners arguments, we therefore reiterate the
rule, for clarity and emphasis, that the mere act of filing of an
ordinary action for collection operates as a waiver of the
mortgage-creditors remedy to foreclose the mortgage. By the
mere filing of the ordinary action for collection against the
principal debtors, the petitioner in the present case is deemed
to have elected a remedy, as a result of which a waiver of the
other necessarily must arise. Corollarily, no final judgment in
the collection suit is required for the rule on waiver to apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate
Appellate Court, a case relied upon by petitioner, supposedly
to buttress its contention, this Court had occasion to rule that
the mere act of filing a collection suit for the recovery of a debt
secured by a mortgage constitutes waiver of the other remedy
of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of
action which is non-payment of the debt. Nevertheless,
alternative remedies are available for its enjoyment and
exercise. Petitioner then may opt to exercise only one of two
remedies so as not to violate the rule against splitting a cause
of action.
As elucidated by this Court in the landmark case of Bachrach
Motor Co., Inc. vs. Icarangal.
For non-payment of a note secured by mortgage, the creditor
has a single cause of action against the debtor. This single
cause of action consists in the recovery of the credit with
execution of the security. In other words, the creditor in his
action may make two demands, the payment of the debt and
the foreclosure of his mortgage. But both demands arise from
the same cause, the non-payment of the debt, and for that
reason, they constitute a single cause of action. Though the
debt and the mortgage constitute separate agreements, the
latter is subsidiary to the former, and both refer to one and the
same obligation. Consequently, there exists only one cause of
action for a single breach of that obligation. Plaintiff, then, by
applying the rules above stated, cannot split up his single
cause of action by filing a complaint for payment of the debt,
and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar
the subsequent complaint. By allowing the creditor to file two
separate complaints simultaneously or successively, one to
recover his credit and another to foreclose his mortgage, we
will, in effect, be authorizing him plural redress for a single
breach of contract at so much cost to the courts and with so
much vexation and oppression to the debtor.
Petitioner further faults the Court of Appeals for allegedly
disregarding the doctrine enunciated in Caltex, wherein this
High Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this rule to
the letter but declare that it is the collection suit which was
waived and/or abandoned. This ruling is more in harmony with
the principles underlying our judicial system. It is of no moment
that the collection suit was filed ahead, what is determinative is
the fact that the foreclosure proceedings ended even before
the decision in the collection suit was rendered. x x x
Notably, though, petitioner took the Caltex ruling out of context.
We must stress that the Caltex case was never intended to
overrule the well-entrenched doctrine enunciated in Bachrach,
which to our mind still finds applicability in cases of this sort. To
reiterate, Bachrach is still good law.
We then quote the decisionof the trial court, in the present
case, thus:
The aforequoted ruling in Caltex is the exception rather than
the rule, dictated by the peculiar circumstances obtaining
therein. In the said case, the Supreme Court chastised Caltex
for making x x x a mockery of our judicial system when it
initially filed a collection suit then, during the pendency thereof,
foreclosed extrajudicially the mortgaged property which
secured the indebtedness, and still pursued the collection suit
to the end. Thus, to prevent a mockery of our judicial system,
the collection suit had to be nullified because the foreclosure
proceedings have already been pursued to their end and can
no longer be undone.
xxxxxxxxx
In the case at bar, it has not been shown whether the
defendant pursued to the end or are still pursuing the collection
suits filed in foreign courts. There is no occasion, therefore, for
this court to apply the exception laid down by the Supreme
Court in Caltex, by nullifying the collection suits. Quite
obviously, too, the aforesaid collection suits are beyond the
reach of this Court. Thus the only way the court may prevent
the spector of a creditor having plural redress for a single
breach of contract is by holding, as the Court hereby holds,
that the defendant has waived the right to foreclose the
mortgages constituted by the plaintiff on its properties originally
covered by Transfer Certificates of Title Nos. T-78759, T-
78762, T-78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe
criticism, to say the least.
Moreover, petitioner attempts to mislead this Court by citing the
case of PCIB vs. IAC. Again, petitioner tried to fit a square peg
in a round hole. It must be stressed that far from overturning
the doctrine laid down in Bachrach, this Court in PCIB
buttressed its firm stand on this issue by declaring:
While the law allows a mortgage creditor to either institute a
personal action for the debt or a real action to foreclosure the
mortgage, he cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case.
xxxxxxxxx
Thus, when the PCIB filed Civil Case No. 29392 to enforce
payment of the 1.3 million promissory note secured by real
estate mortgages and subsequently filed a petition for
extrajudicial foreclosure, it violates the rule against splitting a
cause of action.
Accordingly, applying the foregoing rules, we hold that
petitioner, by the expediency of filing four civil suits before
foreign courts, necessarily abandoned the remedy to foreclose
the real estate mortgages constituted over the properties of
third-party mortgagor and herein private respondent ARC.
Moreover, by filing the four civil actions and by eventually
foreclosing extrajudicially the mortgages, petitioner in effect
transgressed the rules against splitting a cause of action well-
enshrined in jurisprudence and our statute books.
In Bachrach, this Court resolved to deny the creditor the
remedy of foreclosure after the collection suit was filed,
considering that the creditor should not be afforded plural
redress for a single breach of contract. For cause of action
should not be confused with the remedy created for its
enforcement.
Notably, it is not the nature of the redress which is crucial but
the efficacy of the remedy chosen in addressing the creditors
cause. Hence, a suit brought before a foreign court having
competence and jurisdiction to entertain the action is deemed,
for this purpose, to be within the contemplation of the remedy
available to the mortgagee-creditor. This pronouncement would
best serve the interest of justice and fair play and further
discourage the noxious practice of splitting up a lone cause of
action.
Incidentally, BANTSA alleges that under English Law, which
according to petitioner is the governing law with regard to the
principal agreements, the mortgagee does not lose its security
interest by simply filing civil actions for sums of money.
We rule in the negative.
This argument shows desperation on the part of petitioner to
rivet its crumbling cause. In the case at bench, Philippine law
shall apply notwithstanding the evidence presented by
petitioner to prove the English law on the matter.
In a long line of decisions, this Court adopted the well-
imbedded principle in our jurisdiction that there is no judicial
notice of any foreign law. A foreign law must be properly
pleaded and proved as a fact. Thus, if the foreign law involved
is not properly pleaded and proved, our courts will presume
that the foreign law is the same as our local or domestic or
internal law. This is what we refer to as the doctrine of
processual presumption.
In the instant case, assuming arguendo that the English Law
on the matter were properly pleaded and proved in accordance
with Section 24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs. Sy-Gonzales,
said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to
a sound and established public policy of the forum, the said
foreign law, judgment or order shall not be applied.
Additionally, prohibitive laws concerning persons, their acts or
property, and those which have for their object public order,
public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by
determinations or conventions agreed upon in a foreign
country.
The public policy sought to be protected in the instant case is
the principle imbedded in our jurisdiction proscribing the
splitting up of a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is
pertinent -
If two or more suits are instituted on the basis of the same
cause of action, the filing of one or a judgment upon the merits
in any one is available as a ground for the dismissal of the
others.
Moreover, foreign law should not be applied when its
application would work undeniable injustice to the citizens or
residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is
obviously unjust negates the fundamental principles of Conflict
of Laws.
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private
respondent is entitled to the award of actual or compensatory
damages inasmuch as the act of petitioner BANTSA in
extrajudicially foreclosing the real estate mortgages constituted
a clear violation of the rights of herein private respondent ARC,
as third-party mortgagor.
Actual or compensatory damages are those recoverable
because of pecuniary loss in business, trade, property,
profession, job or occupation and the same must be proved,
otherwise if the proof is flimsy and non-substantial, no
damages will be given. Indeed, the question of the value of
property is always a difficult one to settle as valuation of real
property is an imprecise process since real estate has no
inherent value readily ascertainable by an appraiser or by the
court. The opinions of men vary so much concerning the real
value of property that the best the courts can do is hear all of
the witnesses which the respective parties desire to present,
and then, by carefully weighing that testimony, arrive at a
conclusion which is just and equitable.
In the instant case, petitioner assails the Court of Appeals for
relying heavily on the valuation made by Philippine Appraisal
Company. In effect, BANTSA questions the act of the appellate
court in giving due weight to the appraisal report composed of
twenty three pages, signed by Mr. Lauro Marquez and
submitted as evidence by private respondent. The appraisal
report, as the records would readily show, was corroborated by
the testimony of Mr. Reynaldo Flores, witness for private
respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally
offered as evidence the appraisal report dated March 29, 1993
(Exhibit J, Records, p. 409), consisting of twenty three (23)
pages which set out in detail the valuation of the property to
determine its fair market value (TSN, April 22, 1994, p. 4), in
the amount of P99,986,592.00 (TSN, ibid., p. 5), together with
the corroborative testimony of one Mr. Reynaldo F. Flores, an
appraiser and director of Philippine Appraisal Company, Inc.
(TSN, ibid., p. 3). The latters testimony was subjected to
extensive cross-examination by counsel for defendant-
appellant (TSN, April 22, 1994, pp. 6-22).
In the matter of credibility of witnesses, the Court reiterates the
familiar and well-entrenched rule that the factual findings of the
trial court should be respected. The time-tested jurisprudence
is that the findings and conclusions of the trial court on the
credibility of witnesses enjoy a badge of respect for the reason
that trial courts have the advantage of observing the demeanor
of witnesses as they testify.
This Court will not alter the findings of the trial court on the
credibility of witnesses, principally because they are in a better
position to assess the same than the appellate court. Besides,
trial courts are in a better position to examine real evidence as
well as observe the demeanor of witnesses.
Similarly, the appreciation of evidence and the assessment of
the credibility of witnesses rest primarily with the trial court. In
the case at bar, we see no reason that would justify this Court
to disturb the factual findings of the trial court, as affirmed by
the Court of Appeals, with regard to the award of actual
damages.
In arriving at the amount of actual damages, the trial court
justified the award by presenting the following ratiocination in
its assailed decision, to wit:
Indeed, the Court has its own mind in the matter of valuation.
The size of the subject real properties are (sic) set forth in their
individual titles, and the Court itself has seen the character and
nature of said properties during the ocular inspection it
conducted. Based principally on the foregoing, the Court
makes the following observations:
1. The properties consist of about 39 hectares in Bo. Sto.
Cristo, San Jose del Monte, Bulacan, which is (sic) not distant
from Metro Manila the biggest urban center in the Philippines
and are easily accessible through well-paved roads;
2. The properties are suitable for development into a
subdivision for low cost housing, as admitted by defendants
own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already
been demolished. Houses of strong materials are found in the
vicinity of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a
growing community. It has even been shown that the house of
the Barangay Chairman is located adjacent to the property in
question (Exh. 27), and the only remaining piggery (named
Cherry Farm) in the vicinity is about 2 kilometers away from the
western boundary of the property in question (TSN, November
19, p. 3);
4. It will not be hard to find interested buyers of the property, as
indubitably shown by the fact that on March 18, 1994, ICCS
(the buyer during the foreclosure sale) sold the consolidated
real estate properties to Stateland Investment Corporation, in
whose favor new titles were issued, i.e., TCT Nos. T-
187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-
166521(m) by the Register of Deeds of Meycauayan (sic),
Bulacan;
5. The fact that ICCS was able to sell the subject properties to
Stateland Investment Corporation for Thirty Nine Million
(P39,000,000.00) Pesos, which is more than triple defendants
appraisal (Exh. 2) clearly shows that the Court cannot rely on
defendants aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the
trial judge on the credibility of witnesses command great
respect and consideration especially when the conclusions are
supported by the evidence on record. Applying the foregoing
principle, we therefore hold that the trial court committed no
palpable error in giving credence to the testimony of Reynaldo
Flores, who according to the records, is a licensed real estate
broker, appraiser and director of Philippine Appraisal
Company, Inc. since 1990. As the records show, Flores had
been with the company for 26 years at the time of his
testimony.
Of equal importance is the fact that the trial court did not
confine itself to the appraisal report dated 29 March 1993, and
the testimony given by Mr. Reynaldo Flores, in determining the
fair market value of the real property. Above all these, the
record would likewise show that the trial judge in order to
appraise himself of the characteristics and condition of the
property, conducted an ocular inspection where the opposing
parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we
affirm the ruling of the trial court as regards the valuation of the
property
x x x a valuation of Ninety Nine Million Pesos (P99,000,000.00)
for the 39-hectare properties (sic) translates to just about Two
Hundred Fifty Four Pesos (P254.00) per square meter. This
appears to be, as the court so holds, a better approximation of
the fair market value of the subject properties. This is the
amount which should be restituted by the defendant to the
plaintiff by way of actual or compensatory damages x x x.
Further, petitioner ascribes error to the lower court for awarding
an amount allegedly not asked nor prayed for in private
respondents complaint.
Notwithstanding the fact that the award of actual and
compensatory damages by the lower court exceeded that
prayed for in the complaint, the same is nonetheless valid,
subject to certain qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is
pertinent:
SEC. 5. Amendment to conform to or authorize presentation of
evidence. When issues not raised by the pleadings are tried
with the express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the
pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to
raise these issues may be made upon motion of any party at
any time, even after judgement; but failure to amend does not
affect the result of the trial of these issues. If evidence is
objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so with liberality if the
presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co.,
Inc. vs. Asociacion de Agricultures de Talisay-Silay, Inc.
citing Northern Cement Corporation vs. Intermediate
Appellate Court is enlightening:
There have been instances where the Court has held that even
without the necessary amendment, the amount proved at the
trial may be validly awarded, as in Tuazon v. Bolanos (95 Phil.
106), where we said that if the facts shown entitled plaintiff to
relief other than that asked for, no amendment to the complaint
was necessary, especially where defendant had himself raised
the point on which recovery was based. The appellate court
could treat the pleading as amended to conform to the
evidence although the pleadings were actually not amended.
Amendment is also unnecessary when only clerical error or
non substantial matters are involved, as we held in Bank of the
Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs.
Diaz (75 Phil. 672), we stressed that the rule on amendment
need not be applied rigidly, particularly where no surprise or
prejudice is caused the objecting party. And in the recent case
of National Power Corporation vs. Court of Appeals (113 SCRA
556), we held that where there is a variance in the defendants
pleadings and the evidence adduced by it at the trial, the Court
may treat the pleading as amended to conform with the
evidence.
It is the view of the Court that pursuant to the above-mentioned
rule and in light of the decisions cited, the trial court should not
be precluded from awarding an amount higher than that
claimed in the pleading notwithstanding the absence of the
required amendment. But it is upon the condition that the
evidence of such higher amount has been presented properly,
with full opportunity on the part of the opposing parties to
support their respective contentions and to refute each others
evidence.
The failure of a party to amend a pleading to conform to the
evidence adduced during trial does not preclude an
adjudication by the court on the basis of such evidence which
may embody new issues not raised in the pleadings, or serve
as a basis for a higher award of damages. Although the
pleading may not have been amended to conform to the
evidence submitted during trial, judgment may nonetheless be
rendered, not simply on the basis of the issues alleged but also
on the basis of issues discussed and the assertions of fact
proved in the course of trial. The court may treat the pleading
as if it had been amended to conform to the evidence, although
it had not been actually so amended. Former Chief Justice
Moran put the matter in this way:
`When evidence is presented by one party, with the expressed
or implied consent of the adverse party, as to issues not
alleged in the pleadings, judgment may be rendered validly as
regards those issues, which shall be considered as if they have
been raised in the pleadings. There is implied consent to the
evidence thus presented when the adverse party fails to object
thereto.
Clearly, a court may rule and render judgment on the basis of
the evidence before it even though the relevant pleading had
not been previously amended, so long as no surprise or
prejudice is thereby caused to the adverse party. Put a little
differently, so long as the basis requirements of fair play had
been met, as where litigants were given full opportunity to
support their respective contentions and to object to or refute
each others evidence, the court may validly treat the pleadings
as if they had been amended to conform to the evidence and
proceed to adjudicate on the basis of all the evidence before it.
In the instant case, inasmuch as the petitioner was afforded the
opportunity to refute and object to the evidence, both
documentary and testimonial, formally offered by private
respondent, the rudiments of fair play are deemed satisfied. In
fact, the testimony of Reynaldo Flores was put under scrutiny
during the course of the cross-examination. Under these
circumstances, the court acted within the bounds of its
jurisdiction and committed no reversible error in awarding
actual damages the amount of which is higher than that prayed
for. Verily, the lower courts actuations are sanctioned by the
Rules and supported by jurisprudence.
Similarly, we affirm the grant of exemplary damages although
the amount of Five Million Pesos (P5,000,000.00) awarded,
being excessive, is subject to reduction. Exemplary or
corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages. Considering
its purpose, it must be fair and reasonable in every case and
should not be awarded to unjustly enrich a prevailing party. In
our view, an award of P50,000.00 as exemplary damages in
the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is
DENIED for lack of merit. The decision of the Court of Appeals
is hereby AFFIRMED with MODIFICATION of the amount
awarded as exemplary damages. Accordingly, petitioner is
hereby ordered to pay private respondent the sum of
P99,000,000.00 as actual or compensatory damages;
P50,000.00 as exemplary damage and the costs of suit. SO
ORDERED.
SOORAJMULL NAGARMULL vs. BINALBAGAN-ISABELA
SUGAR COMPANY, INC., defendant-appellant.; G.R. No. L-
22470 May 28, 1970; DIZON, J.:
Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from
the decision of the Court of First Instance of Manila in Civil
Case No. 41103 entitled Soorajmull Nagarmull vs. Binalbagan-
Isabela Sugar Company, Inc." of the following tenor:
IN VIEW OF ALL THE FOREGOING,
judgment is hereby rendered in favor of the
plaintiff, Soorajmull Nagarmull, ordering the
defendant, Binalbagan-Isabela Sugar Co.,
Inc. to pay said plaintiff the sum of 18,562
rupees and 8 annas, with reservation for the
plaintiff to prove its equivalent in Philippine
pesos on the date of the filing of the
complaint, plus the costs of suit.
The parties submitted to the trial court the following, stipulation
of facts:
1. Under Contract G/14370 dated May 6,
1949, plaintiff, a foreign corporation with
offices at No. 8 Dalhousie Square (East)
Calcutta, India, agreed to sell to defendant, a
domestic corporation with offices at the
Chronicle Building, Aduana Street, Manila,
1,700,000 pieces of Hessian bags at $26.20
per 100 bags, C.I.F. Iloilo. Shipment of these
bags was to be made in equal installments of
425,000 pcs. or 425 bales (1,000 pcs. to a
bale during each of the months of July,
August, September and October, 1949. A
copy of this contract marked Annex 'A' and
the Calcutta Jute Fabrics Shippers
Association Form 1935 which was made a
part of the contract and marked as Annex 'A-
l' are hereto attached.
2. This agreement was confirmed in a letter
by the plaintiff to the defendant on May 7,
1949, copy of which is attached hereto and
made a part hereof as Annex 'B'; .
3. On September 8, 1949, plaintiff advised
defendant that of the 850 bales scheduled
for shipment in July and August, the former
was able to ship only 310 bales owing to the
alleged failure of the Adamjee Jute Mills to
supply the goods in due time. Copy of
plaintiff's letter is attached hereto as Annex
'C' and made an integral part hereof; "4. In a
letter dated September 29, 1949, defendant
requested plaintiff to ship 100 bales of the
540 bales defaulted from the July and
August shipments. A copy of this letter
marked Annex 'D' is hereto attached. In this
connection, it may also be mentioned that of
the 425 bales scheduled for shipment in
September, 54 bales were likewise defaulted
resulting in a total of 154 bales which is now
the object of the controversy.
5. Defendant requested plaintiff to pay 5% of
the value of the 154 bales defaulted as
penalty which plaintiff did.
6. Meanwhile, on October 1, 1949, the
Government of India increased the export
duty of jute bags from 80 to 350 rupees per
ton, and on October 5, 1949, plaintiff
requested defendant to increase its letter of
credit to cover the enhanced rate of export
duty imposed upon the goods that were to be
shipped in October, reminding the latter that
under their agreement, any alteration in
export duty was to be for the buyer's
account. Copy of plaintiff's letter is attached
hereto as Annex 'E';
7. On October 25, 1949, defendant, in
compliance with plaintiff's request, increased
the amount of its letter of credit by
$10,986.25 to cover the increase in export
duty on 425 bales scheduled under the
contract for the shipment in October, 1949. A
copy of defendants letter marked Annex 'F' is
hereto attached;
8. On October 27, 1949, plaintiff wrote to
defendant for a further increase of $4,000.00
in its letter of credit to cover the shipment of
154 bales which under the contract should
have been included in the July, August and
September shipments. A copy of said letter
is attached hereto as Annex 'G';
9. On November 17, 1949, plaintiff wrote
defendant a letter reiterating its claim for
$4,000.00 corresponding to the increased
export taxes on the 154 bales delivered to
defendant from the defaulted shipments for
the months of July, August and September,
1949. A copy of said letter is attached hereto
as Annex 'H';
10. On February 6, 1951, defendant received
notification from the Bengal Chamber of
Commerce Tribunal of Arbitration in Calcutta,
India, advising it that on December 28, 1950,
Plaintiff applied to said Tribunal for
arbitration regarding their claim. The Tribunal
requested the defendant to send them its
version of the case. This, defendant did on
March 1, 1951, thru the then Government
Corporate Counsel, former Justice Pompeyo
Diaz. A copy of the letter of authority is
attached as Annex 'I';
11. The case was heard by the Tribunal of
Arbitration on July 5, 1951. Having
previously requested the Secretary Foreign
Affairs for Assistance, defendant was
represented at the hearing by the Philippine
Consulate General in Calcutta, India, by
Consul Jose Moreno. A copy of the authority,
consisting of the letter of Government
Corporate Counsel Pompeyo Diaz, dated
March 1, 1951, and 1st Indorsement thereon,
dated March 2, 1951, are attached hereto as
Annexes 'J' and 'J-1';
12. As presented to the Tribunal of
Arbitration, the whole case revolved on the
question of whether or not defendant is liable
to the plaintiff for the payment of increased
export taxes imposed by the Indian
Government on the shipments of jute sacks.
Defendant contended that if the jute sacks in
question were delivered by plaintiff in the
months of July, August, and September,
1949, pursuant to the terms of the contract,
then there would have been no increased
export taxes to pay because said increased
taxes became effective only on October 1,
1949, while on the other hand, plaintiff
argued that the contract between the parties
and all papers and documents made parts
thereto should prevail, including defendant's
letter of September 29, 1949;
13. The Bengal Chamber of Commerce,
Tribunal of Arbitration, refused to sustain
defendant's contention and decided in favor
of the plaintiff, ordering the defendant to pay
to the plaintiff the sum of 18,562 rupees and
8 annas. This award was thereafter referred
to the Calcutta High Court which issued a
decree affirming the award;
14. For about two years, the plaintiff
attempted to enforce the said award through
 the Philippine Charge de'Affaires in Calcutta,
the Indian Legation here in the Philippines,
and the Department of Foreign Affairs. On
September 22, 1952, plaintiff, thru the
Department of Foreign Affairs, sought to
enforce its claim to which letter defendant
replied on August 11, 1952, saying that they
are not bound by the decision of the Bengal
Chamber of Commerce and consequently
are not obligated to pay the claim in
question. Copies of said letters are attached
hereto as Annexes 'K' and 'L', respectively;
15. For more than three years thereafter, no
communication was received by defendant
from the plaintiff regarding their claim until
January 26, 1956, when Atty. S. Emiliano
Calma wrote the defendant a letter of
demand, copy of which is attached hereto as
Annex 'M';
16. On February 3, 1956, defendant's
counsel replied informing Atty. S. Emiliano
Calma that it refuses to pay plaintiff's claim
because the same has no foundation in law
and in fact. A copy of this letter is attached
hereto as Annex 'N';
17. Thereafter, no communication was
received by defendant from plaintiff or its
lawyers regarding their claim until June,
1959, when the present complaint was filed.
FINALLY, parties thru their respective
counsel, state that much as they have
endeavored to agree on all matters of fact,
they have failed to do so on certain points. It
is, therefore respectfully prayed of this
Honorable Court that parties be allowed to
present evidence on the disputed facts.
Thereafter the parties submitted additional evidence pursuant
to the reservation they made in the above stipulation.
The appeal was elevated to the Court of Appeals but the latter,
by its resolution of January 27, 1964, elevated it to this Court
because the additional documents and oral evidence
presented by the parties did not raise any factual issue, and
said court further found that "the three assigned errors quoted
above all pose questions of law."
As may be gathered from the pleadings and the facts
stipulated, the action below was for the enforcement of a
foreign judgment: the decision rendered by the Tribunal of
Arbitration of the Bengal Chamber of Commerce in Calcutta,
India, as affirmed by the High Court of Judicature of Calcutta.
The appealed decision provides for its enforcement subject to
the right reserved to appellee to present evidence on the
equivalent in Philippine currency of the amount adjudged in
Indian currency. The record does not disclose any evidence
presented for that purpose subsequent to the rendition of
judgment.
To secure a reversal of the appealed decision appellant claims
that the lower court committed the following errors:
I. THE LOWER COURT ERRED IN HOLDING
THAT PLAINTIFF-APPELLEE, A FOREIGN
CORPORATION NOT LICENSED TO
TRANSACT BUSINESS IN THE PHILIPPINES,
HAS THE RIGHT TO SUE IN PHILIPPINE
COURTS.
II. THE LOWER COURT ERRED WHEN IT FAILED
TO CONSIDER PLAINTIFF-APPELLEE'S
DEFAULT, AND INSTEAD RELIED SOLELY ON
THE AWARD OF THE BENGAL CHAMBER OF
COMMERCE TRIBUNAL OF ARBITRATION.
III. THE LOWER COURT ERRED WHEN IT HELD
THAT PLAINTIFF-APPELLEE WAS NOT
GUILTY OF LACHES.
The main issue to be resolved is whether or not the decision of
the Tribunal of Arbitration of the Bengal Chamber of
Commerce, as affirmed by the High Court of Judicature of
Calcutta, is enforceable in the Philippines.
For the purpose of this decision We shall assume that appellee
— contrary to appellant's contention — has the right to sue in
Philippine courts and that, as far as the instant case is
concerned, it is not guilty of laches. This notwithstanding, We
are constrained to reverse the appealed decision upon the
ground that it is based upon a clear mistake of law and its
enforcement will give rise to a patent injustice.
It is true that under the provisions of Section 50 of Rule 39,
Rules of Court, a judgment for a sum of money rendered by a
foreign court "is presumptive evidence of a right as between
the parties and their successors in interest by a subsequent
title", but when suit for its enforcement is brought in a
Philippine court, said 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" (Emphasis supplied.)
Upon the facts of record, We are constrained to hold that the
decision sought to be enforced was rendered upon a "clear
mistake of law" and because of that it makes appellant — an
innocent party — suffer the consequences of the default or
breach of contract committed by appellee.
There is no question at all that appellee was guilty of a breach
of contract when it failed to deliver one-hundred fifty-four
Hessian bales which, according to the contract entered into
with appellant, should have been delivered to the latter in the
months of July, August and September, all of the year 1949. It
is equally clear beyond doubt that had these one-hundred fifty-
four bales been delivered in accordance with the contract
aforesaid, the increase in the export tax due upon them would
not have been imposed because said increased export tax
became effective only on October 1, 1949.
To avoid its liability for the aforesaid increase in the export tax,
appellee claims that appellant should be held liable therefor on
the strength of its letter of September 29, 1949 asking appellee
to ship the shortage. This argument is unavailing because it is
not only illogical but contrary to known principles of fairness
and justice. When appellant demanded that appellee deliver
the shortage of 154 bales it did nothing more than to demand
that to which it was entitled as a matter of right. The breach of
contract committed by appellee gave appellant, under the law
and even under general principles of fairness, the right to
rescind the contract or to ask for its specific performance, in
either case with right to demand damages. Part of the
damages appellant was clearly entitled to recover from
appellee growing out of the latter's breach of the contract
consists precisely of the amount of the increase decreed in the
export tax due on the shortage — which, because of appellee's
fault, had to be delivered after the effectivity of the increased
export tax.
To the extent, therefore, that the decisions of the Tribunal of
Arbitration of the Bengal Chamber of Commerce and of the
High Court of Judicature of Calcutta fail to apply to the facts of
this case fundamental principles of contract, the same may be
impeached, as they have been sufficiently impeached by
appellant, on the ground of "clear mistake of law". We agree in
this regard with the majority opinion in Ingenohl vs. Walter E.
Olsen & Co. (47 Phil. 189), although its view was reversed by
the Supreme Court of the United States (273 U.S. 541, 71 L.
ed. 762) which at that time had jurisdiction to review by
certiorari decisions of this Court. We can not sanction a clear
mistake of law that would work an obvious injustice upon
appellant.
WHEREFORE, the appealed judgment is reversed and set
aside, with costs.
NORTHWEST ORIENT AIRLINES, INC
vs. COURT OF APPEALS and C.F. SHARP & COMPANY
INC.; G.R. No. 112573 February 9, 1995; PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the
decision of the Court of Appeals affirming the dismissal of the
petitioner's complaint to enforce the judgment of a Japanese
court. The principal issue here is whether a Japanese court
can acquire jurisdiction over a Philippine corporation doing
business in Japan by serving summons through diplomatic
channels on the Philippine corporation at its principal office in
Manila after prior attempts to serve summons in Japan had
failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter
NORTHWEST), a corporation organized under the laws of the
State of Minnesota, U.S.A., sought to enforce in Civil Case No.
83-17637 of the Regional Trial Court (RTC), Branch 54,
Manila, a judgment rendered in its favor by a Japanese court
against private respondent C.F. Sharp & Company, Inc.,
(hereinafter SHARP), a corporation incorporated under
Philippine laws.
As found by the Court of Appeals in the challenged decision of
10 November 1993, 1 the following are the factual and
procedural antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines
and defendant C.F. Sharp & Company,
through its Japan branch, entered into an
International Passenger Sales Agency
Agreement, whereby the former authorized
the latter to sell its air transportation tickets.
Unable to remit the proceeds of the ticket
sales made by defendant on behalf of the
plaintiff under the said agreement, plaintiff on
March 25, 1980 sued defendant in Tokyo,
Japan, for collection of the unremitted
proceeds of the ticket sales, with claim for
damages.
On April 11, 1980, a writ of summons was
issued by the 36th Civil Department, Tokyo
District Court of Japan against defendant at
its office at the Taiheiyo Building, 3rd floor,
132, Yamashita-cho, Naka-ku, Yokohoma,
Kanagawa Prefecture. The attempt to serve
the summons was unsuccessful because the
bailiff was advised by a person in the office
that Mr. Dinozo, the person believed to be
authorized to receive court processes was in
Manila and would be back on April 24, 1980.
On April 24, 1980, bailiff returned to the
defendant's office to serve the summons. Mr.
Dinozo refused to accept the same claiming
that he was no longer an employee of the
defendant.
After the two attempts of service were
unsuccessful, the judge of the Tokyo District
Court decided to have the complaint and the
writs of summons served at the head office
of the defendant in Manila. On July 11, 1980,
the Director of the Tokyo District Court
requested the Supreme Court of Japan to
serve the summons through diplomatic
channels upon the defendant's head office in
Manila.
On August 28, 1980, defendant received
from Deputy Sheriff Rolando Balingit the writ
of summons (p. 276, Records). Despite
receipt of the same, defendant failed to
appear at the scheduled hearing. Thus, the
Tokyo Court proceeded to hear the plaintiff's
complaint and on [January 29, 1981],
rendered judgment ordering the defendant to
pay the plaintiff the sum of 83,158,195 Yen
and damages for delay at the rate of 6% per jurisdiction over it, the
annum from August 28, 1980 up to and until process of the Court in
payment is completed (pp. 12-14, Records). Japan sent to the
Philippines which is
On March 24, 1981, defendant received from outside Japanese
Deputy Sheriff Balingit copy of the judgment. jurisdiction cannot confer
Defendant not having appealed the jurisdiction over the
judgment, the same became final and defendant in the case
executory. before the Japanese Court
of the case at bar.
Plaintiff was unable to execute the decision Boudard versus Tait 67
in Japan, hence, on May 20, 1983, a suit for Phil. 170. The plaintiff
enforcement of the judgment was filed by contends that the
plaintiff before the Regional Trial Court of Japanese Court acquired
Manila Branch 54.2 jurisdiction because the
defendant is a resident of
Japan, having four (4)
On July 16, 1983, defendant filed its answer
branches doing business
averring that the judgment of the Japanese
therein and in fact had a
Court sought to be enforced is null and void
permit from the Japanese
and unenforceable in this jurisdiction having
government to conduct
been rendered without due and proper notice
business in Japan (citing
to the defendant and/or with collusion or
the exhibits presented by
fraud and/or upon a clear mistake of law and
the plaintiff); if this is so
fact (pp. 41-45, Rec.).
then service of summons
should have been made
Unable to settle the case amicably, the case upon the defendant in
was tried on the merits. After the plaintiff Japan in any of these
rested its case, defendant on April 21, 1989, alleged four branches; as
filed a Motion for Judgment on a Demurrer to admitted by the plaintiff the
Evidence based on two grounds: service of the summons
(1) the foreign judgment sought to be issued by the Japanese
enforced is null and void for want of Court was made in the
jurisdiction and (2) the said judgment is Philippines thru a
contrary to Philippine law and public policy Philippine Sheriff. This
and rendered without due process of law. Court agrees that if the
Plaintiff filed its opposition after which the defendant in a foreign
court a quo rendered the now assailed court is a resident in the
decision dated June 21, 1989 granting the court of that foreign court
demurrer motion and dismissing the such court could acquire
complaint (Decision, pp. 376-378, Records). jurisdiction over the person
In granting the demurrer motion, the trial of the defendant but it
court held that: must be served upon the
defendant in the territorial
The foreign judgment in jurisdiction of the foreign
the Japanese Court sought court. Such is not the case
in this action is null and here because the
void for want of jurisdiction defendant was served with
over the person of the summons in the
defendant considering that Philippines and not in
this is an action in Japan.
personam; the Japanese
Court did not acquire Unable to accept the said decision, plaintiff
jurisdiction over the person on July 11, 1989 moved for reconsideration
of the defendant because of the decision, filing at the same time a
jurisprudence requires that conditional Notice of Appeal, asking the court
the defendant be served to treat the said notice of appeal "as in effect
with summons in Japan in after and upon issuance of the court's denial
order for the Japanese of the motion for reconsideration."
Court to acquire
 Defendant opposed the motion for
reconsideration to which a Reply dated
August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court
disregarded the Motion for Reconsideration
and gave due course to the plaintiff's Notice
of Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It
agreed with the latter in its reliance upon Boudard vs. Tait 4
wherein it was held that "the process of the court has no
extraterritorial effect and no jurisdiction is acquired over the
person of the defendant by serving him beyond the boundaries
of the state." To support its position, the Court of Appeals
further stated:
In an action strictly in personam, such as the
instant case, personal service of summons
within the forum is required for the court to
acquire jurisdiction over the defendant
(Magdalena Estate Inc. vs. Nieto, 125 SCRA
230). To confer jurisdiction on the court,
personal or substituted service of summons
on the defendant not extraterritorial service is
necessary (Dial Corp vs. Soriano, 161 SCRA
739).
But while plaintiff-appellant concedes that
the collection suit filed is an action in
personam, it is its theory that a distinction
must be made between an action in
personam against a resident defendant and
an action in personam against a non-resident
defendant. Jurisdiction is acquired over a
non-resident defendant only if he is served
personally within the jurisdiction of the court
and over a resident defendant if by personal,
substituted or constructive service
conformably to statutory authorization.
Plaintiff-appellant argues that since the
defendant-appellee maintains branches in
Japan it is considered a resident defendant.
Corollarily, personal, substituted or
constructive service of summons when made
in compliance with the procedural rules is
sufficient to give the court jurisdiction to
render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court
cannot lawfully be served outside the
territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter; 41
S.E. 2d 532, 201) and this is regardless of
the residence or citizenship of the party thus
served (Iowa-Rahr vs. Rahr, 129 NW 494,
150 Iowa 511, 35 LRC, NS, 292, Am. Case
1912 D680). There must be actual service
within the proper territorial limits on
defendant or someone authorized to accept
service for him. Thus, a defendant, whether
a resident or not in the forum where the
action is filed, must be served with summons
within that forum.
But even assuming a distinction between a
resident defendant and non-resident
defendant were to be adopted, such
distinction applies only to natural persons
and not in the corporations. This finds
support in the concept that "a corporation
has no home or residence in the sense in
which those terms are applied to natural
persons" (Claude Neon Lights vs. Phil.
Advertising Corp., 57 Phil. 607). Thus, as
cited by the defendant-appellee in its brief:
Residence is said to be an attribute of a
natural person, and can be predicated on an
artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a
corporation can have no local residence or
habitation. It has been said that a corporation
is a mere ideal existence, subsisting only in
contemplation of law — an invisible being
which can have, in fact, no locality and can
occupy no space, and therefore cannot have
a dwelling place. (18 Am. Jur. 2d, p. 693
citing Kimmerle v. Topeka, 88 370, 128 p.
367; Wood v. Hartfold F. Ins. Co., 13 Conn
202)
Jurisprudence so holds that the foreign or
domestic character of a corporation is to be
determined by the place of its origin where
its charter was granted and not by the
location of its business activities (Jennings v.
Idaho Rail Light & P. Co., 26 Idaho 703, 146
p. 101), A corporation is a "resident" and an
inhabitant of the state in which it is
incorporated and no other (36 Am. Jur. 2d, p.
49).
Defendant-appellee is a Philippine
Corporation duly organized under the
Philippine laws. Clearly, its residence is the
Philippines, the place of its incorporation,
and not Japan. While defendant-appellee
maintains branches in Japan, this will not
make it a resident of Japan. A corporation
does not become a resident of another by
engaging in business there even though
licensed by that state and in terms given all
the rights and privileges of a domestic
corporation (Galveston H. & S.A.R. Co. vs.
 Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct.
401).
On this premise, defendant appellee is a
non-resident corporation. As such, court
processes must be served upon it at a place
within the state in which the action is brought
and not elsewhere (St. Clair vs. Cox, 106 US
350, 27 L ed. 222, 1 S. Ct. 354).5
It then concluded that the service of summons effected in
Manila or beyond the territorial boundaries of Japan was null
and did not confer jurisdiction upon the Tokyo District Court
over the person of SHARP; hence, its decision was void.
Unable to obtain a reconsideration of the decision,
NORTHWEST elevated the case to this Court contending that
the respondent court erred in holding that SHARP was not a
resident of Japan and that summons on SHARP could only be
validly served within that country.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is
also proper to presume the regularity of the proceedings and
the giving of due notice therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in
an action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of
a right as between the parties and their successors-in-interest
by a subsequent title. The judgment may, however, be assailed
by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under
Section 3 of Rule 131, a court, whether of the Philippines or
elsewhere, enjoys the presumption that it was acting in the
lawful exercise of jurisdiction and has regularly performed its
official duty.
Consequently, the party attacking a foreign judgment has the
burden of overcoming the presumption of its validity.7 Being
the party challenging the judgment rendered by the Japanese
court, SHARP had the duty to demonstrate the invalidity of
such judgment. In an attempt to discharge that burden, it
contends that the extraterritorial service of summons effected
at its home office in the Philippines was not only ineffectual but
also void, and the Japanese Court did not, therefore acquire
jurisdiction over it.
It is settled that matters of remedy and procedure such as
those relating to the service of process upon a defendant are
governed by the lex fori or the internal law of the forum.8 In this
case, it is the procedural law of Japan where the judgment was
rendered that determines the validity of the extraterritorial
service of process on SHARP. As to what this law is is a
question of fact, not of law. It may not be taken judicial notice
of and must be pleaded and proved like any other fact.9
Sections 24 and 25, Rule 132 of the Rules of Court provide
that it may be evidenced by an official publication or by a duly
attested or authenticated copy thereof. It was then incumbent
upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of
summons and the decision thereafter rendered by the
Japanese court must stand.
Alternatively in the light of the absence of proof regarding
Japanese
law, the presumption of identity or similarity or the so-called
processual presumption 10 may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule
14 of the Rules of Court provides that if the defendant is a
foreign corporation doing business in the Philippines, service
may be made: (1) on its resident agent designated in
accordance with law for that purpose, or, (2) if there is no such
resident agent, on the government official designated by law to
that effect; or (3) on any of its officers or agents within the
Philippines.
If the foreign corporation has designated an agent to receive
summons, the designation is exclusive, and service of
summons is without force and gives the court no jurisdiction
unless made upon him. 11
Where the corporation has no such agent, service shall be
made on the government official designated by law, to wit: (a)
the Insurance Commissioner in the case of a foreign insurance
company; (b) the Superintendent of Banks, in the case of a
foreign banking corporation; and (c) the Securities and
Exchange Commission, in the case of other foreign
corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government
office or official served shall transmit by mail a copy of the
summons or other legal proccess to the corporation at its home
or principal office. The sending of such copy is a necessary
part of the service. 12
SHARP contends that the laws authorizing service of process
upon the Securities and Exchange Commission, the
Superintendent of Banks, and the Insurance Commissioner, as
the case may be, presuppose a situation wherein the foreign
corporation doing business in the country no longer has any
branches or offices within the Philippines. Such contention is
belied by the pertinent provisions of the said laws. Thus,
Section 128 of the Corporation Code 13 and Section 190 of the
Insurance Code 14 clearly contemplate two situations: (1) if the
corporation had left the Philippines or had ceased to transact
business therein, and (2) if the corporation has no designated
agent. Section 17 of the General Banking Act 15 does not even
speak a corporation which had ceased to transact business in
the Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan.
This silence could only mean, or least create an impression,
that it had none. Hence, service on the designated government
official or on any of SHARP's officers or agents in Japan could
be availed of. The respondent, however, insists that only
service of any of its officers or employees in its branches in
Japan could be resorted to. We do not agree. As found by the
respondent court, two attempts at service were made at
SHARP's Yokohama branch. Both were unsuccessful. On the
first attempt, Mr. Dinozo, who was believed to be the person
authorized to accept court process, was in Manila. On the
second, Mr. Dinozo was present, but to accept the summons
because, according to him, he was no longer an employee of
SHARP. While it may be true that service could have been
made upon any of the officers or agents of SHARP at its three
other branches in Japan, the availability of such a recourse
would not preclude service upon the proper government
official, as stated above.
As found by the Court of Appeals, it was the Tokyo District
Court which ordered that summons for SHARP be served at its
head office in the Philippine's after the two attempts of service
had failed. 16 The Tokyo District Court requested the Supreme
Court of Japan to cause the delivery of the summons and other
legal documents to the Philippines. Acting on that request, the
Supreme Court of Japan sent the summons together with the
other legal documents to the Ministry of Foreign Affairs of
Japan which, in turn, forwarded the same to the Japanese
Embassy in Manila . Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of
the Philippines, then to the Executive Judge of the Court of
First Instance (now Regional Trial Court) of Manila, who
forthwith ordered Deputy Sheriff Rolando Balingit to serve the
same on SHARP at its principal office in Manila. This service is
equivalent to service on the proper government official under
Section 14, Rule 14 of the Rules of Court, in relation to Section
128 of the Corporation Code. Hence, SHARP's contention that
such manner of service is not valid under Philippine laws holds
no water.17
In deciding against the petitioner, the respondent court
sustained the trial court's reliance on Boudard vs. Tait 18
where this Court held:
The fundamental rule is that jurisdiction in
personam over nonresidents, so as to
sustain a money judgment, must be based
upon personal service within the state which
renders the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial
effect, and no jurisdiction is acquired over
the person of the defendant by serving him
beyond the boundaries of the state. Nor has
a judgment of a court of a foreign country
against a resident of this country having no
property in such foreign country based on
process served here, any effect here against
either the defendant personally or his
property situated here.
Process issuing from the courts of one state
or country cannot run into another, and
although a nonresident defendant may have
been personally served with such process in
the state or country of his domicile, it will not
give such jurisdiction as to authorize a
personal judgment against him.
It further availed of the ruling in Magdalena Estate, Inc. vs.
Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle
laid down by the Iowa Supreme Court in the 1911 case of
Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard
involved the enforcement of a judgment of the civil division of
the Court of First Instance of Hanoi, French Indo-China. The
trial court dismissed the case because the Hanoi court never
acquired jurisdiction over the person of the defendant
considering that "[t]he, evidence adduced at the trial
conclusively proves that neither the appellee [the defendant]
nor his agent or employees were ever in Hanoi, French Indo-
China; and that the deceased Marie Theodore Jerome
Boudard had never, at any time, been his employee." In
Magdalena Estate, what was declared invalid resulting in the
failure of the court to acquire jurisdiction over the person of the
defendants in an action in personam was the service of
summons through publication against non-appearing resident
defendants. It was claimed that the latter concealed
themselves to avoid personal service of summons upon them.
In Dial, the defendants were foreign corporations which were
not, domiciled and licensed to engage in business in the
Philippines and which did not have officers or agents, places of
business, or properties here. On the other hand, in the instant
case, SHARP was doing business in Japan and was
maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of
the past. In that case, a divided Supreme Court of Iowa
declared that the principle that there can be no jurisdiction in a
court of a territory to render a personal judgment against
anyone upon service made outside its limits was applicable
alike to cases of residents and non-residents. The principle
was put at rest by the United States Supreme Court when it
ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in
the state is alone sufficient to bring an absent defendant within
the reach of the state's jurisdiction for purposes of a personal
judgment by means of appropriate substituted service or
personal service without the state. This principle is embodied in
section 18, Rule 14 of the Rules of Court which allows service
of summons on residents temporarily out of the Philippines to
be made out of the country. The rationale for this rule was
explained in Milliken as follows:
[T]he authority of a state over one of its
citizens is not terminated by the mere fact of
his absence from the state. The state which
accords him privileges and affords protection
to him and his property by virtue of his
domicile may also exact reciprocal duties.
 "Enjoyment of the privileges of residence
within the state, and the attendant right to
invoke the protection of its laws, are
inseparable" from the various incidences of
state citizenship. The responsibilities of that
citizenship arise out of the relationship to the
state which domicile creates. That
relationship is not dissolved by mere
absence from the state. The attendant
duties, like the rights and privileges incident
to domicile, are not dependent on continuous
presence in the state. One such incident of
domicile is amenability to suit within the state
even during sojourns without the state,
where the state has provided and employed
a reasonable method for apprising such an
absent party of the proceedings against him.
23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation
can have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it
has offices and transacts business. This is the rule in our
jurisdiction and apropos thereto, it may be necessery to quote
what we stated in State Investment House, Inc, vs. Citibank,
N.A., 26 to wit:
The issue is whether these Philippine
branches or units may be considered
"residents of the Philippine Islands" as that
term is used in Section 20 of the Insolvency
Law . . . or residents of the state under the
laws of which they were respectively
incorporated. The answer cannot be found in
the Insolvency Law itself, which contains no
definition of the term, resident, or any clear
indication of its meaning. There are however
other statutes, albeit of subsequent
enactment and effectivity, from which
enlightening notions of the term may be
derived.
The National Internal Revenue Code
declares that the term "'resident foreign
corporation' applies to a foreign corporation
engaged in trade or business within the
Philippines," as distinguished from a "'non-
resident foreign corporation' . . . (which is
one) not engaged in trade or bussiness
within the Philippines." [Sec. 20, pars. (h)
and (i)].
The Offshore Banking Law, Presidential
Decree No. 1034, states "that branches,
subsidiaries, affiliation, extension offices or
any other units of corporation or juridical
person organized under the laws of any
foreign country operating in the Philippines
shall be considered residents of the
Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No.
337, places "branches and agencies in the
Philippines of foreign banks . . . (which are)
called Philippine branches," in the same
category as "commercial banks, savings
associations, mortgage banks, development
banks, rural banks, stock savings and loan
associations" (which have been formed and
organized under Philippine laws), making no
distinction between the former and the latter
in so far as the terms "banking institutions"
and "bank" are used in the Act [Sec. 2],
declaring on the contrary that in "all matters
not specifically covered by special provisions
applicable only to foreign banks, or their
branches and agencies in the Philippines,
said foreign banks or their branches and
agencies lawfully doing business in the
Philippines "shall be bound by all laws, rules,
and regulations applicable to domestic
banking corporations of the same class,
except such laws, rules and regulations as
provided for the creation, formation,
organization, or dissolution of corporations or
as fix the relation, liabilities, responsibilities,
or duties of members, stockholders or
officers of corporation. [Sec. 18].
This court itself has already had occasion to
hold [Claude Neon Lights, Fed. Inc. vs.
Philippine Advertising Corp., 57 Phil. 607]
that a foreign corporation licitly doing
business in the Philippines, which is a
defendant in a civil suit, may not be
considered a non-resident within the scope
of the legal provision authorizing attachment
against a defendant not residing in the
Philippine Islands; [Sec. 424, in relation to
Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of
1940, Sec. 1(f), Rule 57, Rules of 1964] in
other words, a preliminary attachment may
not be applied for and granted solely on the
asserted fact that the defendant is a foreign
corporation authorized to do business in the
Philippines — and is consequently and
necessarily, "a party who resides out of the
Philippines." Parenthetically, if it may not be
considered as a party not residing in the
Philippines, or as a party who resides out of
the country, then, logically, it must be
considered a party who does reside in the
Philippines, who is a resident of the country.
Be this as it may, this Court pointed out that:
 . . . Our laws and
jurisprudence indicate a
purpose to assimilate
foreign corporations, duly
licensed to do business
here, to the status of
domestic corporations. (Cf.
Section 73, Act No. 1459,
and Marshall Wells Co. vs.
Henry W. Elser & Co., 46
Phil. 70, 76; Yu Cong Eng
vs. Trinidad, 47 Phil. 385,
411) We think it would be
entirely out of line with this
policy should we make a
discrimination against a
foreign corporation, like
the petitioner, and subject
its property to the harsh
writ of seizure by
attachment when it has
complied not only with
every requirement of law
made specially of foreign
corporations, but in
addition with every
requirement of law made
of domestic corporations. .
..
Obviously, the assimilation of foreign
corporations authorized to do business in the
Philippines "to the status of domestic
corporations, subsumes their being found
and operating as corporations, hence,
residing, in the country.
The same principle is recognized in
American law: that the residence of a
corporation, if it can be said to have a
residence, is necessarily where it exercises
corporate functions . . .;" that it is considered
as dwelling "in the place where its business
is done . . .," as being "located where its
franchises are exercised . . .," and as being
"present where it is engaged in the
prosecution of the corporate enterprise;" that
a "foreign corporation licensed to do
business in a state is a resident of any
country where it maintains an office or agent
for transaction of its usual and customary
business for venue purposes;" and that the
"necessary element in its signification is
locality of existence." [Words and Phrases,
Permanent Ed., vol. 37, pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the
collection suit against it was filed, then in the light of the
processual presumption, SHARP may be deemed a resident of
Japan, and, as such, was amenable to the jurisdiction of the
courts therein and may be deemed to have assented to the
said courts' lawful methods of serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity
of performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation
expenses, and exemplary damages to be without merit. We
find no evidence that would justify an award for attorney's fees
and litigation expenses under Article 2208 of the Civil Code of
the Philippines. Nor is an award for exemplary damages
warranted. Under Article 2234 of the Civil Code, before the
court may consider the question of whether or not exemplary
damages should be awarded, the plaintiff must show that he is
entitled to moral, temperate, or compensatory damaged. There
being no such proof presented by NORTHWEST, no
exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the
challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses,
and exemplary damages but REVERSED insofar as in
sustained the trial court's dismissal of NORTHWEST's
complaint in Civil Case No. 83-17637 of Branch 54 of the
Regional Trial Court of Manila, and another in its stead is
hereby rendered ORDERING private respondent C.F. SHARP
L COMPANY, INC. to pay to NORTHWEST the amounts
adjudged in the foreign judgment subject of said case, with
interest thereon at the legal rate from the filing of the complaint
therein until the said foreign judgment is fully satisfied.
Costs against the private respondent. SO ORDERED.
PHILSEC INVESTMENT CORPORATION, BPI-
INTERNATIONAL FINANCE LIMITED, and ATHONA
HOLDINGS, N.V., petitioners, vs. THE HONORABLE COURT
OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O.
DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG,
respondents.; [G.R. No. 103493. June 19, 1997]; MENDOZA,
J.:
This case presents for determination the conclusiveness of a
foreign judgment upon the rights of the parties under the same
cause of action asserted in a case in our local court. Petitioners
brought this case in the Regional Trial Court of Makati, Branch
56, which, in view of the pendency at the time of the foreign
action, dismissed Civil Case No. 16563 on the ground of litis
pendentia, in addition to forum non conveniens. On appeal, the
Court of Appeals affirmed. Hence this petition for review on
certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat
obtained separate loans from petitioners Ayala International
Finance Limited (hereafter called AYALA) 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.
Private respondent Ducat moved to dismiss Civil Case No.
16563 on the grounds of (1) litis pendentia, vis-a-vis Civil
Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S.,
(2) forum non conveniens, and (3) failure of petitioners
PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property
prejudiced only petitioner ATHONA, as buyer, but not
PHILSEC and BPI-IFL which were not parties to the sale and
whose only participation was to extend financial
accommodation to ATHONA under a separate loan agreement.
On the other hand, private respondents 1488, Inc. and its
president Daic filed a joint Special Appearance and Qualified
Motion to Dismiss, contending that the action being in
personam, extraterritorial service of summons by publication
was ineffectual and did not vest the court with jurisdiction over
1488, Inc., which is a non-resident foreign corporation, and
Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to
dismiss, stating that the evidentiary requirements of the
controversy may be more suitably tried before the forum of the
litis pendentia in the U.S., under the principle in private
international law of forum non conveniens, even as it noted that
Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and
Daics motion to dismiss. On March 9, 1988, the trial court
granted the motion to dismiss filed by 1488, Inc. and Daic on
the ground of litis pendentia considering that
the main factual element of the cause of action in this
case which is the validity of the sale of real property in
the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the
United States District Court which, under the doctrine of
forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the
assessment and/or fluctuations of the fair market value of
real estate situated in Houston, Texas, U.S.A. from the
date of the transaction in 1983 up to the present and
verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488,
Inc. and Daic because they were non-residents and the action
was not an action in rem or quasi in rem, so that extraterritorial
service of summons was ineffective. The trial court
subsequently lifted the writ of attachment it had earlier issued
against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the
trial court erred in applying the principle of litis pendentia and
forum non conveniens and in ruling that it had no jurisdiction
over the defendants, despite the previous attachment of shares
of stocks belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals affirmed the
dismissal of Civil Case No. 16563 against Ducat, 1488, Inc.,
and Daic on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic,
while the defendants are Philsec, the Ayala International
Finance Ltd. (BPI-IFLs former name) and the Athona Holdings,
NV. The case at bar involves the same parties. The transaction
sued upon by the parties, in both cases is the Warranty Deed
executed by and between Athona Holdings and 1488 Inc. In
the U.S. case, breach of contract and the promissory note are
sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducats securities
given in exchange for the Texas property. The recovery of a
sum of money and damages, for fraud purportedly committed
by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from
the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was
an action in personam for the recovery of a sum of money for
alleged tortious acts, so that service of summons by publication
did not vest the trial court with jurisdiction over 1488, Inc. and
Drago Daic. The dismissal of Civil Case No. 16563 on the
ground of forum non conveniens was likewise affirmed by the
Court of Appeals on the ground that the case can be better
tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main
transaction, and involve foreign elements, to wit: 1) the
property subject matter of the sale is situated in Texas, U.S.A.;
2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
although the buyer, Athona Holdings, a foreign corporation
which does not claim to be doing business in the Philippines, is
wholly owned by Philsec, a domestic corporation, Athona
Holdings is also owned by BPI-IFL, also a foreign corporation;
4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION
BETWEEN THE SAME PARTIES FOR THE SAME CAUSE
(LITIS PENDENTIA) RELIED UPON BY THE COURT OF
APPEALS IN AFFIRMING THE TRIAL COURTS DISMISSAL
OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO
RELIED UPON BY THE COURT OF APPEALS IN
AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE
COURT OF APPEALS ERRED IN NOT HOLDING THAT
PHILIPPINE PUBLIC POLICY REQUIRED THE
ASSUMPTION, NOT THE RELINQUISHMENT, BY THE
TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE
CIVIL ACTION FOR THERE IS EVERY REASON TO
PROTECT AND VINDICATE PETITIONERS RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT
ALIENS) INFLICTED UPON THEM HERE IN THE
PHILIPPINES.
We will deal with these contentions in the order in which they
are made.
First. It is important to note in connection with the first point that
while the present case was pending in the Court of Appeals,
the United States District Court for the Southern District of
Texas rendered judgment in the case before it. The judgment,
which was in favor of private respondents, was affirmed on
appeal by the Circuit Court of Appeals. Thus, the principal
issue to be resolved in this case is whether Civil Case No.
16536 is barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be
pleaded as res judicata, a judgment admitting the foreign
decision is not necessary. On the other hand, petitioners argue
that the foreign judgment cannot be given the effect of res
judicata without giving them an opportunity to impeach it on
grounds stated in Rule 39, 50 of the Rules of Court, to wit:
want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.
Petitioners contention is meritorious. While this Court has given
the effect of res judicata to foreign judgments in several cases,
it was after the parties opposed to the judgment had been
given ample opportunity to repel them on grounds allowed
under the law. 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. 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., 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 pleadings 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, 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.
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.
Accordingly, to insure the orderly administration of justice, this
case and Civil Case No. 92-1070 should be consolidated. After
all, the two have been filed in the Regional Trial Court of
Makati, albeit in different salas, this case being assigned to
Branch 56 (Judge Fernando V. Gorospe), while Civil Case No.
92-1070 is pending in Branch 134 of Judge Ignacio Capulong.
In such proceedings, petitioners should have the burden of
impeaching the foreign judgment and only in the event they
succeed in doing so may they proceed with their action against
private respondents.
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. 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.
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. 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.
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, it appears
from the pleadings that petitioners only belatedly impleaded
Guevarra as defendant in Civil Case No. 16563. 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.
Aisawest vs Court of Appeals (1998)- not found
PHILIPPINE ALUMINUM WHEELS, INC., petitioner, vs. FASGI
ENTERPRISES, INC., respondent; [G.R. No. 137378. October
12, 2000]; VITUG, J.:
On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"),
a corporation organized and existing under and by virtue of the
laws of the State of California, United States of America,
entered into a distributorship arrangement with Philippine
Aluminum Wheels, Incorporated ("PAWI"), a Philippine
corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an
Italian corporation. The agreement provided for the purchase,
importation and distributorship in the United States of
aluminum wheels manufactured by PAWI. Pursuant to the
contract, PAWI shipped to FASGI a total of eight thousand five
hundred ninety four (8,594) wheels, with an FOB value of
US$216,444.30 at the time of shipment, the first batch arriving
in two containers and the second in three containers.
Thereabouts, FASGI paid PAWI the FOB value of the wheels.
Unfortunately, FASGI later found the shipment to be defective
and in non-compliance with stated requirements, viz;
"A. contrary to the terms of the Distributorship Agreement
and in violation of U.S. law, the country of origin (the
Philippines) was not stamped on the wheels;
"B. the wheels did not have weight load limits stamped on
them as required to avoid mounting on excessively heavy
vehicles, resulting in risk of damage or bodily injury to
consumers arising from possible shattering of the wheels;
"C. many of the wheels did not have an indication as to
which models of automobile they would fit;
"D. many of the wheels did not fit the model automobiles
for which they were purportedly designed;
"E. some of the wheels did not fit any model
automobile in use in the United States;
"F. most of the boxes in which the wheels were
packed indicated that the wheels were approved by the
Specialty Equipment Manufacturer's Association (hereafter,
`SEMA'); in fact no SEMA approval has been obtained and this
indication was therefore false and could result in fraud upon
retail customers purchasing the wheels."
On 21 September 1979, FASGI instituted an action against
PAWI and FPS for breach of contract and recovery of damages
in the amount of US$2,316,591.00 before the United States
District Court for the Central District of California. In January
1980, during the pendency of the case, the parties entered into
a settlement, entitled "Transaction" with the corresponding
Italian translation "Convenzione Transsativa," where it was
stipulated that FPS and PAWI would accept the return of not
less than 8,100 wheels after restoring to FASGI the purchase
price of US$268,750.00 via four (4) irrevocable letters of credit
("LC"). The rescission of the contract of distributorship was to
be effected within the period starting January up until April
1980.
In a telex message, dated 02 March 1980, PAWI president
Romeo Rojas expressed the company's inability to comply with
the foregoing agreement and proposed a revised schedule of
payment. The message, in part, read:
"We are most anxious in fulfilling all our obligations under
compromise agreement executed by our Mr. Giancarlo Dallera
and your Van Curen. We have tried our best to comply with our
commitments, however, because of the situation as mentioned
in the foregoing and currency regulations and restrictions
imposed by our government on the outflow, of foreign currency
from our country, we are constrained to request for a revised
schedule of shipment and opening of L/Cs.
"After consulting with our bank and government monetary
agencies and on the assumption that we submit the required
pro-forma invoices we can open the letters of credit in your
favor under the following schedule:
"A) First L/C - it will be issued in April 1980 payable 90
days thereafter
"B) Second L/C - it will be issued in June 1980 payable 90
days thereafter
"C) Third L/C - it will be issued in August 1980 payable 90
days thereafter
"D) Fourth L/C - it will be issued in November 1980
payable 90 days thereafter
"We understand your situation regarding the lease of your
warehouse. For this reason, we are willing to defray the extra
storage charges resulting from this new schedule. If you cannot
renew the lease [of] your present warehouse, perhaps you can
arrange to transfer to another warehouse and storage charges
transfer thereon will be for our account. We hope you
understand our position. The delay and the revised schedules
were caused by circumstances totally beyond our control."
On 21 April 1980, again through a telex message, PAWI
informed FASGI that it was impossible to open a letter of credit
on or before April 1980 but assured that it would do its best to
comply with the suggested schedule of payments. In its telex
reply of 29 April 1980, FASGI insisted that PAWI should meet
the terms of the proposed schedule of payments, specifically
its undertaking to open the first LC within April of 1980, and
that "If the letter of credit is not opened by April 30, 1980, then
x x x [it would] immediately take all necessary legal action to
protect [its] position."
Despite its assurances, and FASGI's insistence, PAWI failed to
open the first LC in April 1980 allegedly due to Central Bank
"inquiries and restrictions," prompting FASGI to pursue its
complaint for damages against PAWI before the California
district court. Pre-trial conference was held on 24 November
1980. In the interim, the parties, realizing the protracted
process of litigation, resolved to enter into another
arrangement, this time entitled "Supplemental Settlement
Agreement," on 26 November 1980. In substance, the
covenant provided that FASGI would deliver to PAWI a
container of wheels for every LC opened and paid by PAWI:
"3. Agreement
"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight
Thousand, Seven Hundred Fifty and 00/100 Dollars
($268,750.00), plus interest and storage costs as described
below. Sellers shall pay such amount by delivering to FASGI
the following four (4) irrevocable letters of credit, confirmed by
Crocker Bank, Main Branch, Fresno, California, as set forth
below:
"(i) on or before June 30, 1980, a documentary letter of
credit in the amount of (a) Sixty-Five Thousand, Three
Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b) plus
interest on that amount at the annual rate of 16.25% from
January 1, 1980 until July 31, 1980, (c) plus Two Thousand
Nine Hundred Forty Dollars and 00/100 ($2,940.00) and (d)
with interest on that sum at the annual rate of 16.25% from
May 1, 1980 to July 31, 1980, payable on or after August 31,
1980;
"(ii) on or before September 1, 1980, a documentary letter
of credit in the amount of (a) Sixty-Seven Thousand, Seven
Hundred Ninety-Three Dollars and Sixty-Seven Cents
($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and
00/100 Dollars ($2,940.00), plus (c) interest at an annual rate
equal to the prime rate of Crocker Bank, San Francisco, in
effect from time to time, plus two percent on the amount in (a)
from January 1, 1980 until December 21, 1980, and on the
amount set forth in (b) from May 1, 1980 until December 21,
1980, payable ninety days after the date of the bill of lading
under the letter of credit;
"(iii) on or before November 1, 1980, a documentary letter
of credit in the amount of (a) Sixty-Seven Thousand, Seven
Hundred Ninety-Three Dollars and Sixty-Seven Cents
($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and
00/100 Dollars ($2,490.00), plus (c) interest at an annual rate
equal to the prime rate of Crocker Bank, San Francisco, in
effect from time to time, plus two percent on the amount in (a)
from January 1, 1980 until February 21, 1981, and on the
amount set forth in (b) from May 1, 1980 until February 21,
1981, payable ninety days after the date of the bill of lading
under the latter of credit;
"(iv) on or before January 1, 1981, a documentary letter of
credit in the amount of (a) Sixty-Seven Thousand, Seven
Hundred Ninety-Three Dollars and Sixty-Seven Cents
($67,793.67) plus (b) Five Thousand, Eight Hundred Eighty
and 00/100 Dollars ($5,880.00), plus (c) interest at an annual
rate equal to the prime rate of Crocker Bank, San Francisco, in
effect from time to time, plus two percent on the amount in (a)
from January 1, 1980 until April 21, 1981, and on the amount
set forth in (b) from May 1, 1980 until April 21, 1981, payable
ninety days after the date of the bill of lading under the latter of
credit."
Anent the wheels still in the custody of FASGI, the
supplemental settlement agreement provided that -
"3.4 (a) Upon execution of this Supplemental
Settlement Agreement, the obligations of FASGI to store or
maintain the Containers and Wheels shall be limited to (i)
storing the Wheels and Containers in their present warehouse
location and (ii) maintaining in effect FASGI's current insurance
in favor of FASGI, insuring against usual commercial risks for
such storage in the principal amount of the Letters of Credit
described in Paragraph 3.1. FASGI shall bear no liability,
responsibility or risk for uninsurable risks or casualties to the
Containers or Wheels.
"x x x xxx xxx
"(e) From and after February 28, 1981, unless delivery of
the Letters of Credit are delayed past such date pursuant to the
penultimate Paragraph 3.1, in which case from and after such
later date, FASGI shall have no obligation to maintain, store or
deliver any of the Containers or Wheels."
The deal allowed FASGI to enter before the California court the
foregoing stipulations in the event of the failure of PAWI to
make good the scheduled payments; thus -
"3.5 Concurrently with execution and delivery hereof, the
parties have executed and delivered a Mutual Release (the
`Mutual Release'), and a Stipulation for Judgment (the
`Stipulation for Judgment') with respect to the Action. In the
event of breach of this Supplemental Settlement Agreement by
Sellers, FASGI shall have the right to apply immediately to the
Court for entry of Judgment pursuant to the Stipulation for
Judgment in the full amount thereof, less credit for any
payments made by Sellers pursuant to this Supplemental
Settlement Agreement. FASGI shall have the right thereafter to
enforce the Judgment against PAWI and FPS in the United
States and in any other country where assets of FPS or PAWI
may be located, and FPS and PAWI hereby waive all defenses
in any such country to execution or enforcement of the
Judgment by FASGI. Specifically, FPS and PAWI each
consent to the jurisdiction of the Italian and Philippine courts in
any action brought by FASGI to seek a judgment in those
countries based upon a judgment against FPS or PAWI in the
Action."
In accordance with the aforementioned paragraph 3.5 of the
agreement, the parties made the following stipulation before
the California court:
"The undersigned parties hereto, having entered into a
Supplemental Settlement Agreement in this action,
"IT IS HEREBY STIPULATED by and between plaintiff FASGI
Enterprises, Inc. (`FASGI') and defendants Philippine
Aluminum Wheels, Inc., (`PAWI'), and each of them, that
judgment may be entered in favor of plaintiff FASGI and
against PAWI, in the amount of Two Hundred Eighty Three
Thousand Four Hundred Eighty And 01/100ths Dollars
($283,480.01).
"Plaintiff FASGI shall also be entitled to its costs of suit, and to
reasonable attorneys' fees as determined by the Court added
to the above judgment amount."
The foregoing supplemental settlement agreement, as well as
the motion for the entry of judgment, was executed by FASGI
president Elena Buholzer and PAWI counsel Mr. Thomas
Ready.
PAWI, again, proved to be remiss in its obligation under the
supplemental settlement agreement. While it opened the first
LC on 19 June 1980, it, however, only paid on it nine (9)
months after, or on 20 March 1981, when the letters of credit
by then were supposed to have all been already posted. This
lapse, notwithstanding, FASGI promptly shipped to PAWI the
first container of wheels. Again, despite the delay incurred by
PAWI on the second LC, FASGI readily delivered the second
container. Later, PAWI totally defaulted in opening and paying
the third and the fourth LCs, scheduled to be opened on or
before, respectively, 01 September 1980 and 01 November
1980, and each to be paid ninety (90) days after the date of the
bill of lading under the LC. As so expressed in their affidavits,
FASGI counsel Frank Ker and FASGI president Elena
Buholzer were more inclined to believe that PAWI's failure to
pay was due not to any restriction by the Central Bank or any
other cause than its inability to pay. These doubts were based
on the telex message of PAWI president Romeo Rojas who
attached a copy of a communication from the Central Bank
notifying PAWI of the bank's approval of PAWI's request to
open LCs to cover payment for the re-importation of the
wheels. The communication having been sent to FASGI before
the supplemental settlement agreement was executed, FASGI
speculated that at the time PAWI subsequently entered into the
supplemental settlement agreement, its request to open LCs
had already been approved by the Central Bank. Irked by
PAWI's persistent default, FASGI filed with the US District
Court of the Central District of California the following
stipulation for judgment against PAWI.
"PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M.
in the Courtroom of the Honorable Laughlin E. Waters of the
above Court, plaintiff FASGI ENTERPRISES, INC. (hereinafter
`FASGI') will move the Court for entry of Judgment against
defendant PHILIPPINE ALUMINUM WHEELS, INC.
(hereinafter `PAWI'), pursuant to the Stipulation for Judgment
filed concurrently herewith, executed on behalf of FASGI and
PAWI by their respective attorneys, acting as their authorized
agents.
"Judgment will be sought in the total amount of P252,850.60,
including principal and interest accrued through May 17, 1982,
plus the sum of $17,500.00 as reasonable attorneys' fees for
plaintiff in prosecuting this action.
"The Motion will be made under Rule 54 of the Federal Rules
of Civil Procedure, pursuant to and based upon the Stipulation
for Judgment, the Supplemental Settlement Agreement filed
herein on or about November 21, 1980, the Memorandum of
Points and Authorities and Affidavits of Elena Buholzer, Franck
G. Ker and Stan Cornwell all filed herewith, and upon all the
records, files and pleadings in this action.
"The Motion is made on the grounds that defendant PAWI has
breached its obligations as set forth in the Supplemental
Settlement Agreement, and that the Supplemental Settlement
Agreement expressly permits FASGI to enter the Stipulation for
Judgment in the event that PAWI has not performed under the
Supplemental Settlement Agreement."
On 24 August 1982, FASGI filed a notice of entry of judgment.
A certificate of finality of judgment was issued, on 07
September 1982, by the US District Judge of the District Court
for the Central District of California. PAWI, by this time, was
approximately twenty (20) months in arrears in its obligation
under the supplemental settlement agreement.
Unable to obtain satisfaction of the final judgment within the
United States, FASGI filed a complaint for "enforcement of
foreign judgment" in February 1983, before the Regional Trial
Court, Branch 61, of Makati, Philippines. The Makati court,
however, in an order of 11 September 1990, dismissed the
case, thereby denying the enforcement of the foreign judgment
within Philippine jurisdiction, on the ground that the decree was
tainted with collusion, fraud, and clear mistake of law and fact.
The lower court ruled that the foreign judgment ignored the
reciprocal obligations of the parties. While the assailed foreign
judgment ordered the return by PAWI of the purchase amount,
no similar order was made requiring FASGI to return to PAWI
the third and fourth containers of wheels. This situation, the
trial court maintained, amounted to an unjust enrichment on the
part of FASGI. Furthermore, the trial court said, the
supplemental settlement agreement and the subsequent
motion for entry of judgment upon which the California court
had based its judgment were a nullity for having been entered
into by Mr. Thomas Ready, counsel for PAWI, without the
latter's authorization.
FASGI appealed the decision of the trial court to the Court of
Appeals. In a decision, dated 30 July 1997, the appellate court
reversed the decision of the trial court and ordered the full
enforcement of the California judgment.
Hence this appeal.
Generally, in the absence of a special compact, no sovereign is
bound to give effect within its dominion to a judgment rendered
by a tribunal of another country; however, the rules of comity,
utility and convenience of nations have established a usage
among civilized states by which final judgments of foreign
courts of competent jurisdiction are reciprocally respected and
rendered efficacious under certain conditions that may vary in
different countries.
In this jurisdiction, a valid judgment rendered by a foreign
tribunal may be recognized insofar as the immediate parties
and the underlying cause of action are concerned so long as it
is convincingly shown that there has been an opportunity for a
full and fair hearing before a court of competent jurisdiction;
that trial upon regular proceedings has been conducted,
following due citation or voluntary appearance of the defendant
and under a system of jurisprudence likely to secure an
impartial administration of justice; and that there is nothing to
indicate either a prejudice in court and in the system of laws
under which it is sitting or fraud in procuring the judgment. A
foreign judgment is presumed to be valid and binding in the
country from which it comes, until a contrary showing, on the
basis of a presumption of regularity of proceedings and the
giving of due notice in the foreign forum. Rule 39, section 48 of
the Rules of Court of the Philippines provides:
Sec. 48. Effect of foreign judgments or final orders - The effect
of a judgment or final order of a tribunal of a foreign country,
having jurisdiction to render the judgment or final order is as
follows:
xxxx
(b) In case of a judgment or final order against a person, the
judgment or final order is presumptive evidence of a right as
between the parties and their successors-in-interest by a
subsequent title.
In either case, the judgment or final order may be repelled by
evidence a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc.,
one of the early Philippine cases on the enforcement of foreign
judgments, this Court has ruled that a judgment for a sum of
money rendered in a foreign court is presumptive evidence of a
right between the parties and their successors-in-interest by
subsequent title, but when suit for its enforcement is brought in
a Philippine court, such judgment may be repelled by evidence
of want of jurisdiction, want of notice to the party, collusion,
fraud or clear mistake of law or fact. In Northwest Orient
Airlines, Inc., vs. Court of Appeals, the Court has said that a
party attacking a foreign judgment is tasked with the burden of
overcoming its presumptive validity.
PAWI claims that its counsel, Mr. Ready, has acted without its
authority. Verily, in this jurisdiction, it is clear that an attorney
cannot, without a client's authorization, settle the action or
subject matter of the litigation even when he honestly believes
that such a settlement will best serve his client's interest.
In the instant case, the supplemental settlement agreement
was signed by the parties, including Mr. Thomas Ready, on 06
October 1980. The agreement was lodged in the California
case on 26 November 1980 or two (2) days after the pre-trial
conference held on 24 November 1980. If Mr. Ready was
indeed not authorized by PAWI to enter into the supplemental
settlement agreement, PAWI could have forthwith signified to
FASGI a disclaimer of the settlement. Instead, more than a
year after the execution of the supplemental settlement
agreement, particularly on 09 October 1981, PAWI President
Romeo S. Rojas sent a communication to Elena Buholzer of
FASGI that failed to mention Mr. Ready's supposed lack of
authority. On the contrary, the letter confirmed the terms of the
agreement when Mr. Rojas sought forbearance for the
impending delay in the opening of the first letter of credit under
the schedule stipulated in the agreement.
It is an accepted rule that when a client, upon becoming aware
of the compromise and the judgment thereon, fails to promptly
repudiate the action of his attorney, he will not afterwards be
heard to complain about it.
Nor could PAWI claim any prejudice by the settlement. PAWI
was spared from possibly paying FASGI substantial amounts
of damages and incurring heavy litigation expenses normally
generated in a full-blown trial. PAWI, under the agreement was
afforded time to reimburse FASGI the price it had paid for the
defective wheels. PAWI, should not, after its opportunity to
enjoy the benefits of the agreement, be allowed to later disown
the arrangement when the terms thereof ultimately would prove
to operate against its hopeful expectations.
PAWI assailed not only Mr. Ready's authority to sign on its
behalf the Supplemental Settlement Agreement but denounced
likewise his authority to enter into a stipulation for judgment
before the California court on 06 August 1982 on the ground
that it had by then already terminated the former's services. For
his part, Mr. Ready admitted that while he did receive a request
from Manuel Singson of PAWI to withdraw from the motion of
judgment, the request unfortunately came too late. In an
explanatory telex, Mr. Ready told Mr. Singson that under
American Judicial Procedures when a motion for judgment had
already been filed a counsel would not be permitted to
withdraw unilaterally without a court order. From the time the
stipulation for judgment was entered into on 26 April 1982 until
the certificate of finality of judgment was issued by the
California court on 07 September 1982, no notification was
issued by PAWI to FASGI regarding its termination of Mr.
Ready's services. If PAWI were indeed hoodwinked by Mr.
Ready who purportedly acted in collusion with FASGI, it should
have aptly raised the issue before the forum which issued the
judgment in line with the principle of international comity that a
court of another jurisdiction should refrain, as a matter of
propriety and fairness, from so assuming the power of passing
judgment on the correctness of the application of law and the
evaluation of the facts of the judgment issued by another
tribunal.
Fraud, to hinder the enforcement within this jurisdiction of a
foreign judgment, must be extrinsic, i.e., fraud based on facts
not controverted or resolved in the case where judgment is
rendered, or that which would go to the jurisdiction of the court
or would deprive the party against whom judgment is rendered
a chance to defend the action to which he has a meritorious
case or defense. In fine, intrinsic fraud, that is, fraud which
goes to the very existence of the cause of action - such as
fraud in obtaining the consent to a contract - is deemed already
adjudged, and it, therefore, cannot militate against the
recognition or enforcement of the foreign judgment.
Even while the US judgment was against both FPS and PAWI,
FASGI had every right to seek enforcement of the judgment
solely against PAWI or, for that matter, only against FPS.
FASGI, in its complaint, explained:
"17. There exists, and at all times relevant herein there
existed, a unity of interest and ownership between defendant
PAWI and defendant FPS, in that they are owned and
controlled by the same shareholders and managers, such that
any individuality and separateness between these defendants
has ceased, if it ever existed, and defendant FPS is the alter
ego of defendant PAWI. The two entities are used
interchangeably by their shareholders and managers, and
plaintiff has found it impossible to ascertain with which entity it
is dealing at any one time. Adherence to the fiction of separate
existence of these defendant corporations would permit an
abuse of the corporate privilege and would promote injustice
against this plaintiff because assets can easily be shifted
between the two companies thereby frustrating plaintiff's
attempts to collect on any judgment rendered by this Court."
Paragraph 14 of the Supplemental Settlement Agreement fixed
the liability of PAWI and FPS to be "joint and several" or
solidary. The enforcement of the judgment against PAWI alone
would not, of course, preclude it from pursuing and recovering
whatever contributory liability FPS might have pursuant to their
own agreement.
PAWI would argue that it was incumbent upon FASGI to first
return the second and the third containers of defective wheels
before it could be required to return to FASGI the purchase
price therefor, relying on their original agreement (the
"Transaction"). Unfortunately, PAWI defaulted on its covenants
thereunder that thereby occasioned the subsequent execution
of the supplemental settlement agreement. This time the
parties agreed, under paragraph 3.4(e) thereof, that any further
default by PAWI would release FASGI from any obligation to
maintain, store or deliver the rejected wheels. The
supplemental settlement agreement evidently superseded, at
the very least on this point, the previous arrangements made
by the parties.
PAWI cannot, by this petition for review, seek refuge over a
business dealing and decision gone awry. Neither do the
courts function to relieve a party from the effects of an unwise
or unfavorable contract freely entered into. As has so aptly
been explained by the appellate court, the over-all picture
might, indeed, appear to be onerous to PAWI but it should bear
emphasis that the settlement which has become the basis for
the foreign judgment has not been the start of a business
venture but the end of a failed one, and each party, naturally,
has had to negotiate from either position of strength or
weakness depending on its own perception of who might have
to bear the blame for the failure and the consequence of loss.
Altogether, the Court finds no reversible error on the part of the
appellate court in its appealed judgment.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED. No costs. SO ORDERED.
MANUFACTURERS HANOVER TRUST CO. and/or
CHEMICAL BANK, petitioners, vs. RAFAEL MA. GUERRERO,
respondent.; [G.R. No. 136804. February 19, 2003]; CARPIO,
J.:
The Case
This is a petition for review under Rule 45 of the Rules of Court
to set aside the Court of Appeals Decision of August 24, 1998
and Resolution of December 14, 1998 in CA-G.R. SP No.
42310 affirming the trial courts denial of petitioners motion for
partial summary judgment.
The Antecedents
On May 17, 1994, respondent Rafael Ma. Guerrero (Guerrero
for brevity) filed a complaint for damages against petitioner
Manufacturers Hanover Trust Co. and/or Chemical Bank (the
Bank for brevity) with the Regional Trial Court of Manila (RTC
for brevity). Guerrero sought payment of damages allegedly for
(1) illegally withheld taxes charged against interests on his
checking account with the Bank; (2) a returned check worth
US$18,000.00 due to signature verification problems; and (3)
unauthorized conversion of his account. Guerrero amended his
complaint on April 18, 1995.
On September 1, 1995, the Bank filed its Answer alleging, inter
alia, that by stipulation Guerreros account is governed by New
York law and this law does not permit any of Guerreros claims
except actual damages. Subsequently, the Bank filed a Motion
for Partial Summary Judgment seeking the dismissal of
Guerreros claims for consequential, nominal, temperate, moral
and exemplary damages as well as attorneys fees on the same
ground alleged in its Answer. The Bank contended that the trial
should be limited to the issue of actual damages. Guerrero
opposed the motion.
The affidavit of Alyssa Walden, a New York attorney,
supported the Banks Motion for Partial Summary Judgment.
Alyssa Waldens affidavit (Walden affidavit for brevity) stated
that Guerreros New York bank account stipulated that the
governing law is New York law and that this law bars all of
Guerreros claims except actual damages. The Philippine
Consular Office in New York authenticated the Walden
affidavit.
The RTC denied the Banks Motion for Partial Summary
Judgment and its motion for reconsideration on March 6, 1996
and July 17, 1996, respectively. The Bank filed a petition for
certiorari and prohibition with the Court of Appeals assailing the
RTC Orders. In its Decision dated August 24, 1998, the Court
of Appeals dismissed the petition. On December 14, 1998, the
Court of Appeals denied the Banks motion for reconsideration.
Hence, the instant petition.
The Ruling of the Court of Appeals
The Court of Appeals sustained the RTC orders denying the
motion for partial summary judgment. The Court of Appeals
ruled that the Walden affidavit does not serve as proof of the
New York law and jurisprudence relied on by the Bank to
support its motion. The Court of Appeals considered the New
York law and jurisprudence as public documents defined in
Section 19, Rule 132 of the Rules on Evidence, as follows:
SEC. 19. Classes of Documents. For the purpose of their
presentation in evidence, documents are either public or
private.
Public documents are:
(a) The written official acts, or records of the official
acts of the sovereign authority, official bodies
and tribunals, and public officers, whether of
the Philippines, or of a foreign country;
x x x.
The Court of Appeals opined that the following procedure
outlined in Section 24, Rule 132 should be followed in proving
foreign law:
SEC. 24. Proof of official record. The record of public
documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official
publication thereof or by a copy attested by the officer having
the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate
may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by
any officer in the foreign service of the Philippines stationed in
the foreign country in which the record is kept, and
authenticated by the seal of his office.
The Court of Appeals likewise rejected the Banks argument
that Section 2, Rule 34 of the old Rules of Court allows the
Bank to move with the supporting Walden affidavit for partial
summary judgment in its favor. The Court of Appeals clarified
that the Walden affidavit is not the supporting affidavit referred
to in Section 2, Rule 34 that would prove the lack of genuine
issue between the parties. The Court of Appeals concluded
that even if the Walden affidavit is used for purposes of
summary judgment, the Bank must still comply with the
procedure prescribed by the Rules to prove the foreign law.
The Issues
The Bank contends that the Court of Appeals committed
reversible error in -
x x x HOLDING THAT [THE BANKS] PROOF OF FACTS TO
SUPPORT ITS MOTION FOR SUMMARY JUDGMENT MAY
NOT BE GIVEN BY AFFIDAVIT;
x x x HOLDING THAT [THE BANKS] AFFIDAVIT, WHICH
PROVES FOREIGN LAW AS A FACT, IS HEARSAY AND
THEREBY CANNOT SERVE AS PROOF OF THE NEW YORK
LAW RELIED UPON BY PETITIONERS IN THEIR MOTION
FOR SUMMARY JUDGMENT x x x.
First, the Bank argues that in moving for partial summary
judgment, it was entitled to use the Walden affidavit to prove
that the stipulated foreign law bars the claims for
consequential, moral, temperate, nominal and exemplary
damages and attorneys fees. Consequently, outright dismissal
by summary judgment of these claims is warranted.
Second, the Bank claims that the Court of Appeals mixed up
the requirements of Rule 35 on summary judgments and those
of a trial on the merits in considering the Walden affidavit as
hearsay. The Bank points out that the Walden affidavit is not
hearsay since Rule 35 expressly permits the use of affidavits.
Lastly, the Bank argues that since Guerrero did not submit any
opposing affidavit to refute the facts contained in the Walden
affidavit, he failed to show the need for a trial on his claims for
damages other than actual.
The Courts Ruling
The petition is devoid of merit.
The Bank filed its motion for partial summary judgment
pursuant to Section 2, Rule 34 of the old Rules of Court which
reads:
Section 2. Summary judgment for defending party. A party
against whom a claim, counterclaim, or cross-claim is asserted
or a declaratory relief is sought may, at any time, move with
supporting affidavits for a summary judgment in his favor as to
all or any part thereof.
A court may grant a summary judgment to settle expeditiously
a case if, on motion of either party, there appears from the
pleadings, depositions, admissions, and affidavits that no
important issues of fact are involved, except the amount of
damages. In such event, the moving party is entitled to a
judgment as a matter of law.
In a motion for summary judgment, the crucial question is: are
the issues raised in the pleadings genuine, sham or fictitious,
as shown by affidavits, depositions or admissions
accompanying the motion?
A genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which
is fictitious or contrived so as not to constitute a genuine issue
for trial.
A perusal of the parties respective pleadings would show that
there are genuine issues of fact that necessitate formal trial.
Guerreros complaint before the RTC contains a statement of
the ultimate facts on which he relies for his claim for damages.
He is seeking damages for what he asserts as illegally withheld
taxes charged against interests on his checking account with
the Bank, a returned check worth US$18,000.00 due to
signature verification problems, and unauthorized conversion
of his account. In its Answer, the Bank set up its defense that
the agreed foreign law to govern their contractual relation bars
the recovery of damages other than actual. Apparently, facts
are asserted in Guerreros complaint while specific denials and
affirmative defenses are set out in the Banks answer.
True, the court can determine whether there are genuine
issues in a case based merely on the affidavits or counter-
affidavits submitted by the parties to the court. However, as
correctly ruled by the Court of Appeals, the Banks motion for
partial summary judgment as supported by the Walden affidavit
does not demonstrate that Guerreros claims are sham,
fictitious or contrived. On the contrary, the Walden affidavit
shows that the facts and material allegations as pleaded by the
parties are disputed and there are substantial triable issues
necessitating a formal trial.
There can be no summary judgment where questions of fact
are in issue or where material allegations of the pleadings are
in dispute. The resolution of whether a foreign law allows only
the recovery of actual damages is a question of fact as far as
the trial court is concerned since foreign laws do not prove
themselves in our courts. Foreign laws are not a matter of
judicial notice. Like any other fact, they must be alleged and
proven. Certainly, the conflicting allegations as to whether New
York law or Philippine law applies to Guerreros claims present
a clear dispute on material allegations which can be resolved
only by a trial on the merits.
Under Section 24 of Rule 132, the record of public documents
of a sovereign authority or tribunal may be proved by (1) an
official publication thereof or (2) a copy attested by the
officer having the legal custody thereof. Such official
publication or copy must be accompanied, if the record is not
kept in the Philippines, with a certificate that the attesting
officer has the legal custody thereof. The certificate may be
issued by any of the authorized Philippine embassy or consular
officials stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office. The attestation
must state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be, and
must be under the official seal of the attesting officer.
Certain exceptions to this rule were recognized in Asiavest
Limited v. Court of Appeals which held that:
x x x:
Although it is desirable that foreign law be proved in
accordance with the above rule, however, the Supreme Court
held in the case of Willamette Iron and Steel Works v. Muzzal,
that Section 41, Rule 123 (Section 25, Rule 132 of the Revised
Rules of Court) does not exclude the presentation of other
competent evidence to prove the existence of a foreign law. In
that case, the Supreme Court considered the testimony under
oath of an attorney-at-law of San Francisco, California, who
quoted verbatim a section of California Civil Code and who
stated that the same was in force at the time the obligations
were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et
al., upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case,
the counsel for respondent testified that as an active member
of the California Bar since 1951, he is familiar with the revenue
and taxation laws of the State of California. When asked by the
lower court to state the pertinent California law as regards
exemption of intangible personal properties, the witness cited
Article 4, Sec. 13851 (a) & (b) of the California Internal and
Revenue Code as published in Derrings California Code, a
publication of Bancroft-Whitney Co., Inc. And as part of his
testimony, a full quotation of the cited section was offered in
evidence by respondents. Likewise, in several naturalization
cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule of
practice, may be allowed and used as basis for favorable
action, if, in the light of all the circumstances, the Court is
satisfied of the authenticity of the written proof offered. Thus, in
a number of decisions, mere authentication of the Chinese
Naturalization Law by the Chinese Consulate General of
Manila was held to be competent proof of that law. (Emphasis
supplied)
The Bank, however, cannot rely on Willamette Iron and Steel
Works v. Muzzal or Collector of Internal Revenue v. Fisher
to support its cause. These cases involved attorneys testifying
in open court during the trial in the Philippines and quoting the
particular foreign laws sought to be established. On the other
hand, the Walden affidavit was taken abroad ex parte and the
affiant never testified in open court. The Walden affidavit
cannot be considered as proof of New York law on damages
not only because it is self-serving but also because it does not
state the specific New York law on damages. We reproduce
portions of the Walden affidavit as follows:
3. In New York, [n]ominal damages are damages in
name only, trivial sums such as six cents or $1. Such damages
are awarded both in tort and contract cases when the plaintiff
establishes a cause of action against the defendant, but is
unable to prove actual damages. Dobbs, Law of Remedies,
3.32 at 294 (1993). Since Guerrero is claiming for actual
damages, he cannot ask for nominal damages.
4. There is no concept of temperate damages in New York law.
I have reviewed Dobbs, a well-respected treatise, which does
not use the phrase temperate damages in its index. I have also
done a computerized search for the phrase in all published
New York cases, and have found no cases that use it. I have
never heard the phrase used in American law.
5. The Uniform Commercial Code (UCC) governs many
aspects of a Banks relationship with its depositors. In this case,
it governs Guerreros claim arising out of the non-payment of
the $18,000 check. Guerrero claims that this was a wrongful
dishonor. However, the UCC states that justifiable refusal to
pay or accept as opposed to dishonor, occurs when a bank
refuses to pay a check for reasons such as a missing
indorsement, a missing or illegible signature or a forgery, 3-
510, Official Comment 2. .. to the Complaint, MHT returned the
check because it had no signature card on . and could not
verify Guerreros signature. In my opinion, consistent with the
UCC, that is a legitimate and justifiable reason not to pay.
6. Consequential damages are not available in the ordinary
case of a justifiable refusal to pay. UCC 1-106 provides that
neither consequential or special or punitive damages may be
had except as specifically provided in the Act or by other rule of
law. UCC 4-103 further provides that consequential damages
can be recovered only where there is bad faith. This is more
restrictive than the New York common law, which may allow
consequential damages in a breach of contract case (as does
the UCC where there is a wrongful dishonor).
7. Under New York law, requests for lost profits, damage to
reputation and mental distress are considered consequential
damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312,
319, 540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif
Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718,
374 N.Y.S..2d 868, 869-70 (4th Dept 1975) damage to
reputation); Dobbs, Law of Remedies 12.4(1) at 63 (emotional
distress).
8. As a matter of New York law, a claim for emotional distress
cannot be recovered for a breach of contract. Geler v. National
Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y.
1991); Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540
N.Y.S.2d 387, 390 (3d Dept 1989) Martin v. Donald Park
Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dept 1976).
Damage to reputation is also not recoverable for a contract.
Motif Construction Corp. v. Buffalo Savings Bank, 374
N.Y.S.2d at 869-70.
9. In cases where the issue is the breach of a contract to
purchase stock, New York courts will not take into
consideration the performance of the stock after the breach.
Rather, damages will be based on the value of the stock at the
time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456
N.Y.S.2d 558, 559 (4th Dept 1982), app. den. 59 N.Y.2d 601,
449 N.E.2d 1276, 463 N.Y.S.2d 1023 (1983).
10. Under New York law, a party can only get consequential
damages if they were the type that would naturally arise from
the breach and if they were brought within the contemplation of
parties as the probable result of the breach at the time of or
prior to contracting. Kenford Co., Inc. v. Country of Erie, 73
N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman
v. Fargo, 223 N.Y. 32, 36 (1918).
11. Under New York law, a plaintiff is not entitled to attorneys
fees unless they are provided by contract or statute. E.g., Geler
v. National Westminster Bank, 770 F. Supp. 210, 213
(S.D.N.Y. 1991); Camatron Sewing Mach, Inc. v. F.M. Ring
Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d 396 (1st Dept
1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577
N.Y.S.2d 280, 281 (1st Dept 1991). There is no statute that
permits attorneys fees in a case of this type.
12. Exemplary, or punitive damages are not allowed for a
breach of contract, even where the plaintiff claims the
defendant acted with malice. Geler v. National Westminster
Bank, 770 F.Supp. 210, 215 (S.D.N.Y. 1991); Catalogue
Service of chester_v. Insurance Co. of North America, 74
A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dept 1980);
Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833,
488 N.Y.S.2d 241, 242 (2d Dept 1985).
13. Exemplary or punitive damages may be recovered only
where it is alleged and proven that the wrong supposedly
committed by defendant amounts to a fraud aimed at the public
generally and involves a high moral culpability. Walker v.
Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223 N.Y.S.2d 488
(1961).
14. Furthermore, it has been consistently held under New York
law that exemplary damages are not available for a mere
breach of contract for in such a case, as a matter of law, only a
private wrong and not a public right is involved. Thaler v. The
North Insurance Company, 63 A.D.2d 921, 406 N.Y.S.2d 66
(1st Dept 1978).
The Walden affidavit states conclusions from the affiants
personal interpretation and opinion of the facts of the case vis
a vis the alleged laws and jurisprudence without citing any law
in particular. The citations in the Walden affidavit of various
U.S. court decisions do not constitute proof of the official
records or decisions of the U.S. courts. While the Bank
attached copies of some of the U.S. court decisions cited in the
Walden affidavit, these copies do not comply with Section 24 of
Rule 132 on proof of official records or decisions of foreign
courts.
The Banks intention in presenting the Walden affidavit is to
prove New York law and jurisprudence. However, because of
the failure to comply with Section 24 of Rule 132 on how to
prove a foreign law and decisions of foreign courts, the Walden
affidavit did not prove the current state of New York law and
jurisprudence. Thus, the Bank has only alleged, but has not
proved, what New York law and jurisprudence are on the
matters at issue.
Next, the Bank makes much of Guerreros failure to submit an
opposing affidavit to the Walden affidavit. However, the
pertinent provision of Section 3, Rule 35 of the old Rules of
Court did not make the submission of an opposing affidavit
mandatory, thus:
SEC. 3. Motion and proceedings thereon. The motion shall be
served at least ten (10) days before the time specified for the
hearing. The adverse party prior to the day of hearing may
serve opposing affidavits. After the hearing, the judgment
sought shall be rendered forthwith if the pleadings, depositions
and admissions on file, together with the affidavits, show that,
except as to the amount of damages, there is no genuine issue
as to any material fact and that the moving party is entitled to a
judgment as a matter of law. (Emphasis supplied)
It is axiomatic that the term may as used in remedial law, is
only permissive and not mandatory.
Guerrero cannot be said to have admitted the averments in the
Banks motion for partial summary judgment and the Walden
affidavit just because he failed to file an opposing affidavit.
Guerrero opposed the motion for partial summary judgment,
although he did not present an opposing affidavit. Guerrero
may not have presented an opposing affidavit, as there was no
need for one, because the Walden affidavit did not establish
what the Bank intended to prove. Certainly, Guerrero did not
admit, expressly or impliedly, the veracity of the statements in
the Walden affidavit. The Bank still had the burden of proving
New York law and jurisprudence even if Guerrero did not
present an opposing affidavit. As the party moving for summary
judgment, the Bank has the burden of clearly demonstrating
the absence of any genuine issue of fact and that any doubt as
to the existence of such issue is resolved against the movant.
Moreover, it would have been redundant and pointless for
Guerrero to submit an opposing affidavit considering that what
the Bank seeks to be opposed is the very subject matter of the
complaint. Guerrero need not file an opposing affidavit to the
Walden affidavit because his complaint itself controverts the
matters set forth in the Banks motion and the Walden affidavit.
A party should not be made to deny matters already averred in
his complaint.
There being substantial triable issues between the parties, the
courts a quo correctly denied the Banks motion for partial
summary judgment. There is a need to determine by
presentation of evidence in a regular trial if the Bank is guilty of
any wrongdoing and if it is liable for damages under the
applicable laws.
This case has been delayed long enough by the Banks resort
to a motion for partial summary judgment. Ironically, the Bank
has successfully defeated the very purpose for which summary
judgments were devised in our rules, which is, to aid parties in
avoiding the expense and loss of time involved in a trial.
WHEREFORE, the petition is DENIED for lack of merit. The
Decision dated August 24, 1998 and the Resolution dated
December 14, 1998 of the Court of Appeals in CA-G.R. SP No.
42310 is AFFIRMED. SO ORDERED.
ST. AVIATION SERVICES CO., PTE., LTD., -versus- GRAND
INTERNATIONAL AIRWAYS, INC.,; G.R. No. 140288;
October 23, 2006; SANDOVAL-GUTIERREZ, J.:
Challenged in the instant Petition for Review on
Certiorari are the Decision of the Court of Appeals dated July
30, 1999 and its Resolution dated September 29, 1999 in CA-
G.R. SP No. 51134 setting aside the Orders dated October 30,
1998 and December 16, 1998 of the Regional Trial Court
(RTC), Branch 117, Pasay City in Civil Case No. 98-1389.
St. Aviation Services Co., Pte., Ltd., petitioner, is a
foreign corporation based in Singapore. It is engaged in the
manufacture, repair, and maintenance of airplanes and
aircrafts. Grand International Airways, Inc., respondent, is a
domestic corporation engaged in airline operations.
Sometime in January 1996, petitioner and respondent
executed an Agreement for the Maintenance and Modification
of Airbus A 300 B4-103 Aircraft Registration No. RP-C8882
(First Agreement). Under this stipulation, petitioner agreed to
undertake maintenance and modification works on
respondents aircraft. The parties agreed on the mode and (of Grand) is among the grounds for a motion to dismiss under
manner of payment by respondent of the contract price, Rule 16 of the 1997 Rules of Civil Procedure.
including interest in case of default. They also agreed that the
construction, validity and performance thereof shall be
governed by the laws of Singapore. They further agreed to
Respondent filed a motion for reconsideration but was
submit any suit arising from their agreement to the non-
denied by the RTC in its Order dated December 16, 1998.
exclusive jurisdiction of the Singapore courts.

On February 15, 1999, respondent filed with the Court

At about the same time, or on January 12, 1996, the
of Appeals a Petition for Certiorari assailing the RTC Order
parties verbally agreed that petitioner will repair and undertake
denying its motion to dismiss. Respondent alleged that the
maintenance works on respondents other aircraft, Aircraft No.
extraterritorial service of summons on its office in the
RP-C8881; and that the works shall be based on a General
Philippines is defective and that the Singapore court did not
Terms of Agreement (GTA). The GTA terms are similar to
acquire jurisdiction over its person. Thus, its judgment sought
those of their First Agreement.
to be enforced is void. Petitioner, in its comment, moved to
dismiss the petition for being unmeritorious.

Petitioner undertook the contracted works and

thereafter promptly delivered the aircrafts to respondent.
On July 30, 1999, the Court of Appeals issued its
During the period from March 1996 to October 1997, petitioner
Decision granting the petition and setting aside the Orders
billed respondent in the total amount of US$303,731.67 or
dated October 30, 1998 and December 16, 1998 of the RTC
S$452,560.18. But despite petitioners repeated demands,
without prejudice to the right of private respondent to initiate
respondent failed to pay, in violation of the terms agreed upon.
another proceeding before the proper court to enforce its claim.
It found:

On December 12, 1997, petitioner filed with the High

Court of the Republic of Singapore an action for the sum of
In the case at bar, the complaint
S$452,560.18, including interest and costs, against
does not involve the personal status of
respondent, docketed as Suit No. 2101. Upon petitioners
plaintiff, nor any property in which the
motion, the court issued a Writ of Summons to be served
defendant has a claim or interest, or which
extraterritorially or outside Singapore upon respondent. The
the private respondent has attached but
court sought the assistance of the sheriff of Pasay City to effect
purely an action for collection of debt. It is a
service of the summons upon respondent. However, despite
personal action as well as an action in
receipt of summons, respondent failed to answer the claim.
personam, not an action in rem or quasi in
rem. As a personal action, the service of
summons should be personal or substituted,
On February 17, 1998, on motion of petitioner, the not extraterritorial, in order to confer
Singapore High Court rendered a judgment by default against jurisdiction on the court.
respondent.

On August 4, 1998, petitioner filed with the RTC, Petitioner seasonably filed a motion for
Branch 117, Pasay City, a Petition for Enforcement of reconsideration but it was denied on September 29, 1999.
Judgment, docketed as Civil Case No. 98-1389.

Hence, the instant Petition for Review on Certiorari.

Respondent filed a Motion to Dismiss the Petition on
two grounds: (1) the Singapore High Court did not acquire
jurisdiction over its person; and (2) the foreign judgment sought
to be enforced is void for having been rendered in violation of
its right to due process.
On October 30, 1998, the RTC denied respondents
motion to dismiss, holding that neither one of the two grounds
The issues to be resolved are: (1) whether the
Singapore High Court has acquired jurisdiction over the person
of respondent by the service of summons upon its office in the
Philippines; and (2) whether the judgment by default in Suit No.
2101 by the Singapore High Court is enforceable in the
Philippines.
 Generally, in the absence of a special contract, no
sovereign is bound to give effect within its dominion to a
judgment rendered by a tribunal of another country; however,
under the rules of comity, utility and convenience, nations have
established a usage among civilized states by which final
judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious under certain
conditions that may vary in different countries. Certainly, the
Philippine legal system has long ago accepted into its
jurisprudence and procedural rules the viability of an action for
enforcement of foreign judgment, as well as the requisites for
such valid enforcement, as derived from internationally
accepted doctrines.
The conditions for the recognition and enforcement of
a foreign judgment in our legal system are contained in Section
48, Rule 39 of the 1997 Rules of Civil Procedure, as amended,
thus:
SEC. 48. Effect of foreign
judgments. The effect of a judgment or final
order of a tribunal of a foreign country,
having jurisdiction to render the judgment or
final order is as follows:
(a) In case of a
judgment or final order
upon a specific thing,
the judgment or final
order is conclusive
upon the title to the
thing; and
(b) In case of a
judgment or final order
against a person, the
judgment or final order
is presumptive
evidence of a right as
between the parties
and their successors
in interest by a
subsequent title;
In either case, the judgment or final
order 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.
Under the above Rule, a foreign judgment or order
against a person is merely presumptive evidence of a right as
between the parties. It may be repelled, among others, by want
of jurisdiction of the issuing authority or by want of notice to the
party against whom it is enforced. The party attacking a foreign
judgment has the burden of overcoming the presumption of its
validity.
Respondent, in assailing the validity of the judgment
sought to be enforced, contends that the service of summons
is void and that the Singapore court did not acquire jurisdiction
over it.
Generally, matters of remedy and procedure such as
those relating to the service of process upon a defendant are
governed by the lex fori or the internal law of the forum, which
in this case is the law of Singapore. Here, petitioner moved for
leave of court to serve a copy of the Writ of Summons outside
Singapore. In an Order dated December 24, 1997, the
Singapore High Court granted leave to serve a copy of the Writ
of Summons on the Defendant by a method of service
authorized by the law of the Philippines for service of any
originating process issued by the Philippines at ground
floor, APMC Building, 136 Amorsolo corner Gamboa Street,
1229 Makati City, or elsewhere in the Philippines. This
service of summons outside Singapore is in accordance with
Order 11, r. 4(2) of the Rules of Court 1996 of Singapore,
which provides.
(2) Where in accordance with these
Rules, an originating process is to be served
on a defendant in any country with respect to
which there does not subsist a Civil
Procedure Convention providing for service
in that country of process of the High Court,
the originating process may be served
a) through the government of that
country, where that government is willing to
effect service;
b) through a Singapore Consular
authority in that country, except where
service through such an authority is contrary
to the law of the country; or
c) by a method of service
authorized by the law of that country for
service of any originating process issued
by that country.
In the Philippines, jurisdiction over a party is acquired
by service of summons by the sheriff, his deputy or other
proper court officer either personally by handing a copy thereof
to the defendant or by substituted service. In this case, the Writ
of Summons issued by the Singapore High Court was served
upon respondent at its office located at Mercure Hotel (formerly
Village Hotel), MIA Road, Pasay City. The Sheriffs Return
shows that it was received on May 2, 1998 by Joyce T. Austria,
Secretary of the General Manager of respondent company. But
respondent completely ignored the summons, hence, it was
declared in default.
 Considering that the Writ of Summons was served
upon respondent in accordance with our Rules, jurisdiction was
acquired by the Singapore High Court over its person. Clearly,
the judgment of default rendered by that court against
respondent is valid.
WHEREFORE, we GRANT the petition. The
challenged Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 51134 are SET ASIDE. The RTC, Branch
117, Pasay City is hereby DIRECTED to hear Civil Case No.
98-1389 with dispatch. SO ORDERED.
KOREA TECHNOLOGIES CO., LTD., - versus - HON.
ALBERTO A. LERMA, in his capacity as Presiding Judge
of Branch 256 of Regional Trial Court of Muntinlupa City,
and PACIFIC GENERAL STEEL MANUFACTURING
CORPORATION,; G.R. No. 143581; January 7, 2008;
VELASCO, JR., J.:
In our jurisdiction, the policy is to favor alternative
methods of resolving disputes, particularly in civil and
commercial disputes. Arbitration along with mediation,
conciliation, and negotiation, being inexpensive, speedy and
less hostile methods have long been favored by this Court. The
petition before us puts at issue an arbitration clause in a
contract mutually agreed upon by the parties stipulating that
they would submit themselves to arbitration in a foreign
country. Regrettably, instead of hastening the resolution of
their dispute, the parties wittingly or unwittingly prolonged the
controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is
a Korean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific General
Steel Manufacturing Corp. (PGSMC) is a domestic
corporation.
On March 5, 1997, PGSMC and KOGIES executed a
Contract whereby KOGIES would set up an LPG Cylinder
Manufacturing Plant in Carmona, Cavite. The contract was
executed in the Philippines. On April 7, 1997, the parties
executed, in Korea, an Amendment for Contract No. KLP-
970301 dated March 5, 1997 amending the terms of payment.
The contract and its amendment stipulated that KOGIES will
ship the machinery and facilities necessary for manufacturing
LPG cylinders for which PGSMC would pay USD 1,224,000.
KOGIES would install and initiate the operation of the plant for
which PGSMC bound itself to pay USD 306,000 upon the
plants production of the 11-kg. LPG cylinder samples. Thus,
the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract
of Lease with Worth Properties, Inc. (Worth) for use of Worths
5,079-square meter property with a 4,032-square meter
warehouse building to house the LPG manufacturing plant. The
monthly rental was PhP 322,560 commencing on January 1,
1998 with a 10% annual increment clause. Subsequently, the
machineries, equipment, and facilities for the manufacture of
LPG cylinders were shipped, delivered, and installed in the
Carmona plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate executed by
the parties on January 22, 1998, after the installation of the
plant, the initial operation could not be conducted as PGSMC
encountered financial difficulties affecting the supply of
materials, thus forcing the parties to agree that KOGIES would
be deemed to have completely complied with the terms and
conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the
installation and initial operation of the plant, PGSMC issued
two postdated checks: (1) BPI Check No. 0316412 dated
January 30, 1998 for PhP 4,500,000; and (2) BPI Check No.
0316413 dated March 30, 1998 for PhP 4,500,000.
When KOGIES deposited the checks, these were
dishonored for the reason PAYMENT STOPPED. Thus, on
May 8, 1998, KOGIES sent a demand letter to PGSMC
threatening criminal action for violation of Batas Pambansa
Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMCs President faxed a letter dated May 7, 1998 to
KOGIES President who was then staying at a Makati City
hotel. She complained that not only did KOGIES deliver a
different brand of hydraulic press from that agreed upon but it
had not delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks
it issued KOGIES were fully funded but the payments were
stopped for reasons previously made known to KOGIES.
On June 1, 1998, PGSMC informed KOGIES that
PGSMC was canceling their Contract dated March 5, 1997 on
the ground that KOGIES had altered the quantity and lowered
the quality of the machineries and equipment it delivered to
PGSMC, and that PGSMC would dismantle and transfer the
machineries, equipment, and facilities installed in the Carmona
plant. Five days later, PGSMC filed before the Office of the
Public Prosecutor an Affidavit-Complaint for Estafa docketed
as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of
KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing
the latter that PGSMC could not unilaterally rescind their
contract nor dismantle and transfer the machineries and
equipment on mere imagined violations by KOGIES. It also
insisted that their disputes should be settled by arbitration as
agreed upon in Article 15, the arbitration clause of their
contract.
On June 23, 1998, PGSMC again wrote KOGIES
reiterating the contents of its June 1, 1998 letter threatening
that the machineries, equipment, and facilities installed in the
plant would be dismantled and transferred on July 4, 1998.
Thus, on July 1, 1998, KOGIES instituted an Application for
Arbitration before the Korean Commercial Arbitration Board
(KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as
amended.
On July 3, 1998, KOGIES filed a Complaint for
Specific Performance, docketed as Civil Case No. 98-117
against PGSMC before the Muntinlupa City Regional Trial
Court (RTC). The RTC granted a temporary restraining order
(TRO) on July 4, 1998, which was subsequently extended until
July 22, 1998. In its complaint, KOGIES alleged that PGSMC
had initially admitted that the checks that were stopped were
not funded but later on claimed that it stopped payment of the
checks for the reason that their value was not received as the
former allegedly breached their contract by altering the quantity
and lowering the quality of the machinery and equipment
installed in the plant and failed to make the plant operational
although it earlier certified to the contrary as shown in a
January 22, 1998 Certificate. Likewise, KOGIES averred that
PGSMC violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to
arbitration. KOGIES also asked that PGSMC be restrained
from dismantling and transferring the machinery and
equipment installed in the plant which the latter threatened to
do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the
TRO arguing that KOGIES was not entitled to the TRO since
Art. 15, the arbitration clause, was null and void for being
against public policy as it ousts the local courts of jurisdiction
over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with
Compulsory Counterclaim asserting that it had the full right to
dismantle and transfer the machineries and equipment
because it had paid for them in full as stipulated in the contract;
that KOGIES was not entitled to the PhP 9,000,000 covered by
the checks for failing to completely install and make the plant
operational; and that KOGIES was liable for damages
amounting to PhP 4,500,000 for altering the quantity and
lowering the quality of the machineries and equipment.
Moreover, PGSMC averred that it has already paid PhP
2,257,920 in rent (covering January to July 1998) to Worth and
it was not willing to further shoulder the cost of renting the
premises of the plant considering that the LPG cylinder
manufacturing plant never became operational.
After the parties submitted their Memoranda, on July
23, 1998, the RTC issued an Order denying the application for
a writ of preliminary injunction, reasoning that PGSMC had
paid KOGIES USD 1,224,000, the value of the machineries
and equipment as shown in the contract such that KOGIES no
longer had proprietary rights over them. And finally, the RTC
held that Art. 15 of the Contract as amended was invalid as it
tended to oust the trial court or any other court jurisdiction over
any dispute that may arise between the parties. KOGIES
prayer for an injunctive writ was denied. The dispositive portion
of the Order stated:
WHEREFORE, in view of the
foregoing consideration, this Court believes
and so holds that no cogent reason exists for
this Court to grant the writ of preliminary
injunction to restrain and refrain defendant
from dismantling the machineries and
facilities at the lot and building of Worth
Properties, Incorporated at Carmona, Cavite
and transfer the same to another site: and
therefore denies plaintiffs application for a
writ of preliminary injunction.
On July 29, 1998, KOGIES filed its Reply to Answer
and Answer to Counterclaim. KOGIES denied it had altered the
quantity and lowered the quality of the machinery, equipment,
and facilities it delivered to the plant. It claimed that it had
performed all the undertakings under the contract and had
already produced certified samples of LPG cylinders. It averred
that whatever was unfinished was PGSMCs fault since it failed
to procure raw materials due to lack of funds. KOGIES, relying
on Chung Fu Industries (Phils.), Inc. v. Court of Appeals,
insisted that the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum
with Motion to Dismiss answering PGSMCs memorandum of
July 22, 1998 and seeking dismissal of PGSMCs
counterclaims, KOGIES, on August 4, 1998, filed its Motion for
Reconsideration of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was
not merely for machinery and facilities worth USD 1,224,000
but was for the sale of an LPG manufacturing plant consisting
of supply of all the machinery and facilities and transfer of
technology for a total contract price of USD 1,530,000 such
that the dismantling and transfer of the machinery and facilities
would result in the dismantling and transfer of the very plant
itself to the great prejudice of KOGIES as the still unpaid
owner/seller of the plant. Moreover, KOGIES points out that the
arbitration clause under Art. 15 of the Contract as amended
was a valid arbitration stipulation under Art. 2044 of the Civil
Code and as held by this Court in Chung Fu Industries (Phils.),
Inc.
In the meantime, PGSMC filed a Motion for Inspection
of Things to determine whether there was indeed alteration of
the quantity and lowering of quality of the machineries and
equipment, and whether these were properly installed.
KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the
coverage of the arbitration clause in their contract.
On September 21, 1998, the trial court issued an
Order (1) granting PGSMCs motion for inspection; (2) denying
KOGIES motion for reconsideration of the July 23, 1998 RTC
Order; and (3) denying KOGIES motion to dismiss PGSMCs
compulsory counterclaims as these counterclaims fell within
the requisites of compulsory counterclaims.
 On October 2, 1998, KOGIES filed an Urgent Motion On the issue of nonpayment of docket fees and non-
for Reconsideration of the September 21, 1998 RTC Order attachment of a certificate of non-forum shopping by PGSMC,
granting inspection of the plant and denying dismissal of the CA held that the counterclaims of PGSMC were
PGSMCs compulsory counterclaims. compulsory ones and payment of docket fees was not required
since the Answer with counterclaim was not an initiatory
Ten days after, on October 12, 1998, without waiting pleading. For the same reason, the CA said a certificate of
for the resolution of its October 2, 1998 urgent motion for non-forum shopping was also not required.
reconsideration, KOGIES filed before the Court of Appeals
(CA) a petition for certiorari docketed as CA-G.R. SP No. Furthermore, the CA held that the petition for certiorari
49249, seeking annulment of the July 23, 1998 and September had been filed prematurely since KOGIES did not wait for the
21, 1998 RTC Orders and praying for the issuance of writs of resolution of its urgent motion for reconsideration of the
prohibition, mandamus, and preliminary injunction to enjoin the September 21, 1998 RTC Order which was the plain, speedy,
RTC and PGSMC from inspecting, dismantling, and and adequate remedy available. According to the CA, the RTC
transferring the machineries and equipment in the Carmona must be given the opportunity to correct any alleged error it has
plant, and to direct the RTC to enforce the specific agreement committed, and that since the assailed orders were
on arbitration to resolve the dispute. interlocutory, these cannot be the subject of a petition for
certiorari.
In the meantime, on October 19, 1998, the RTC
denied KOGIES urgent motion for reconsideration and directed Hence, we have this Petition for Review on Certiorari
the Branch Sheriff to proceed with the inspection of the under Rule 45
machineries and equipment in the plant on October 28, 1998.
The Issues
Thereafter, KOGIES filed a Supplement to the Petition
in CA-G.R. SP No. 49249 informing the CA about the October Petitioner posits that the appellate court committed
19, 1998 RTC Order. It also reiterated its prayer for the the following errors:
issuance of the writs of prohibition, mandamus and preliminary
injunction which was not acted upon by the CA. KOGIES a. PRONOUNCING THE QUESTION
asserted that the Branch Sheriff did not have the technical OF OWNERSHIP OVER THE MACHINERY
expertise to ascertain whether or not the machineries and AND FACILITIES AS A QUESTION OF
equipment conformed to the specifications in the contract and FACT BEYOND THE AMBIT OF A
were properly installed. PETITION FOR CERTIORARI INTENDED
ONLY FOR CORRECTION OF ERRORS OF
On November 11, 1998, the Branch Sheriff filed his JURISDICTION OR GRAVE ABUSE OF
Sheriffs Report finding that the enumerated machineries and DISCRETION AMOUNTING TO LACK OF
equipment were not fully and properly installed. (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURTS
The Court of Appeals affirmed the trial court and declared FINDING ON THE SAME QUESTION WAS
the arbitration clause against public policy IMPROPERLY RAISED IN THE PETITION
BELOW;
On May 30, 2000, the CA rendered the assailed
Decision affirming the RTC Orders and dismissing the petition b. DECLARING AS NULL AND VOID
for certiorari filed by KOGIES. The CA found that the RTC did THE ARBITRATION CLAUSE IN ARTICLE
not gravely abuse its discretion in issuing the assailed July 23, 15 OF THE CONTRACT BETWEEN THE
1998 and September 21, 1998 Orders. Moreover, the CA PARTIES FOR BEING CONTRARY TO
reasoned that KOGIES contention that the total contract price PUBLIC POLICY AND FOR OUSTING THE
for USD 1,530,000 was for the whole plant and had not been COURTS OF JURISDICTION;
fully paid was contrary to the finding of the RTC that PGSMC
fully paid the price of USD 1,224,000, which was for all the c. DECREEING PRIVATE
machineries and equipment. According to the CA, this RESPONDENTS COUNTERCLAIMS TO BE
determination by the RTC was a factual finding beyond the ALL COMPULSORY NOT NECESSITATING
ambit of a petition for certiorari. PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM
On the issue of the validity of the arbitration clause, SHOPPING;
the CA agreed with the lower court that an arbitration clause
which provided for a final determination of the legal rights of d. RULING THAT THE PETITION
the parties to the contract by arbitration was against public WAS FILED PREMATURELY WITHOUT
policy. WAITING FOR THE RESOLUTION OF THE
MOTION FOR RECONSIDERATION OF
THE ORDER DATED SEPTEMBER 21,
 1998 OR WITHOUT GIVING THE TRIAL
COURT AN OPPORTUNITY TO CORRECT
ITSELF;
e. PROCLAIMING THE TWO
ORDERS DATED JULY 23 AND
SEPTEMBER 21, 1998 NOT TO BE
PROPER SUBJECTS OF CERTIORARI
AND PROHIBITION FOR BEING
INTERLOCUTORY IN NATURE;
f. NOT GRANTING THE
RELIEFS AND REMEDIES PRAYED FOR
IN HE (SIC) PETITION AND, INSTEAD,
DISMISSING THE SAME FOR ALLEGEDLY
WITHOUT MERIT.
The Courts Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall
first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims
and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the
counterclaims, it should have paid docket fees and filed a
certificate of non-forum shopping, and that its failure to do so
was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of
PGSMC were incorporated in its Answer with Compulsory
Counterclaim dated July 17, 1998 in accordance with Section 8
of Rule 11, 1997 Revised Rules of Civil Procedure, the rule
that was effective at the time the Answer with Counterclaim
was filed. Sec. 8 on existing counterclaim or cross-claim states,
A compulsory counterclaim or a cross-claim that a defending
party has at the time he files his answer shall be contained
therein.
On July 17, 1998, at the time PGSMC filed its Answer
incorporating its counterclaims against KOGIES, it was not
liable to pay filing fees for said counterclaims being compulsory
in nature. We stress, however, that effective August 16, 2004
under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC,
docket fees are now required to be paid in compulsory
counterclaim or cross-claims.
As to the failure to submit a certificate of forum
shopping, PGSMCs Answer is not an initiatory pleading which
requires a certification against forum shopping under Sec. 5 of
Rule 7, 1997 Revised Rules of Civil Procedure. It is a
responsive pleading, hence, the courts a quo did not commit
reversible error in denying KOGIES motion to dismiss
PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz, the CA also pronounced that
certiorari and Prohibition are neither the remedies to question
the propriety of an interlocutory order of the trial court. The CA
erred on its reliance on Gamboa. Gamboa involved the denial
of a motion to acquit in a criminal case which was not
assailable in an action for certiorari since the denial of a motion
to quash required the accused to plead and to continue with
the trial, and whatever objections the accused had in his
motion to quash can then be used as part of his defense and
subsequently can be raised as errors on his appeal if the
judgment of the trial court is adverse to him. The general rule is
that interlocutory orders cannot be challenged by an appeal.
Thus, in Yamaoka v. Pescarich Manufacturing Corporation, we
held:
The proper remedy in such cases is
an ordinary appeal from an adverse
judgment on the merits, incorporating in said
appeal the grounds for assailing the
interlocutory orders. Allowing appeals from
interlocutory orders would result in the sorry
spectacle of a case being subject of a
counterproductive ping-pong to and from the
appellate court as often as a trial court is
perceived to have made an error in any of its
interlocutory rulings. However, where the
assailed interlocutory order was issued with
grave abuse of discretion or patently
erroneous and the remedy of appeal would
not afford adequate and expeditious relief,
the Court allows certiorari as a mode of
redress.
Also, appeals from interlocutory orders would open
the floodgates to endless occasions for dilatory motions. Thus,
where the interlocutory order was issued without or in excess
of jurisdiction or with grave abuse of discretion, the remedy is
certiorari.
The alleged grave abuse of discretion of the
respondent court equivalent to lack of jurisdiction in the
issuance of the two assailed orders coupled with the fact that
there is no plain, speedy, and adequate remedy in the ordinary
course of law amply provides the basis for allowing the resort
to a petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum
shopping in filing the petition for certiorari. Note that KOGIES
motion for reconsideration of the July 23, 1998 RTC Order
which denied the issuance of the injunctive writ had already
been denied. Thus, KOGIES only remedy was to assail the
RTCs interlocutory order via a petition for certiorari under Rule
65.
 While the October 2, 1998 motion for reconsideration
of KOGIES of the September 21, 1998 RTC Order relating to
the inspection of things, and the allowance of the compulsory
counterclaims has not yet been resolved, the circumstances in
this case would allow an exception to the rule that before
certiorari may be availed of, the petitioner must have filed a
motion for reconsideration and said motion should have been
first resolved by the court a quo. The reason behind the rule is
to enable the lower court, in the first instance, to pass upon
and correct its mistakes without the intervention of the higher
court.
The September 21, 1998 RTC Order directing the
branch sheriff to inspect the plant, equipment, and facilities
when he is not competent and knowledgeable on said matters
is evidently flawed and devoid of any legal support. Moreover,
there is an urgent necessity to resolve the issue on the
dismantling of the facilities and any further delay would
prejudice the interests of KOGIES. Indeed, there is real and
imminent threat of irreparable destruction or substantial
damage to KOGIES equipment and machineries. We find the
resort to certiorari based on the gravely abusive orders of the
trial court sans the ruling on the October 2, 1998 motion for
reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15
of the Contract, the arbitration clause. It provides:
Article 15. Arbitration.All disputes,
controversies, or differences which may arise
between the parties, out of or in relation to or
in connection with this Contract or for the
breach thereof, shall finally be settled by
arbitration in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the
Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall
be final and binding upon both parties
concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling
that the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law
of the place where the contract is made governs. Lex loci
contractus. The contract in this case was perfected here in the
Philippines. Therefore, our laws ought to govern. Nonetheless,
Art. 2044 of the Civil Code sanctions the validity of mutually
agreed arbitral clause or the finality and binding effect of an
arbitral award. Art. 2044 provides, Any stipulation that the
arbitrators award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039 and 2040. (Emphasis
supplied.)
Arts. 2038, 2039, and 2040 abovecited refer to
instances where a compromise or an arbitral award, as applied
to Art. 2044 pursuant to Art. 2043, may be voided, rescinded,
or annulled, but these would not denigrate the finality of the
arbitral award.
The arbitration clause was mutually and voluntarily
agreed upon by the parties. It has not been shown to be
contrary to any law, or against morals, good customs, public
order, or public policy. There has been no showing that the
parties have not dealt with each other on equal footing. We find
no reason why the arbitration clause should not be respected
and complied with by both parties. In Gonzales v. Climax
Mining Ltd., we held that submission to arbitration is a contract
and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is a
contract. Again in Del Monte Corporation-USA v. Court of
Appeals, we likewise ruled 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.
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the
arbitration must be done in Seoul, Korea in accordance with
the Commercial Arbitration Rules of the KCAB, and that the
arbitral award is final and binding, is not contrary to public
policy. This Court has sanctioned the validity of arbitration
clauses in a catena of cases. In the 1957 case of Eastboard
Navigation Ltd. v. Juan Ysmael and Co., Inc., this Court had
occasion to rule that an arbitration clause to resolve differences
and breaches of mutually agreed contractual terms is valid. In
BF Corporation v. Court of Appeals, we held that [i]n this
jurisdiction, arbitration has been held valid and constitutional.
Even before the approval on June 19, 1953 of Republic Act No.
876, this Court has countenanced the settlement of disputes
through arbitration. Republic Act No. 876 was adopted to
supplement the New Civil Codes provisions on arbitration. And
in LM Power Engineering Corporation v. Capitol Industrial
Construction Groups, Inc., we declared that:
Being an inexpensive, speedy and
amicable method of settling disputes,
arbitrationalong with mediation, conciliation
and negotiationis encouraged by the
Supreme Court. Aside from unclogging
judicial dockets, arbitration also hastens the
resolution of disputes, especially of the
commercial kind. It is thus regarded as the
wave of the future in international civil and
commercial disputes. Brushing aside a
contractual agreement calling for arbitration
between the parties would be a step
backward.
Consistent with the above-
mentioned policy of encouraging alternative
dispute resolution methods, courts should
liberally construe arbitration clauses.
 Provided such clause is susceptible of an
interpretation that covers the asserted
dispute, an order to arbitrate should be
granted. Any doubt should be resolved in
favor of arbitration.
Having said that the instant arbitration clause
is not against public policy, we come to the question
on what governs an arbitration clause specifying that
in case of any dispute arising from the contract, an
arbitral panel will be constituted in a foreign country
and the arbitration rules of the foreign country would
govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law to which
we are a signatory
For domestic arbitration proceedings, we have
particular agencies to arbitrate disputes arising from
contractual relations. In case a foreign arbitral body is chosen
by the parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the Arbitration
Rules of the UNCITRAL Model Law on International
Commercial Arbitration of the United Nations Commission on
International Trade Law (UNCITRAL) in the New York
Convention on June 21, 1985, the Philippines committed itself
to be bound by the Model Law. We have even incorporated the
Model Law in Republic Act No. (RA) 9285, otherwise known as
the Alternative Dispute Resolution Act of 2004 entitled An Act
to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for
Alternative Dispute Resolution, and for Other Purposes,
promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of
the Model Law are the pertinent provisions:
CHAPTER 4 - INTERNATIONAL
COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model
Law on International Commercial
Arbitration.International commercial
arbitration shall be governed by the Model
Law on International Commercial Arbitration
(the Model Law) adopted by the United
Nations Commission on International Trade
Law on June 21, 1985 (United Nations
Document A/40/17) and recommended for
enactment by the General Assembly in
Resolution No. 40/72 approved on
December 11, 1985, copy of which is hereto
attached as Appendix A.
SEC. 20. Interpretation of Model
Law.In interpreting the Model Law, regard
shall be had to its international origin and to
the need for uniformity in its interpretation
and resort may be made to the travaux
preparatories and the report of the Secretary
General of the United Nations Commission
on International Trade Law dated March 25,
1985 entitled, International Commercial
Arbitration: Analytical Commentary on Draft
Trade identified by reference number A/CN.
9/264.
While RA 9285 was passed only in 2004, it
nonetheless applies in the instant case since it is a procedural
law which has a retroactive effect. Likewise, KOGIES filed its
application for arbitration before the KCAB on July 1, 1998 and
it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case.
Well-settled is the rule that procedural laws are construed to be
applicable to actions pending and undetermined at the time of
their passage, and are deemed retroactive in that sense and to
that extent. As a general rule, the retroactive application of
procedural laws does not violate any personal rights because
no vested right has yet attached nor arisen from them.
Among the pertinent features of RA 9285 applying
and incorporating the UNCITRAL Model Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction
over disputes that are properly the subject of arbitration
pursuant to an arbitration clause, and mandates the referral to
arbitration in such cases, thus:
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 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 unless it finds that the arbitration
agreement is null and void, inoperative or
incapable of being performed.
(2) Foreign arbitral awards must be confirmed by the
RTC
Foreign arbitral awards while mutually stipulated by
the parties in the arbitration clause to be final and binding are
not immediately enforceable or cannot be implemented
immediately. Sec. 35 of the UNCITRAL Model Law stipulates
the requirement for the arbitral award to be recognized by a
competent court for enforcement, which court under Sec. 36 of
the UNCITRAL Model Law may refuse recognition or
enforcement on the grounds provided for. RA 9285
incorporated these provisos to Secs. 42, 43, and 44 relative to
Secs. 47 and 48, thus:
SEC. 42. Application of the New
York Convention.The New York Convention
shall govern the recognition and enforcement
of arbitral awards covered by said
Convention.
 The recognition and enforcement of
such arbitral awards shall be filed with the
Regional Trial Court in accordance with the
rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall
provide that the party relying on the award or
applying for its enforcement shall file with the
court the original or authenticated copy of the
award and the arbitration agreement. If the
award or agreement is not made in any of
the official languages, the party shall supply
a duly certified translation thereof into any of
such languages.
The applicant shall establish that
the country in which foreign arbitration award
was made in party to the New York
Convention.
xxxx
SEC. 43. Recognition and
Enforcement of Foreign Arbitral Awards Not
Covered by the New York Convention.The
recognition and enforcement of foreign
arbitral awards not covered by the New York
Convention shall be done in accordance with
procedural rules to be promulgated by the
Supreme Court. The Court may, on grounds
of comity and reciprocity, recognize and
enforce a non-convention award as a
convention award.
SEC. 44. Foreign Arbitral Award
Not Foreign Judgment.A foreign arbitral
award when confirmed by a court of a foreign
country, shall be recognized and enforced as
a foreign arbitral award and not as a
judgment of a foreign court.
A foreign arbitral award, when
confirmed by the Regional Trial Court, shall
be enforced in the same manner as final and
executory decisions of courts of law of the
Philippines
xxxx
SEC. 47. Venue and
Jurisdiction.Proceedings for recognition and
enforcement of an arbitration agreement or
for vacations, setting aside, correction or
modification of an arbitral award, and any
application with a court for arbitration
assistance and supervision shall be deemed
as special proceedings and shall be filed with
the Regional Trial Court (i) where arbitration
proceedings are conducted; (ii) where the
asset to be attached or levied upon, or the
act to be enjoined is located; (iii) where any
of the parties to the dispute resides or has
his place of business; or (iv) in the National
Judicial Capital Region, at the option of the
applicant.
SEC. 48. Notice of Proceeding to
Parties.In a special proceeding for
recognition and enforcement of an arbitral
award, the Court shall send notice to the
parties at their address of record in the
arbitration, or if any part cannot be served
notice at such address, at such partys last
known address. The notice shall be sent al
least fifteen (15) days before the date set for
the initial hearing of the application.
It is now clear that foreign arbitral awards when
confirmed by the RTC are deemed not as a judgment of a
foreign court but as a foreign arbitral award, and when
confirmed, are enforced as final and executory decisions of our
courts of law.
Thus, it can be gleaned that the concept of a final and
binding arbitral award is similar to judgments or awards given
by some of our quasi-judicial bodies, like the National Labor
Relations Commission and Mines Adjudication Board, whose
final judgments are stipulated to be final and binding, but not
immediately executory in the sense that they may still be
judicially reviewed, upon the instance of any party. Therefore,
the final foreign arbitral awards are similarly situated in that
they need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral
awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated
and vested the RTC with specific authority and jurisdiction to
set aside, reject, or vacate a foreign arbitral award on grounds
provided under Art. 34(2) of the UNCITRAL Model Law. Secs.
42 and 45 provide:
SEC. 42. Application of the New
York Convention.The New York Convention
shall govern the recognition and enforcement
of arbitral awards covered by said
Convention.
The recognition and enforcement of
such arbitral awards shall be filed with the
Regional Trial Court in accordance with the
rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall
provide that the party relying on the award or
applying for its enforcement shall file with the
court the original or authenticated copy of the
award and the arbitration agreement. If the
award or agreement is not made in any of
the official languages, the party shall supply
a duly certified translation thereof into any of
 such languages.
The applicant shall establish that
the country in which foreign arbitration award
was made is party to the New York
Convention.
If the application for rejection or
suspension of enforcement of an award has
been made, the Regional Trial Court may, if
it considers it proper, vacate its decision and
may also, on the application of the party
claiming recognition or enforcement of the
award, order the party to provide appropriate
security.
xxxx
SEC. 45. Rejection of a Foreign
Arbitral Award.A party to a foreign arbitration
proceeding may oppose an application for
recognition and enforcement of the arbitral
award in accordance with the procedures
and rules to be promulgated by the Supreme
Court only on those grounds enumerated
under Article V of the New York Convention.
Any other ground raised shall be disregarded
by the Regional Trial Court.
Thus, while the RTC does not have jurisdiction over
disputes governed by arbitration mutually agreed upon by the
parties, still the foreign arbitral award is subject to judicial
review by the RTC which can set aside, reject, or vacate it. In
this sense, what this Court held in Chung Fu Industries (Phils.),
Inc. relied upon by KOGIES is applicable insofar as the foreign
arbitral awards, while final and binding, do not oust courts of
jurisdiction since these arbitral awards are not absolute and
without exceptions as they are still judicially reviewable.
Chapter 7 of RA 9285 has made it clear that all arbitral awards,
whether domestic or foreign, are subject to judicial review on
specific grounds provided for.
(4) Grounds for judicial review different in domestic
and foreign arbitral awards
The differences between a final arbitral award from an
international or foreign arbitral tribunal and an award given by a
local arbitral tribunal are the specific grounds or conditions that
vest jurisdiction over our courts to review the awards.
For foreign or international arbitral awards which must
first be confirmed by the RTC, the grounds for setting aside,
rejecting or vacating the award by the RTC are provided under
Art. 34(2) of the UNCITRAL Model Law.
For final domestic arbitral awards, which also need
confirmation by the RTC pursuant to Sec. 23 of RA 876 and
shall be recognized as final and executory decisions of the
RTC, they may only be assailed before the RTC and vacated
on the grounds provided under Sec. 25 of RA 876.
(5) RTC decision of assailed foreign arbitral award
appealable
Sec. 46 of RA 9285 provides for an appeal before the
CA as the remedy of an aggrieved party in cases where the
RTC sets aside, rejects, vacates, modifies, or corrects an
arbitral award, thus:
SEC. 46. Appeal from Court
Decision or Arbitral Awards.A decision of the
Regional Trial Court confirming, vacating,
setting aside, modifying or correcting an
arbitral award may be appealed to the Court
of Appeals in accordance with the rules and
procedure to be promulgated by the
Supreme Court.
The losing party who appeals from
the judgment of the court confirming an
arbitral award shall be required by the
appellate court to post a counterbond
executed in favor of the prevailing party
equal to the amount of the award in
accordance with the rules to be promulgated
by the Supreme Court.
Thereafter, the CA decision may further be appealed
or reviewed before this Court through a petition for review
under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285,
PGSMC must submit to the foreign arbitration as it bound itself
through the subject contract. While it may have misgivings on
the foreign arbitration done in Korea by the KCAB, it has
available remedies under RA 9285. Its interests are duly
protected by the law which requires that the arbitral award that
may be rendered by KCAB must be confirmed here by the RTC
before it can be enforced.
With our disquisition above, petitioner is correct in its
contention that an arbitration clause, stipulating that the arbitral
award is final and binding, does not oust our courts of
jurisdiction as the international arbitral award, the award of
which is not absolute and without exceptions, is still judicially
reviewable under certain conditions provided for by the
UNCITRAL Model Law on ICA as applied and incorporated in
RA 9285.
Finally, it must be noted that there is nothing in the
subject Contract which provides that the parties may dispense
with the arbitration clause.
Unilateral rescission improper and illegal
 Having ruled that the arbitration clause of the subject
contract is valid and binding on the parties, and not contrary to
public policy; consequently, being bound to the contract of
arbitration, a party may not unilaterally rescind or terminate the
contract for whatever cause without first resorting to arbitration.
What this Court held in University of the Philippines v.
De Los Angeles and reiterated in succeeding cases, that the
act of treating a contract as rescinded on account of infractions
by the other contracting party is valid albeit provisional as it can
be judicially assailed, is not applicable to the instant case on
account of a valid stipulation on arbitration. Where an
arbitration clause in a contract is availing, neither of the parties
can unilaterally treat the contract as rescinded since whatever
infractions or breaches by a party or differences arising from
the contract must be brought first and resolved by arbitration,
and not through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC
and KOGIES on whether the equipment and machineries
delivered and installed were properly installed and operational
in the plant in Carmona, Cavite; the ownership of equipment
and payment of the contract price; and whether there was
substantial compliance by KOGIES in the production of the
samples, given the alleged fact that PGSMC could not supply
the raw materials required to produce the sample LPG
cylinders, are matters proper for arbitration. Indeed, we note
that on July 1, 1998, KOGIES instituted an Application for
Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15
of the Contract as amended. Thus, it is incumbent upon
PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion
in granting PGSMCs Motion for Inspection of Things on
September 21, 1998, as the subject matter of the motion is
under the primary jurisdiction of the mutually agreed arbitral
body, the KCAB in Korea.
In addition, whatever findings and conclusions made
by the RTC Branch Sheriff from the inspection made on
October 28, 1998, as ordered by the trial court on October 19,
1998, is of no worth as said Sheriff is not technically competent
to ascertain the actual status of the equipment and
machineries as installed in the plant.
For these reasons, the September 21, 1998 and
October 19, 1998 RTC Orders pertaining to the grant of the
inspection of the equipment and machineries have to be
recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue
petitioner raised on whether the total contract price of USD
1,530,000 was for the whole plant and its installation is beyond
the ambit of a Petition for Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in
an original action for certiorari. Whether or not there was full
payment for the machineries and equipment and installation is
indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of
discretion is the order of the RTC in resolving the issue on the
ownership of the plant when it is the arbitral body (KCAB) and
not the RTC which has jurisdiction and authority over the said
issue. The RTCs determination of such factual issue
constitutes grave abuse of discretion and must be reversed
and set aside.
RTC has interim jurisdiction to protect the rights of the
parties
Anent the July 23, 1998 Order denying the issuance
of the injunctive writ paving the way for PGSMC to dismantle
and transfer the equipment and machineries, we find it to be in
order considering the factual milieu of the instant case.
Firstly, while the issue of the proper installation of the
equipment and machineries might well be under the primary
jurisdiction of the arbitral body to decide, yet the RTC under
Sec. 28 of RA 9285 has jurisdiction to hear and grant interim
measures to protect vested rights of the parties. Sec. 28
pertinently provides:
SEC. 28. Grant of interim Measure
of Protection.(a) It is not incompatible with
an arbitration agreement for a party to
request, before constitution of the
tribunal, from a Court to grant such
measure. After constitution of the arbitral
tribunal and during arbitral proceedings, a
request for an interim measure of protection,
or modification thereof, may be made with
the arbitral or to the extent that the arbitral
tribunal has no power to act or is unable
to act effectivity, the request may be
made with the Court. The arbitral tribunal is
deemed constituted when the sole arbitrator
or the third arbitrator, who has been
nominated, has accepted the nomination and
written communication of said nomination
and acceptance has been received by the
party making the request.
(b) The following rules on interim or
provisional relief shall be observed:
Any party may request that
provisional relief be granted against the
adverse party.
Such relief may be granted:
(i) to prevent irreparable
loss or injury;
 (ii) to provide security for the
performance of any obligation;
(iii) to produce or preserve any
evidence; or
(iv) to compel any other
appropriate act or omission.
(c) The order granting provisional
relief may be conditioned upon the provision
of security or any act or omission specified in
the order.
(d) Interim or provisional relief is
requested by written application transmitted
by reasonable means to the Court or arbitral
tribunal as the case may be and the party
against whom the relief is sought, describing
in appropriate detail the precise relief, the
party against whom the relief is requested,
the grounds for the relief, and the evidence
supporting the request.
(e) The order shall be binding
upon the parties.
(f) Either party may apply with the
Court for assistance in implementing or
enforcing an interim measure ordered by an
arbitral tribunal.
(g) A party who does not comply
with the order shall be liable for all damages
resulting from noncompliance, including all
expenses, and reasonable attorney's fees,
paid in obtaining the orders judicial
enforcement. (Emphasis ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA
defines an interim measure of protection as:
Article 17. Power of arbitral tribunal to order
interim measures
xxx xxx xxx
(2) An interim measure is any temporary
measure, whether in the form of an award or
in another form, by which, at any time prior to
the issuance of the award by which the
dispute is finally decided, the arbitral tribunal
orders a party to:
(a) Maintain or restore the status quo
pending determination of the dispute;
(b) Take action that would prevent, or refrain
from taking action that is likely to cause,
current or imminent harm or prejudice to the
arbitral process itself;
(c) Provide a means of preserving assets out
of which a subsequent award may be
satisfied; or
(d) Preserve evidence that may be relevant
and material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants
courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power
of issuing an interim measure in relation to
arbitration proceedings, irrespective of
whether their place is in the territory of this
State, as it has in relation to proceedings in
courts. The court shall exercise such power
in accordance with its own procedures in
consideration of the specific features of
international arbitration.
In the recent 2006 case of Transfield Philippines, Inc.
v. Luzon Hydro Corporation, we were explicit that even the
pendency of an arbitral proceeding does not foreclose resort to
the courts for provisional reliefs. We explicated this way:
As a fundamental point, the pendency of
arbitral proceedings does not foreclose
resort to the courts for provisional reliefs.
The Rules of the ICC, which governs the
parties arbitral dispute, allows the application
of a party to a judicial authority for interim or
conservatory measures. Likewise, Section
14 of Republic Act (R.A.) No. 876 (The
Arbitration Law) recognizes the rights of any
party to petition the court to take measures
to safeguard and/or conserve any matter
which is the subject of the dispute in
arbitration. In addition, R.A. 9285, otherwise
known as the Alternative Dispute Resolution
Act of 2004, allows the filing of provisional or
interim measures with the regular courts
whenever the arbitral tribunal has no power
to act or to act effectively.
It is thus beyond cavil that the RTC has authority and
jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and
machineries are in the possession of PGSMC, it has the right
to protect and preserve the equipment and machineries in the
best way it can. Considering that the LPG plant was non-
operational, PGSMC has the right to dismantle and transfer the
equipment and machineries either for their protection and
preservation or for the better way to make good use of them
which is ineluctably within the management discretion of
PGSMC.
Thirdly, and of greater import is the reason that
maintaining the equipment and machineries in Worths property
is not to the best interest of PGSMC due to the prohibitive rent
while the LPG plant as set-up is not operational. PGSMC was
losing PhP322,560 as monthly rentals or PhP3.87M for 1998
alone without considering the 10% annual rent increment in
maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on
motions or petitions relating to the preservation or transfer of
the equipment and machineries as an interim measure, yet on
hindsight, the July 23, 1998 Order of the RTC allowing the
transfer of the equipment and machineries given the non-
recognition by the lower courts of the arbitral clause, has
accorded an interim measure of protection to PGSMC which
would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has
already been paid a substantial amount based on the contract.
Moreover, KOGIES is amply protected by the arbitral action it
has instituted before the KCAB, the award of which can be
enforced in our jurisdiction through the RTC. Besides, by our
decision, PGSMC is compelled to submit to arbitration
pursuant to the valid arbitration clause of its contract with
KOGIES.
PGSMC to preserve the subject equipment and
machineries
Finally, while PGSMC may have been granted the
right to dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or dispose of
the same considering the pending arbitral proceedings to settle
the differences of the parties. PGSMC therefore must preserve
and maintain the subject equipment and machineries with the
diligence of a good father of a family until final resolution of the
arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in
that:
(1) The May 30, 2000 CA Decision in CA-G.R.
SP No. 49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19,
1998 RTC Orders in Civil Case No. 98-117 are REVERSED
and SET ASIDE;
(3) The parties are hereby ORDERED to submit
themselves to the arbitration of their dispute and differences
arising from the subject Contract before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle
and transfer the equipment and machineries, if it had not done
so, and ORDERED to preserve and maintain them until the
finality of whatever arbitral award is given in the arbitration
proceedings. No pronouncement as to costs. SO ORDERED.
GERBERT R. CORPUZ - versus -DAISYLYN TIROL STO.
TOMAS and The SOLICITOR GENERAL,; G.R. No.
186571; August 11, 2010; BRION, J.
Before the Court is a direct appeal from the decision
of the Regional Trial Court (RTC) of Laoag City, Branch 11,
elevated via a petition for review on certiorari under Rule 45 of
the Rules of Court (present petition).
Petitioner Gerbert R. Corpuz was a former Filipino
citizen who acquired Canadian citizenship through
naturalization on November 29, 2000. On January 18, 2005,
Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina,
in Pasig City. Due to work and other professional
commitments, Gerbert left for Canada soon after the wedding.
He returned to the Philippines sometime in April 2005 to
surprise Daisylyn, but was shocked to discover that his wife
was having an affair with another man. Hurt and disappointed,
Gerbert returned to Canada and filed a petition for divorce. The
Superior Court of Justice, Windsor, Ontario, Canada granted
Gerberts petition for divorce on December 8, 2005. The divorce
decree took effect a month later, on January 8, 2006.
Two years after the divorce, Gerbert has moved on
and has found another Filipina to love. Desirous of marrying his
new Filipina fiance in the Philippines, Gerbert went to the Pasig
City Civil Registry Office and registered the Canadian divorce
decree on his and Daisylyns marriage certificate. Despite the
registration of the divorce decree, an official of the National
Statistics Office (NSO) informed Gerbert that the marriage
between him and Daisylyn still subsists under Philippine law; to
be enforceable, the foreign divorce decree must first be
judicially recognized by a competent Philippine court, pursuant
to NSO Circular No. 4, series of 1982.
Accordingly, Gerbert filed a petition for judicial
recognition of foreign divorce and/or declaration of
marriage as dissolved (petition) with the RTC. Although
summoned, Daisylyn did not file any responsive pleading but
submitted instead a notarized letter/manifestation to the trial
court. She offered no opposition to Gerberts petition and, in
fact, alleged her desire to file a similar case herself but was
prevented by financial and personal circumstances. She, thus,
requested that she be considered as a party-in-interest with a
similar prayer to Gerberts.
In its October 30, 2008 decision, the RTC denied
Gerberts petition. The RTC concluded that Gerbert was not
the proper party to institute the action for judicial recognition of
the foreign divorce decree as he is a naturalized Canadian
citizen. It ruled that only the Filipino spouse can avail of the
remedy, under the second paragraph of Article 26 of the Family
Code, in order for him or her to be able to remarry under
Philippine law. Article 26 of the Family Code reads:
 Art. 26. All marriages solemnized
outside the Philippines, in accordance with
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4), (5)
and (6), 36, 37 and 38.
Where a marriage between a
Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter
validly obtained abroad by the alien
spouse capacitating him or her to
remarry, the Filipino spouse shall
likewise have capacity to remarry under
Philippine law.
This conclusion, the RTC stated, is consistent with the
legislative intent behind the enactment of the second
paragraph of Article 26 of the Family Code, as determined by
the Court in Republic v. Orbecido III; the provision was enacted
to avoid the absurd situation where the Filipino spouse remains
married to the alien spouse who, after obtaining a divorce, is
no longer married to the Filipino spouse.
THE PETITION
From the RTCs ruling, Gerbert filed the present
petition.
Gerbert asserts that his petition before the RTC is
essentially for declaratory relief, similar to that filed in
Orbecido; he, thus, similarly asks for a determination of his
rights under the second paragraph of Article 26 of the Family
Code. Taking into account the rationale behind the second
paragraph of Article 26 of the Family Code, he contends that
the provision applies as well to the benefit of the alien spouse.
He claims that the RTC ruling unduly stretched the doctrine in
Orbecido by limiting the standing to file the petition only to the
Filipino spouse an interpretation he claims to be contrary to the
essence of the second paragraph of Article 26 of the Family
Code. He considers himself as a proper party, vested with
sufficient legal interest, to institute the case, as there is a
possibility that he might be prosecuted for bigamy if he marries
his Filipina fiance in the Philippines since two marriage
certificates, involving him, would be on file with the Civil
Registry Office. The Office of the Solicitor General and
Daisylyn, in their respective Comments, both support Gerberts
position.
Essentially, the petition raises the issue of whether
the second paragraph of Article 26 of the Family Code
extends to aliens the right to petition a court of this
jurisdiction for the recognition of a foreign divorce decree.
THE COURTS RULING
The alien spouse can claim no right under the second
paragraph of Article 26 of the Family Code as the
substantive right it establishes is in favor of the Filipino
spouse
The resolution of the issue requires a review of the
legislative history and intent behind the second paragraph of
Article 26 of the Family Code.
The Family Code recognizes only two types of
defective marriages void and voidable marriages. In both
cases, the basis for the judicial declaration of absolute nullity or
annulment of the marriage exists before or at the time of the
marriage. Divorce, on the other hand, contemplates the
dissolution of the lawful union for cause arising after the
marriage. Our family laws do not recognize absolute divorce
between Filipino citizens.
Recognizing the reality that divorce is a possibility in
marriages between a Filipino and an alien, President Corazon
C. Aquino, in the exercise of her legislative powers under the
Freedom Constitution, enacted Executive Order No. (EO) 227,
amending Article 26 of the Family Code to its present wording,
as follows:
Art. 26. All marriages solemnized
outside the Philippines, in accordance with
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4), (5)
and (6), 36, 37 and 38.
Where a marriage between a
Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter
validly obtained abroad by the alien
spouse capacitating him or her to
remarry, the Filipino spouse shall
likewise have capacity to remarry under
Philippine law.
Through the second paragraph of Article 26 of the Family
Code, EO 227 effectively incorporated into the law this Courts
holding in Van Dorn v. Romillo, Jr. and Pilapil v. Ibay-Somera.
In both cases, the Court refused to acknowledge the alien
spouses assertion of marital rights after a foreign courts
divorce decree between the alien and the Filipino. The Court,
thus, recognized that the foreign divorce had already severed
the marital bond between the spouses. The Court reasoned in
Van Dorn v. Romillo that:
To maintain x x x that, under our
laws, [the Filipino spouse] has to be
considered still married to [the alien
spouse] and still subject to a wife's
obligations x x x cannot be just. [The
Filipino spouse] should not be obliged to live
together with, observe respect and fidelity,
and render support to [the alien spouse]. The
latter should not continue to be one of her
 heirs with possible rights to conjugal
property. She should not be discriminated
against in her own country if the ends of
justice are to be served.
As the RTC correctly stated, the provision was
included in the law to avoid the absurd situation where the
Filipino spouse remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the Filipino spouse.
The legislative intent is for the benefit of the Filipino spouse, by
clarifying his or her marital status, settling the doubts created
by the divorce decree. Essentially, the second paragraph of
Article 26 of the Family Code provided the Filipino spouse
a substantive right to have his or her marriage to the alien
spouse considered as dissolved, capacitating him or her
to remarry. Without the second paragraph of Article 26 of the
Family Code, the judicial recognition of the foreign decree of
divorce, whether in a proceeding instituted precisely for that
purpose or as a related issue in another proceeding, would be
of no significance to the Filipino spouse since our laws do not
recognize divorce as a mode of severing the marital bond;
Article 17 of the Civil Code provides that the policy against
absolute divorces cannot be subverted by judgments
promulgated in a foreign country. The inclusion of the second
paragraph in Article 26 of the Family Code provides the direct
exception to this rule and serves as basis for recognizing the
dissolution of the marriage between the Filipino spouse and his
or her alien spouse.
Additionally, an action based on the second
paragraph of Article 26 of the Family Code is not limited to the
recognition of the foreign divorce decree. If the court finds that
the decree capacitated the alien spouse to remarry, the courts
can declare that the Filipino spouse is likewise capacitated to
contract another marriage. No court in this jurisdiction,
however, can make a similar declaration for the alien spouse
(other than that already established by the decree), whose
status and legal capacity are generally governed by his
national law.
Given the rationale and intent behind the enactment,
and the purpose of the second paragraph of Article 26 of the
Family Code, the RTC was correct in limiting the applicability of
the provision for the benefit of the Filipino spouse. In other
words, only the Filipino spouse can invoke the second
paragraph of Article 26 of the Family Code; the alien spouse
can claim no right under this provision.
The foreign divorce decree is presumptive evidence of a
right that clothes the party with legal interest to petition
for its recognition in this jurisdiction
We qualify our above conclusion i.e., that the second
paragraph of Article 26 of the Family Code bestows no rights in
favor of aliens with the complementary statement that this
conclusion is not sufficient basis to dismiss Gerberts petition
before the RTC. In other words, the unavailability of the second
paragraph of Article 26 of the Family Code to aliens does not
necessarily strip Gerbert of legal interest to petition the RTC for
the recognition of his foreign divorce decree. The foreign
divorce decree itself, after its authenticity and conformity with
the aliens national law have been duly proven according to our
rules of evidence, serves as a presumptive evidence of right in
favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules
of Court which provides for the effect of foreign judgments.
This Section states:
SEC. 48. Effect of foreign
judgments or final orders.The effect of a
judgment or final order of a tribunal of a
foreign country, having jurisdiction to
render the judgment or final order is as
follows:
(a) In case of a judgment or
final order upon a specific
thing, the judgment or final
order is conclusive upon
the title of the thing; and
(b) In case of a judgment or
final order against a
person, the judgment or
final order is
presumptive evidence of
a right as between the
parties and their
successors in interest by
a subsequent title.
In either case, the judgment or final
order 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.
To our mind, direct involvement or being the subject of the
foreign judgment is sufficient to clothe a party with the requisite
interest to institute an action before our courts for the
recognition of the foreign judgment. In a divorce situation, we
have declared, no less, that the divorce obtained by an alien
abroad may be recognized in the Philippines, provided the
divorce is valid according to his or her national law.
The starting point in any recognition of a foreign
divorce judgment is the acknowledgment that our courts do not
take judicial notice of foreign judgments and laws. Justice
Herrera explained that, as a rule, no sovereign is bound to give
effect within its dominion to a judgment rendered by a tribunal
of another country. This means that the foreign judgment and
its authenticity must be proven as facts under our rules on
evidence, together with the aliens applicable national law to
show the effect of the judgment on the alien himself or herself.
The recognition may be made in an action instituted specifically
for the purpose or in another action where a party invokes the
foreign decree as an integral aspect of his claim or defense.
In Gerberts case, since both the foreign divorce
decree and the national law of the alien, recognizing his or her
capacity to obtain a divorce, purport to be official acts of a
sovereign authority, Section 24, Rule 132 of the Rules of Court
comes into play. This Section requires proof, either by (1)
official publications or (2) copies attested by the officer having
legal custody of the documents. If the copies of official records
are not kept in the Philippines, these must be (a) accompanied
by a certificate issued by the proper diplomatic or consular
officer in the Philippine foreign service stationed in the foreign
country in which the record is kept and (b) authenticated by the
seal of his office.
status, i.e., those affecting all his personal qualities and
relations, more or less permanent in nature, not ordinarily
terminable at his own will, such as his being legitimate or
illegitimate, or his being married or not.
A judgment of divorce is a judicial decree, although a
foreign one, affecting a persons legal capacity and status that
must be recorded. In fact, Act No. 3753 or the Law on Registry
of Civil Status specifically requires the registration of divorce
decrees in the civil registry:

The records show that Gerbert attached to his petition Sec. 1. Civil Register. A civil register is
a copy of the divorce decree, as well as the required established for recording the civil status
certificates proving its authenticity, but failed to include a copy of persons, in which shall be entered:
of the Canadian law on divorce. Under this situation, we can, at
this point, simply dismiss the petition for insufficiency of (a) births;
supporting evidence, unless we deem it more appropriate to (b) deaths;
remand the case to the RTC to determine whether the divorce (c) marriages;
decree is consistent with the Canadian divorce law. (d) annulments of marriages;
(e) divorces;
(f) legitimations;
We deem it more appropriate to take this latter course (g) adoptions;
of action, given the Article 26 interests that will be served and (h) acknowledgment of natural
the Filipina wifes (Daisylyn’s) obvious conformity with the children;
petition. A remand, at the same time, will allow other interested (i) naturalization; and
(j) changes of name.
parties to oppose the foreign judgment and overcome a
petitioners presumptive evidence of a right by proving want of
jurisdiction, want of notice to a party, collusion, fraud, or clear xxxx
mistake of law or fact. Needless to state, every precaution
must be taken to ensure conformity with our laws before a Sec. 4. Civil Register Books. The local
recognition is made, as the foreign judgment, once recognized, registrars shall keep and preserve in
shall have the effect of res judicata between the parties, as their offices the following books, in
provided in Section 48, Rule 39 of the Rules of Court. which they shall, respectively make the
proper entries concerning the civil status
In fact, more than the principle of comity that is served of persons:
by the practice of reciprocal recognition of foreign judgments
between nations, the res judicata effect of the foreign (1) Birth and death register;
judgments of divorce serves as the deeper basis for extending (2) Marriage register, in which
judicial recognition and for considering the alien spouse bound shall be entered not only the
by its terms. This same effect, as discussed above, will not marriages solemnized but also
obtain for the Filipino spouse were it not for the substantive divorces and dissolved
rule that the second paragraph of Article 26 of the Family Code marriages.
provides. (3) Legitimation, acknowledgment,
adoption, change of name and
naturalization register.
Considerations beyond the recognition of the foreign
divorce decree
But while the law requires the entry of the divorce decree in the
civil registry, the law and the submission of the decree by
As a matter of housekeeping concern, we note that
themselves do not ipso facto authorize the decrees
the Pasig City Civil Registry Office has already recorded
registration. The law should be read in relation with the
the divorce decree on Gerbert and Daisylyn’s marriage
requirement of a judicial recognition of the foreign judgment
certificate based on the mere presentation of the decree.
before it can be given res judicata effect. In the context of the
We consider the recording to be legally improper; hence, the
present case, no judicial order as yet exists recognizing the
need to draw attention of the bench and the bar to what had
foreign divorce decree. Thus, the Pasig City Civil Registry
been done.
Office acted totally out of turn and without authority of law
when it annotated the Canadian divorce decree on Gerbert and
Article 407 of the Civil Code states that [a]cts, events
Daisylyns marriage certificate, on the strength alone of the
and judicial decrees concerning the civil status of persons shall
foreign decree presented by Gerbert.
be recorded in the civil register. The law requires the entry in
the civil registry of judicial decrees that produce legal
consequences touching upon a persons legal capacity and
 Evidently, the Pasig City Civil Registry Office was
aware of the requirement of a court recognition, as it cited NSO
Circular No. 4, series of 1982, and Department of Justice
Opinion No. 181, series of 1982 both of which required a final
order from a competent Philippine court before a foreign
judgment, dissolving a marriage, can be registered in the civil
registry, but it, nonetheless, allowed the registration of the
decree. For being contrary to law, the registration of the foreign
divorce decree without the requisite judicial recognition is
patently void and cannot produce any legal effect.
Another point we wish to draw attention to is that the
recognition that the RTC may extend to the Canadian divorce
decree does not, by itself, authorize the cancellation of the
entry in the civil registry. A petition for recognition of a foreign
judgment is not the proper proceeding, contemplated under the
Rules of Court, for the cancellation of entries in the civil
registry.
Article 412 of the Civil Code declares that no entry in
a civil register shall be changed or corrected, without judicial
order. The Rules of Court supplements Article 412 of the Civil
Code by specifically providing for a special remedial
proceeding by which entries in the civil registry may be
judicially cancelled or corrected. Rule 108 of the Rules of Court
sets in detail the jurisdictional and procedural requirements that
must be complied with before a judgment, authorizing the
cancellation or correction, may be annotated in the civil
registry. It also requires, among others, that the verified petition
must be filed with the RTC of the province where the
corresponding civil registry is located; that the civil registrar
and all persons who have or claim any interest must be made
parties to the proceedings; and that the time and place for
hearing must be published in a newspaper of general
circulation. As these basic jurisdictional requirements have not
been met in the present case, we cannot consider the petition
Gerbert filed with the RTC as one filed under Rule 108 of the
Rules of Court.
We hasten to point out, however, that this ruling
should not be construed as requiring two separate proceedings
for the registration of a foreign divorce decree in the civil
registry one for recognition of the foreign decree and another
specifically for cancellation of the entry under Rule 108 of the
Rules of Court. The recognition of the foreign divorce decree
may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of
Court) is precisely to establish the status or right of a party or a
particular fact. Moreover, Rule 108 of the Rules of Court can
serve as the appropriate adversarial proceeding by which the
applicability of the foreign judgment can be measured and
tested in terms of jurisdictional infirmities, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
WHEREFORE, we GRANT the petition for review on
certiorari, and REVERSE the October 30, 2008 decision of the
Regional Trial Court of Laoag City, Branch 11, as well as its
February 17, 2009 order. We order the REMAND of the case
to the trial court for further proceedings in accordance with our
ruling above. Let a copy of this Decision be furnished the Civil
Registrar General. No costs. SO ORDERED.
LANDOIL RESOURCES CORPORATION, PETITIONER, VS.
AL RABIAH LIGHTING COMPANY; G.R. No. 174720:
September 07, 2011; PERALTA, J.:
Assailed in the instant petition for review on certiorari filed by
petitioner are the Decision dated August 14, 2003 and the
Resolution dated August 29, 2006 of the Court of Appeals
issued in CA-G.R. CV No. 52003.
The facts, as borne by the records, are as follows:
Respondent Al Rabiah Lighting Company (Al Rabiah) is a
foreign corporation existing under the laws of Kuwait.
Defendant Construction Consortium, Inc. (CCI) and petitioner
Landoil Resources Corporation (Landoil) are both domestic
corporations organized under the Philippines Laws.
On December 20, 1981, CCI and respondent Al Rabiah
entered into a Sub-Contract Agreement wherein respondent
was assigned to carry out the electrical works of Kuwait Oil
Company's New Industrial Training Centre project in Ahmadi,
Kuwait in the total amount of Three Hundred Forty- Three
Thousand Five Hundred Kuwaiti Dinar. Respondent started
carrying out its work as agreed upon. Later, the project owner
had withdrawn the principal contract which led to the
termination of petitioner's and CCI's services. Consequently,
respondent's works were stopped before being completed.
On September 12, 1982, petitioner, through its Regional
Managing Director for Operations Robert J. Brown, sent a letter
to respondent through Mr. Said Y. Al Imam, confirming that
based on the July progress billing, petitioner owed respondent
the sum of KD 21,930,317 which was already due and
proposed the payment of 12% interest on the overdue account
until payment has been made.
In a letter dated June 4, 1983, petitioner informed respondent
that the Prime Contractor Al Fahd Company had already
terminated its contract; that petitioner agreed to pay
respondent 12% interest per year on the unpaid bills of
completed works. The letter was signed by both Robert Brown
and Gerald Love.
On June 9, 1983, petitioner acknowledged its indebtedness to
respondent in the amount of KD 91,580.059, plus general
overtime pay of KD 8,126 and promised to pay it in
installments.
As petitioner failed to pay respondent any part of the amount
due, together with the contractual interest of 12%, the latter
referred their dispute to the Commercial Kully Court of Kuwait
for arbitration as provided under the Sub-Contract Agreement.
The parties were duly notified of the scheduled sessions of
arbitration, but only respondent and its counsel appeared
thereat.
On April 14, 1984, the Arbitrator rendered its award as follows:
 The court decides that Land Oil Resources Company
(Construction Consortium Incorporation) is indebted to
[Al] Rabiah Lighting Company by KD 108,368.860 and
that it is compelled to pay this sum in settlement of the
account of the contract concluded between them on
20th December, 1981. The said sum includes also the
contractual interest until the date of issue of this
Award.
Respondent then filed with the Regional Trial Court (RTC) of
Makati, an action for Enforcement of Foreign Judgment Plus
Damages against defendant CCI and petitioner. The case was
raffled off to Branch 64 and was docketed as Civil Case No.
11578.
In its Answer, petitioner admitted the existence of the Sub-
Contract Agreement, but claimed to have no knowledge as to
its genuineness and due execution. By way of Special and
Affirmative Defenses, petitioner argued among others that
respondent had no cause of action; respondent's claims had
been paid, set-off or extinguished; the Commercial Kully Court
of Kuwait did not acquire jurisdiction over petitioner; and the
arbitral award was contrary to public policy, hence, illegal.
Petitioner also alleged that since it had not been paid by its
principal contractor the value of the corresponding
accomplishments done by respondent, respondent's cause of
action had not yet accrued; and that the termination of the
contract by the primary contractor occurred without the fault or
negligence of petitioner and defendant CCI, nor were they
responsible for force majeure under the contract.
On the other hand, defendant CCI, in its Answer, specifically
denied the Sub-Contract Agreement for lack of knowledge,
claiming that it was not a party to the contract and that G.W.
Love was not an employee nor authorized to act for and in
behalf of CCI; and that the Commercial Kully Court of Kuwait
did not acquire jurisdiction over it and the arbitral award was
contrary to public policy.
After trial, the RTC rendered its Decision dated July 31, 1995,
the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court
finds the petition of plaintiff AL RABIAH Company to
be well-taken, and judgment is hereby rendered
finding defendants Landoil Resources Corporation
and Construction Consortium solidarily liable to
plaintiff Al Rabiah Lighting Company in the sum
indicated in Arbitral Award with legal interest thereon
from July 1984 (Certification of Non-occurrence of
Appeal) until payment is made. Defendants are
likewise ordered to pay to plaintiff the sum of
P250,000.00 as attorney's fees and P100,000.00 as
exemplary damages. SO ORDERED.
In resolving the main issue of whether the RTC can validly set
aside the foreign arbitral award rendered against petitioner and
defendant CCI on the bases of the defenses raised in the
parties' respective Answers, the RTC ruled in the negative. The
RTC found that petitioner and CCI were estopped from
claiming that they were not parties to the Sub-Contract
Agreement. Petitioner's Answer alleged that it admitted the
existence of the sub-contract agreement, although claimed that
"it has no knowledge as to its genuineness and due execution";
that such lack of knowledge was belied or negated by
petitioner's own allegations in its Answer acknowledging
indebtedness to respondent. The RTC found that petitioner's
letter dated September 12, 1982 to respondent confirmed that
it owed respondent the sum of KD 21,930,317 and anticipated
that payment would be made in early October 1982, together
with the other due accounts. This letter was submitted as
respondent's Exhibit "C" and the RTC noted that this letter was
among the documents submitted by respondent to the foreign
arbitrator in support of its claim against petitioner and CCI.
The RTC said that while it appeared in the Sub-Contract
Agreement that the contracting parties were CCI and
respondent, however, in paragraph VIII thereof, petitioner
Landoil appeared together with CCI as the First Party to whom
notices shall be sent. The RTC then concluded that the
inclusion of petitioner as first party to whom the notices shall be
sent and the conduct exhibited by petitioner led to the
inevitable conclusion that the two defendants, petitioner and
CCI, were the parties with whom respondent entered into the
sub-contract agreement; and that this conclusion was even
strengthened by the fact that as between the two defendants,
petitioner and CCI, there existed a "pooling agreement" for
undertaking projects abroad pursuant to Presidential Decree
(PD) 929. Since petitioner and CCI were the parties with whom
respondent contracted, they were bound by the terms of the
agreement, including the referral of their dispute to arbitration
in accordance with the Rules and Regulations of the State of
Kuwait.
Dissatisfied, petitioner appealed the RTC Decision to the CA.
After the submission of the parties' respective briefs, the case
was submitted for resolution.
On August 14, 2003, the CA issued its assailed Decision which
dismissed the appeal and affirmed the RTC decision.
The CA ruled, among others, that petitioner was already
estopped from claiming that it was not a party to the Sub-
Contract Agreement as the agreement itself mentioned
petitioner Landoil as one of the contracting parties and that
petitioner had made representations in the past, binding itself
for the overdue accounts in favor of respondent.
Petitioner's motion for reconsideration was denied in a
Resolution dated August 29, 2006.
Hence, this petition wherein petitioner raises the following
issues:
(a) whether a Philippine Court, in enforcing a foreign judgment
that has become final and executory, has the jurisdiction to
alter, amend or expand such final foreign judgment;
(b) Whether a foreign judgment may be enforced against a
party other than the party decreed and held liable therein; and

(c) Whether Estoppel was properly appreciated in this case.
Petitioner contends that as appearing in the dispositive portion
of the foreign arbitral award, there is only one defendant
adjudged liable to respondent, i.e., Land Oil Resources
Company (Construction Consortium Incorporation); thus, the
party against whom the Writ of Execution may be directed.
Petitioner claims that it is not the same as Land Oil Resources
Company (Construction Consortium Incorporation) as its
Articles of Incorporation does not indicate any such appellation;
that it was not a party to the proceedings before the foreign
arbitrator as it is a different entity. Thus, enforcing an award
against a non-party such as petitioner would be executing on
properties owned by a third person other than the judgment
debtor; and that to allow the same would amount to a
deprivation of property without due process of law. Petitioner
avers that the RTC and the CA erred and committed grave
abuse of discretion in amending and modifying the foreign
arbitral award so as to include petitioner which is a corporation
different from the entity adjudged liable in the foreign arbitral
award.
We are not convinced.
As correctly found by the CA, petitioner's argument that the
party adjudged liable under the foreign arbitral award was a
different entity from it was only raised for the first time in
petitioner's motion for reconsideration filed with it; thus, could
not be entertained. We quote with approval what the CA said
when it denied petitioner's motion for reconsideration in this
wise:
The defendant mainly argues that it was never a party
to the subcontract agreement. We find its argument
meritless, because it is now too late for the defendant
to claim that the party adjudged liable under the
foreign arbitral award was a different entity. Moreover,
we note that this is the first time that the defendant
raises such defense. It is settled in jurisprudence that
an issue cannot be raised for the first time on appeal.
With more reason should we disallow and disregard
the issue if it is initially raised in a motion for
reconsideration of the decision of the appellate court.
From the outset of the case, the defendant's stance
has always been to deny any participation in the sub-
contract agreement between Construction Consortium
Inc. and the plaintiff and, in the alternative, to bewail
the failure of the arbitral award to spell out the factual
distinctions between its liability and that of the
Construction Consortium Inc. for they were separate
and distinct entities. Thus, this is the first time that it
asserts that it was not the defendant in the case
before the Commercial Kully Court of the State of
Kuwait. The defendant thus asserts the existence of a
third corporation against whom the arbitral award was
supposedly rendered, Landoil Resources Company
(Construction Consortium Incorporated). Not only is
the Court precluded from entertaining such first-time
issue but we also frown upon the apparent self-
contradiction. We note that the defendant had, in the
course of this case, repeatedly affirmed that it was the
same party as the defendant against whom the
foreign judgment had been rendered. In its Answer to
the Complaint, it stated that:
12. The award directs the Landoil to pay and
makes Construction Consortium Incorporated liable. x
xx
Likewise, in its appeal brief, it also
acknowledged being the defendant against whom the
arbitral award was being enforced, thuswise:
x x x the foreign judgment subject of the case before
the court a quo is an arbitral award rendered by the
Commercial Kully Court of the State of Kuwait on April
14, 1984, compelling defendant CCI and defendant
appellant to pay the sum of KD 108,368.860 in
settlement of the contract allegedly concluded
between them and plaintiff-appellee, which included a
10% contractual interest until the time of said award.
Indeed, petitioner had never claimed in the RTC that it was not
the party referred to in the foreign arbitral award. On the
contrary, petitioner's Answer with Counterclaim filed in the RTC
even established its knowledge and participation in the Sub-
Contract Agreement. Under the heading of Special and
Affirmative Defenses, petitioner alleged, among others that:
6. plaintiff's claims have been paid, set-off, or extinguished.
xxxx
14. That under the Sub-Contract, Annex "A" of the complaint, it
is provided as follows:
14.1 FIRST PARTY agrees to pay SECOND PARTY at
monthly intervals based on actual monthly progress
accomplishment, plus 50% on material on Site less 5%
retention and less advance payments, to be paid within 15
days of FIRST PARTY'S receipt from Client subject to any
changes imposed by the Client in approving the monthly
Valuation Certificate. Details of any such modifications will be
available to the Sub-Contractor insofar as they affect his
previously agreed valuation amount.
Defendant has not been paid by its principal contractor the
payment/value of the corresponding accomplishments done by
plaintiff and that, therefore, plaintiff's cause of action against
answering defendant has not accrued;
15. That in any event, the alleged claim was discharged on
September 12, 1983 by assignment to plaintiff in the full
amount of the true and actual measure and valuation
calculated upon termination of the contract by the Primary
Contractor;
16. In any event, the termination of the contract of the primary
contractor occurred without the fault or negligence of the
defendants; neither was it responsible for the force majeure
under the terms of the contract."
Moreover, in petitioner's Memorandum of Authorities on the
Invalidity and Unenforceability of the Foreign Judgment filed
with the RTC, it again made admission that it was the party
referred to in the foreign arbitral award, thus:
xxxx
Likewise, the foreign arbitral award rendered judgment against
both defendants by placing the name of defendant LANDOIL
RESOURCES COMPANY (sic corporation) and thereafter
enclosed in parenthesis the name of the other defendant
Construction Consortium, Inc. without however specifying the
specific liabilities of either of the defendants. Being
corporations, defendants have legal personalities separate and
distinct from each other and as such must be taken distinctly
and separately from one another x x x
Section 4, Rule 129 of the Rules of Court provides:
Sec. 4. Judicial admissions. - An admission, verbal or written,
made by a party in the course of the proceedings in the same
case, does not require proof. The admission may be
contradicted only by showing that it was made through
palpable mistake or that no such admission was made.
A party may make judicial admissions in (a) the pleadings; (b)
during the trial, either by verbal or written manifestations or
stipulations; or (c) in other stages of the judicial proceeding. It
is well-settled that judicial admissions cannot be contradicted
by the admitter who is the party himself and binds the person
who makes the same, and absent any showing that this was
made thru palpable mistake, no amount of rationalization can
offset it.
Finally, we find no reversible error committed by the CA in
affirming the RTC decision finding petitioner estopped from
denying its participation and liability under the Sub-Contract
Agreement and the enforcement of the foreign arbitral award
against it. We find apropos what the CA said in this wise:
Defendant-appellant cannot deny its participation in the
Subcontract. The agreement itself mentioned Landoil as one of
the contracting parties. Specifically, a perusal of the
Subcontract Agreement reveals in Article 8, Section 1 thereof
that:
8.1 All notices to a party hereto shall be sent as follows:
FIRST PARTY: LANDOIL RESOURCES CORPORATION
CONSTRUCTION CONSORTIUM INCORPORATED
P.O. Box 49393
Omariyah,Kuwait
For the attention of Or delivered
To: K.O.C. Project Manager
Project Office of Ahmadi
SECONDARY PARTY: AL RABIAH LIGHTING COMPANY
W.L.I.
P.O. Box 22015 Sarat
Kuwait
For the attention of Or delivered
To: Mr. Said Y. Al Imam
Further, it is of record that on September 12, 1982, Landoil,
thru its Regional Marketing Director Robert J. Brown, wrote to
plaintiff Al Rabiah confirming that Landoil owes Al Rabiah the
sum of KD21,930.317 and that said sum was due on August
22, 1982. It was further acknowledged in said letter that
inasmuch as the sum cannot be paid immediately, an interest
at the rate of 12% on the overdue amount shall be paid until
the principal amount can be satisfied. Landoil signified that it
expected to pay such amount by October 1982 together with
other due accounts. This letter is part of the evidence on record
and was not refuted by defendant-appellant Landoil.
The foregoing persuades this Court of Landoil's participation in
the Subcontract Agreement. It is apparent that Landoil is
named as a first party to the subject Agreement and it
represented itself as an obligor in the September 12, 1982
letter acknowledging overdue accounts in favor of Al Rabiah.
Moreover, notwithstanding its denial, defendant-appellant did
allege in Paragraph 14 of its Answer to the Complaint a quo
that:
14. x x x x
Defendant had not been paid by its principal contractor the
payment/value of the corresponding accomplishments done by
plaintiff and that therefore, plaintiff's cause of action against
answering defendant has not accrued. (RTC Records, p. 43)
Such statement impliedly admits defendant-appellant's liability
under the Subcontract Agreement, but raises as a special
defense that plaintiff-appellee's action is allegedly premature,
as Landoil itself had not received any payment from its
principal contractor.
Thus, Landoil's argument, that it is a distinct corporation from
CCI and cannot be accountable for breaches made by such
other corporation, must fail. We find that Landoil itself is a party
to the Subcontract Agreement and has made representations
in the past binding itself to Al Rabiah for overdue accounts in
favor of the latter. Under the doctrine of estoppels, an
admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as
against the person relying thereof. (Ayala Corporation v. Ray
Burton Development Corporation, 294 SCRA 48).
Petitioner is indeed barred from adopting an inconsistent
position, attitude, or course of conduct that would cause loss or
injury to respondent.
WHEREFORE, the petition for review is DENIED. The Decision
dated August 14, 2003 and the Resolution dated August 29,
2006 of the Court of Appeals are hereby AFFIRMED. SO
ORDERED.
PhilSec Investment vs CA (1997) – refer to the previous case
[G.R. No. 114323. July 23, 1998]
OIL AND NATURAL GAS COMMISSION, petitioner, vs.
COURT OF APPEALS and PACIFIC CEMENT COMPANY,
INC. respondents.
DECISION
MARTINEZ, J.:
This proceeding involves the enforcement of a foreign
judgment rendered by the Civil Judge of Dehra Dun, India in
favor of the petitioner, OIL AND NATURAL GAS
COMMISSION and against the private respondent, PACIFIC
CEMENT COMPANY, INCORPORATED.
The petitioner is a foreign corporation owned and controlled by
the Government of India while the private respondent is a
private corporation duly organized and existing under the laws
of the Philippines. The present conflict between the petitioner
and the private respondent has its roots in a contract entered
into by and between both parties on February 26, 1983
whereby the private respondent undertook to supply the
petitioner FOUR THOUSAND THREE HUNDRED (4,300)
metric tons of oil well cement. In consideration therefor, the
petitioner bound itself to pay the private respondent the amount
of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE
HUNDRED U.S. DOLLARS ($477,300.00) by opening an
irrevocable, divisible, and confirmed letter of credit in favor of
the latter. The oil well cement was loaded on board the ship
MV SURUTANA NAVA at the port of Surigao City, Philippines
for delivery at Bombay and Calcutta, India. However, due to a
dispute between the shipowner and the private respondent, the
cargo was held up in Bangkok and did not reach its point of
destination. Notwithstanding the fact that the private
respondent had already received payment and despite several
demands made by the petitioner, the private respondent failed
to deliver the oil well cement. Thereafter, negotiations ensued
between the parties and they agreed that the private
respondent will replace the entire 4,300 metric tons of oil well
cement with Class G cement cost free at the petitioners
designated port. However, upon inspection, the Class G
cement did not conform to the petitioners specifications. The
petitioner then informed the private respondent that it was
referring its claim to an arbitrator pursuant to Clause 16 of their
contract which stipulates:
Except where otherwise provided in the supply order/contract
all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or
these conditions or otherwise concerning the materials or the
execution or failure to execute the same during
stipulated/extended period or after the
completion/abandonment thereof shall be referred to the sole
arbitration of the persons appointed by Member of the
Commission at the time of dispute. It will be no objection to any
such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter
to which the supply or contract relates and that in the course of
his duties as Commissions employee he had expressed views
on all or any of the matter in dispute or difference.
The arbitrator to whom the matter is originally referred being
transferred or vacating his office or being unable to act for any
reason the Member of the Commission shall appoint another
person to act as arbitrator in acordance with the terms of the
contract/supply order. Such person shall be entitled to proceed
with reference from the stage at which it was left by his
predecessor. Subject as aforesaid the provisions of the
Arbitration Act, 1940, or any Statutary modification or re-
enactment there of and the rules made there under and for the
time being in force shall apply to the arbitration proceedings
under this clause.
The arbitrator may with the consent of parties enlarge the time,
from time to time, to make and publish the award.
The venue for arbitration shall be at Dehra dun.
On July 23, 1988, the chosen arbitrator, one Shri N.N.
Malhotra, resolved the dispute in petitioners favor setting forth
the arbitral award as follows:
NOW THEREFORE after considering all facts of the case, the
evidence, oral and documentarys adduced by the claimant and
carefully examining the various written statements,
submissions, letters, telexes, etc. sent by the respondent, and
the oral arguments addressed by the counsel for the claimants,
I, N.N. Malhotra, Sole Arbitrator, appointed under clause 16 of
the supply order dated 26.2.1983, according to which the
parties, i.e. M/S Oil and Natural Gas Commission and the
Pacific Cement Co., Inc. can refer the dispute to the sole
arbitration under the provision of the Arbitration Act. 1940, do
hereby award and direct as follows:-
The Respondent will pay the following to the claimant :-
1. Amount received by the Respondent
against the letter of credit
No. 11/19
dated 28.2.1983
- - - US $ 477,300.00
2. Re-imbursement of expenditure incurred
by the claimant on the
inspection teams
 visit to Philippines in August 1985
- - - US$ 3,881.00
3. L. C. Establishment charges incurred
by the claimant - - - US $ 1,252.82
4. Loss of interest suffered by claimant
from 21.6.83 to 23.7.88
- US $ 417,169.95
Total amount of award - - - US $ 899,603.77
In addition to the above, the respondent would also be liable to
pay to the claimant the interest at the rate of 6% on the above
amount, with effect from 24.7.1988 upto the actual date of
payment by the Respondent in full settlement of the claim as
awarded or the date of the decree, whichever is earlier.
I determine the cost at Rs. 70,000/- equivalent to US $5,000
towards the expenses on Arbitration, legal expenses, stamps
duly incurred by the claimant. The cost will be shared by the
parties in equal proportion.
Pronounced at Dehra Dun to-day, the 23rd of July 1988.
To enable the petitioner to execute the above award in its
favor, it filed a Petition before the Court of the Civil Judge in
Dehra Dun, India (hereinafter referred to as the foreign court
for brevity), praying that the decision of the arbitrator be made
the Rule of Court in India. The foreign court issued notices to
the private respondent for filing objections to the petition. The
private respondent complied and sent its objections dated
January 16, 1989. Subsequently, the said court directed the
private respondent to pay the filing fees in order that the latters
objections could be given consideration. Instead of paying the
required filing fees, the private respondent sent the following
communication addressed to the Civil Judge of Dehra Dun:
The Civil Judge
Dehra Dun (U.P.) India
Re: Misc. Case No. 5 of 1989
M/S Pacific Cement Co.,
Inc. vs. ONGC Case
Sir:
1. We received your letter dated 28 April 1989
only last 18 May 1989.
2. Please inform us how much is the court fee
to be paid. Your letter did not mention the
amount to be paid.
3. Kindly give us 15 days from receipt of your
letter advising us how much to pay to
comply with the same.
Thank you for your kind consideration.
Pacific Cement Co., Inc.
By:
Jose Cortes, Jr.
President"
Without responding to the above communication, the foreign
-- court refused to admit the private respondents objections for
failure to pay the required filing fees, and thereafter issued an
Order on February 7, 1990, to wit:
ORDER
Since objections filed by defendant have been rejected through
Misc. Suit No. 5 on 7.2.90, therefore, award should be made
Rule of the Court.
ORDER
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
Court. On the basis of conditions of award decree is passed.
Award Paper No. 3/B-1 shall be a part of the decree. The
plaintiff shall also be entitled to get from defendant (US$ 899,
603.77 (US$ Eight Lakhs ninety nine thousand six hundred and
three point seventy seven only) alongwith 9% interest per
annum till the last date of realisation.
Despite notice sent to the private respondent of the foregoing
order and several demands by the petitioner for compliance
therewith, the private respondent refused to pay the amount
adjudged by the foreign court as owing to the petitioner.
Accordingly, the petitioner filed a complaint with Branch 30 of
the Regional Trial Court (RTC) of Surigao City for the
enforcement of the aforementioned judgment of the foreign
court. The private respondent moved to dismiss the complaint
on the following grounds: (1) plaintiffs lack of legal capacity to
sue; (2) lack of cause of action; and (3) plaintiffs claim or
demand has been waived, abandoned, or otherwise
extinguished. The petitioner filed its opposition to the said
motion to dismiss, and the private respondent, its rejoinder
thereto. On January 3, 1992, the RTC issued an order
upholding the petitioners legal capacity to sue, albeit
dismissing the complaint for lack of a valid cause of action. The
RTC held that the rule prohibiting foreign corporations
transacting business in the Philippines without a license from
maintaining a suit in Philippine courts admits of an exception,
that is, when the foreign corporation is suing on an isolated
transaction as in this case. Anent the issue of the sufficiency of
the petitioners cause of action, however, the RTC found the
referral of the dispute between the parties to the arbitrator
under Clause 16 of their contract erroneous. According to the
RTC,
[a] perusal of the above-quoted clause (Clause 16) readily
shows that the matter covered by its terms is limited to ALL
QUESTIONS AND DISPUTES, RELATING TO THE MEANING
OF THE SPECIFICATION, DESIGNS, DRAWINGS AND
INSTRUCTIONS HEREIN BEFORE MENTIONED and as to
the QUALITY OF WORKMANSHIP OF THE ITEMS
ORDERED or as to any other questions, claim, right or thing
whatsoever, but qualified to IN ANY WAY ARISING OR
RELATING TO THE SUPPLY ORDER/CONTRACT, DESIGN,
DRAWING, SPECIFICATION, etc., repeating the enumeration
in the opening sentence of the clause.
The court is inclined to go along with the observation of the
defendant that the breach, consisting of the non-delivery of the
purchased materials, should have been properly litigated
before a court of law, pursuant to Clause No. 15 of the
Contract/Supply Order, herein quoted, to wit:
JURISDICTION
All questions, disputes and differences, arising under out of or
in connection with this supply order, shall be subject to the
EXCLUSIVE JURISDICTION OF THE COURT, within the local
limits of whose jurisdiction and the place from which this supply
order is situated.
The RTC characterized the erroneous submission of the
dispute to the arbitrator as a mistake of law or fact amounting
to want of jurisdiction. Consequently, the proceedings had
before the arbitrator were null and void and the foreign court
had therefore, adopted no legal award which could be the
source of an enforceable right.
The petitioner then appealed to the respondent Court of
Appeals which affirmed the dismissal of the complaint. In its
decision, the appellate court concurred with the RTCs ruling
that the arbitrator did not have jurisdiction over the dispute
between the parties, thus, the foreign court could not validly
adopt the arbitrators award. In addition, the appellate court
observed that the full text of the judgment of the foreign court
contains the dispositive portion only and indicates no findings
of fact and law as basis for the award. Hence, the said
judgment cannot be enforced by any Philippine court as it
would violate the constitutional provision that no decision shall
be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based. The
appellate court ruled further that the dismissal of the private
respondents objections for non-payment of the required legal
fees, without the foreign court first replying to the private
respondents query as to the amount of legal fees to be paid,
constituted want of notice or violation of due process. Lastly, it
pointed out that the arbitration proceeding was defective
because the arbitrator was appointed solely by the petitioner,
and the fact that the arbitrator was a former employee of the
latter gives rise to a presumed bias on his part in favor of the
petitioner.
A subsequent motion for reconsideration by the petitioner of
the appellate courts decision was denied, thus, this petition for
review on certiorari citing the following as grounds in support
thereof:
RESPONDENT COURT OF APPEALS GRAVELY
ERRED IN AFFIRMING THE LOWER COURTS
ORDER OF DISMISSAL SINCE:
A. THE NON-DELIVERY OF THE CARGO WAS A
MATTER PROPERLY COGNIZABLE BY THE
PROVISIONS OF CLAUSE 16 OF THE CONTRACT;
B. THE JUDGMENT OF THE CIVIL COURT OF
DEHRADUN, INDIA WAS AN AFFIRMATION OF THE
FACTUAL AND LEGAL FINDINGS OF THE
ARBITRATOR AND THEREFORE ENFORCEABLE IN
THIS JURISDICTION;
C. EVIDENCE MUST BE RECEIVED TO REPEL THE
EFFECT OF A PRESUMPTIVE RIGHT UNDER A
FOREIGN JUDGMENT.
The threshold issue is whether or not the arbitrator had
jurisdiction over the dispute between the petitioner and the
private respondent under Clause 16 of the contract. To
reiterate, Clause 16 provides as follows:
Except where otherwise provided in the supply order/contract
all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items
ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or
these conditions or otherwise concerning the materials or the
execution or failure to execute the same during
stipulated/extended period or after the
completion/abandonment thereof shall be referred to the sole
arbitration of the persons appointed by Member of the
Commission at the time of dispute. It will be no objection to any
such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter
to which the supply or contract relates and that in the course of
his duties as Commissions employee he had expressed views
on all or any of the matter in dispute or difference.
The dispute between the parties had its origin in the non-
delivery of the 4,300 metric tons of oil well cement to the
petitioner. The primary question that may be posed, therefore,
is whether or not the non-delivery of the said cargo is a proper
subject for arbitration under the above-quoted Clause 16. The
petitioner contends that the same was a matter within the
purview of Clause 16, particularly the phrase, x x x or as to any
other questions, claim, right or thing whatsoever, in any way
arising or relating to the supply order/contract, design, drawing,
specification, instruction x x x. It is argued that the foregoing
phrase allows considerable latitude so as to include non-
delivery of the cargo which was a claim, right or thing relating
to the supply order/contract. The contention is bereft of merit.
First of all, the petitioner has misquoted the said phrase,
shrewdly inserting a comma between the words supply
order/contract and design where none actually exists. An
accurate reproduction of the phrase reads, x x x or as to any
other question, claim, right or thing whatsoever, in any way
arising out of or relating to the supply order/contract design,
drawing, specification, instruction or these conditions x x x. The
absence of a comma between the words supply order/contract
and design indicates that the former cannot be taken
separately but should be viewed in conjunction with the words
design, drawing, specification, instruction or these conditions. It
is thus clear that to fall within the purview of this phrase, the
claim, right or thing whatsoever must arise out of or relate to
the design, drawing, specification, or instruction of the supply
order/contract. The petitioner also insists that the non-delivery
of the cargo is not only covered by the foregoing phrase but
also by the phrase, x x x or otherwise concerning the materials
or the execution or failure to execute the same during the
stipulated/extended period or after completion/abandonment
thereof x x x.
The doctrine of noscitur a sociis, although a rule in the
construction of statutes, is equally applicable in the
ascertainment of the meaning and scope of vague contractual
stipulations, such as the aforementioned phrase. According to
the maxim noscitur a sociis, where a particular word or phrase
is ambiguous in itself or is equally susceptible of various
meanings, its correct construction may be made clear and
specific by considering the company of the words in which it is
found or with which it is associated, or stated differently, its
obscurity or doubt may be reviewed by reference to associated
words. A close examination of Clause 16 reveals that it covers
three matters which may be submitted to arbitration namely,
(1) all questions and disputes, relating to the meaning of the
specification designs, drawings and instructions herein before
mentioned and as to quality of workmanship of the items
ordered; or
(2) any other question, claim, right or thing whatsoever, in any
way arising out of or relating to the supply order/contract
design, drawing, specification, instruction or these conditions;
or
(3) otherwise concerning the materials or the execution or
failure to execute the same during stipulated/extended period
or after the completion/abandonment thereof.
The first and second categories unmistakably refer to
questions and disputes relating to the design, drawing,
instructions, specifications or quality of the materials of the
supply/order contract. In the third category, the clause,
execution or failure to execute the same, may be read as
execution or failure to execute the supply order/contract. But in
accordance with the doctrine of noscitur a sociis, this reference
to the supply order/contract must be construed in the light of
the preceding words with which it is associated, meaning to
say, as being limited only to the design, drawing, instructions,
specifications or quality of the materials of the supply
order/contract. The non-delivery of the oil well cement is
definitely not in the nature of a dispute arising from the failure
to execute the supply order/contract design, drawing,
instructions, specifications or quality of the materials. That
Clause 16 should pertain only to matters involving the technical
aspects of the contract is but a logical inference considering
that the underlying purpose of a referral to arbitration is for
such technical matters to be deliberated upon by a person
possessed with the required skill and expertise which may be
otherwise absent in the regular courts.
This Court agrees with the appellate court in its ruling that the
non-delivery of the oil well cement is a matter properly
cognizable by the regular courts as stipulated by the parties in
Clause 15 of their contract:
All questions, disputes and differences, arising under out of or
in connection with this supply order, shall be subject to the
exclusive jurisdiction of the court, within the local limits of
whose jurisdiction and the place from which this supply order is
situated.
The following fundamental principles in the interpretation of
contracts and other instruments served as our guide in arriving
at the foregoing conclusion:
"ART. 1373. If some stipulation of any contract should admit of
several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual."
ART. 1374. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly.
Sec. 11. Instrument construed so as to give effect to all
provisions. In the construction of an instrument, where there
are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all.
Thus, this Court has held that as in statutes, the provisions of a
contract should not be read in isolation from the rest of the
instrument but, on the contrary, interpreted in the light of the
other related provisions. The whole and every part of a contract
must be considered in fixing the meaning of any of its parts and
in order to produce a harmonious whole. Equally applicable is
the canon of construction that in interpreting a statute (or a
contract as in this case), care should be taken that every part
thereof be given effect, on the theory that it was enacted as an
integrated measure and not as a hodge-podge of conflicting
provisions. The rule is that a construction that would render a
provision inoperative should be avoided; instead, apparently
inconsistent provisions should be reconciled whenever
possible as parts of a coordinated and harmonious whole.
The petitioners interpretation that Clause 16 is of such latitude
as to contemplate even the non-delivery of the oil well cement
would in effect render Clause 15 a mere superfluity. A perusal
of Clause 16 shows that the parties did not intend arbitration to
be the sole means of settling disputes. This is manifest from
Clause 16 itself which is prefixed with the proviso, Except
where otherwise provided in the supply order/contract x x x,
thus indicating that the jurisdiction of the arbitrator is not all
encompassing, and admits of exceptions as may be provided
elsewhere in the supply order/contract. We believe that the
correct interpretation to give effect to both stipulations in the
contract is for Clause 16 to be confined to all claims or disputes
arising from or relating to the design, drawing, instructions,
specifications or quality of the materials of the supply
order/contract, and for Clause 15 to cover all other claims or
disputes.
The petitioner then asseverates that granting, for the sake of
argument, that the non-delivery of the oil well cement is not a
proper subject for arbitration, the failure of the replacement
cement to conform to the specifications of the contract is a
matter clearly falling within the ambit of Clause 16. In this
contention, we find merit. When the 4,300 metric tons of oil well
cement were not delivered to the petitioner, an agreement was
forged between the latter and the private respondent that Class
G cement would be delivered to the petitioner as replacement.
Upon inspection, however, the replacement cement was
rejected as it did not conform to the specifications of the
contract. Only after this latter circumstance was the matter
brought before the arbitrator. Undoubtedly, what was referred
to arbitration was no longer the mere non-delivery of the cargo
at the first instance but also the failure of the replacement
cargo to conform to the specifications of the contract, a matter
clearly within the coverage of Clause 16.
The private respondent posits that it was under no legal
obligation to make replacement and that it undertook the latter
only in the spirit of liberality and to foster good business
relationship. Hence, the undertaking to deliver the replacement
cement and its subsequent failure to conform to specifications
are not anymore subject of the supply order/contract or any of
the provisions thereof. We disagree.
As per Clause 7 of the supply order/contract, the private
respondent undertook to deliver the 4,300 metric tons of oil
well cement at BOMBAY (INDIA) 2181 MT and CALCUTTA
2119 MT. The failure of the private respondent to deliver the
cargo to the designated places remains undisputed. Likewise,
the fact that the petitioner had already paid for the cost of the
cement is not contested by the private respondent. The private
respondent claims, however, that it never benefited from the
transaction as it was not able to recover the cargo that was
unloaded at the port of Bangkok. First of all, whether or not the
private respondent was able to recover the cargo is immaterial
to its subsisting duty to make good its promise to deliver the
cargo at the stipulated place of delivery. Secondly, we find it
difficult to believe this representation. In its Memorandum filed
before this Court, the private respondent asserted that the Civil
Court of Bangkok had already ruled that the non-delivery of the
cargo was due solely to the fault of the carrier. It is, therefore,
but logical to assume that the necessary consequence of this
finding is the eventual recovery by the private respondent of
the cargo or the value thereof. What inspires credulity is not
that the replacement was done in the spirit of liberality but that
it was undertaken precisely because of the private respondents
recognition of its duty to do so under the supply order/contract,
Clause 16 of which remains in force and effect until the full
execution thereof.
We now go to the issue of whether or not the judgment of the
foreign court is enforceable in this jurisdiction in view of the
private respondents allegation that it is bereft of any statement
of facts and law upon which the award in favor of the petitioner
was based. The pertinent portion of the judgment of the foreign
court reads:
ORDER
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the
Court. On the basis of conditions of award decree is passed.
Award Paper No. 3/B-1 shall be a part of the decree. The
plaintiff shall also be entitled to get from defendant ( US$ 899,
603.77 (US$ Eight Lakhs ninety nine thousand six hundred and
three point seventy seven only) alongwith 9% interest per
annum till the last date of realisation.
As specified in the order of the Civil Judge of Dehra Dun,
Award Paper No. 3/B-1 shall be a part of the decree. This is a
categorical declaration that the foreign court adopted the
findings of facts and law of the arbitrator as contained in the
latters Award Paper. Award Paper No. 3/B-1, contains an
exhaustive discussion of the respective claims and defenses of
the parties, and the arbitrators evaluation of the same.
Inasmuch as the foregoing is deemed to have been
incorporated into the foreign courts judgment the appellate
court was in error when it described the latter to be a simplistic
decision containing literally, only the dispositive portion.
The constitutional mandate that no decision shall be rendered
by any court without expressing therein clearly and distinctly
the facts and the law on which it is based does not preclude
the validity of memorandum decisions which adopt by
reference the findings of fact and conclusions of law contained
in the decisions of inferior tribunals. In Francisco v. Permskul,
this Court held that the following memorandum decision of the
Regional Trial Court of Makati did not transgress the
requirements of Section 14, Article VIII of the Constitution:
MEMORANDUM DECISION
After a careful perusal, evaluation and study of the records of
this case, this Court hereby adopts by reference the findings of
fact and conclusions of law contained in the decision of the
Metropolitan Trial Court of Makati, Metro Manila, Branch 63
and finds that there is no cogent reason to disturb the same.
WHEREFORE, judgment appealed from is hereby affirmed in
toto. (Underscoring supplied.)
This Court had occasion to make a similar pronouncement in
the earlier case of Romero v. Court of Appeals, where the
assailed decision of the Court of Appeals adopted the findings
and disposition of the Court of Agrarian Relations in this wise:
We have, therefore, carefully reviewed the evidence and made
a re-assessment of the same, and We are persuaded, nay
compelled, to affirm the correctness of the trial courts factual
findings and the soundness of its conclusion. For judicial
convenience and expediency, therefore, We hereby adopt by
way of reference, the findings of facts and conclusions of the
court a quo spread in its decision, as integral part of this Our
decision. (Underscoring supplied)
Hence, even in this jurisdiction, incorporation by reference is
allowed if only to avoid the cumbersome reproduction of the
decision of the lower courts, or portions thereof, in the decision
of the higher court. This is particularly true when the decision
sought to be incorporated is a lengthy and thorough discussion
of the facts and conclusions arrived at, as in this case, where
Award Paper No. 3/B-1 consists of eighteen (18) single spaced
pages.
Furthermore, the recognition to be accorded a foreign
judgment is not necessarily affected by the fact that the
procedure in the courts of the country in which such judgment
was rendered differs from that of the courts of the country in
which the judgment is relied on. This Court has held that
matters of remedy and procedure are governed by the lex fori
or the internal law of the forum. Thus, if under the procedural
rules of the Civil Court of Dehra Dun, India, a valid judgment
may be rendered by adopting the arbitrators findings, then the
same must be accorded respect. In the same vein, if the
procedure in the foreign court mandates that an Order of the
Court becomes final and executory upon failure to pay the
necessary docket fees, then the courts in this jurisdiction
cannot invalidate the order of the foreign court simply because
our rules provide otherwise.
The private respondent claims that its right to due process had
been blatantly violated, first by reason of the fact that the
foreign court never answered its queries as to the amount of
docket fees to be paid then refused to admit its objections for
failure to pay the same, and second, because of the presumed
bias on the part of the arbitrator who was a former employee of
the petitioner.
Time and again this Court has held that the essence of due
process is to be found in the reasonable opportunity to be
heard and submit any evidence one may have in support of
ones defense or stated otherwise, what is repugnant to due
process is the denial of opportunity to be heard. Thus, there is
no violation of due process even if no hearing was conducted,
where the party was given a chance to explain his side of the
controversy and he waived his right to do so.
In the instant case, the private respondent does not deny the
fact that it was notified by the foreign court to file its objections
to the petition, and subsequently, to pay legal fees in order for
its objections to be given consideration. Instead of paying the
legal fees, however, the private respondent sent a
communication to the foreign court inquiring about the correct
amount of fees to be paid. On the pretext that it was yet
awaiting the foreign courts reply, almost a year passed without
the private respondent paying the legal fees. Thus, on
February 2, 1990, the foreign court rejected the objections of
the private respondent and proceeded to adjudicate upon the
petitioners claims. We cannot subscribe to the private
respondents claim that the foreign court violated its right to due
process when it failed to reply to its queries nor when the latter
rejected its objections for a clearly meritorious ground. The
private respondent was afforded sufficient opportunity to be
heard. It was not incumbent upon the foreign court to reply to
the private respondents written communication. On the
contrary, a genuine concern for its cause should have
prompted the private respondent to ascertain with all due
diligence the correct amount of legal fees to be paid. The
private respondent did not act with prudence and diligence thus
its plea that they were not accorded the right to procedural due
process cannot elicit either approval or sympathy from this
Court.
The private respondent bewails the presumed bias on the part
of the arbitrator who was a former employee of the petitioner.
This point deserves scant consideration in view of the following
stipulation in the contract:
x x x. It will be no objection to any such appointment that the
arbitrator so appointed is a Commission employer (sic) that he
had to deal with the matter to which the supply or contract
relates and that in the course of his duties as Commissions
employee he had expressed views on all or any of the matter in
dispute or difference. (Underscoring supplied.)
Finally, we reiterate hereunder our pronouncement in the case
of Northwest Orient Airlines, Inc. v. Court of Appeals that:
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is
also proper to presume the regularity of the proceedings and
the giving of due notice therein.
Under Section 50, Rule 39 of the Rules of Court, a judgment in
an action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of
a right as between the parties and their successors-in-interest
by a subsequent title. The judgment may, however, be assailed
by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under
Section 3 of Rule 131, a court, whether of the Philippines or
elsewhere, enjoys the presumption that it was acting in the
lawful exercise of jurisdiction and has regularly performed its
official duty.
Consequently, the party attacking a foreign judgment, the
private respondent herein, had the burden of overcoming the
presumption of its validity which it failed to do in the instant
case.
The foreign judgment being valid, there is nothing else left to
be done than to order its enforcement, despite the fact that the
petitioner merely prays for the remand of the case to the RTC
for further proceedings. As this Court has ruled on the validity
and enforceability of the said foreign judgment in this
jurisdiction, further proceedings in the RTC for the reception of
evidence to prove otherwise are no longer necessary.
WHEREFORE, the instant petition is GRANTED, and the
assailed decision of the Court of Appeals sustaining the trial
courts dismissal of the OIL AND NATURAL GAS
COMMISSIONs complaint in Civil Case No. 4006 before
Branch 30 of the RTC of Surigao City is REVERSED, and
another in its stead is hereby rendered ORDERING private
respondent PACIFIC CEMENT COMPANY, INC. to pay to
petitioner the amounts adjudged in the foreign judgment
subject of said case. SO ORDERED.
[G.R. No. 141536. February 26, 2001]
GIL MIGUEL T. PUYAT, petitioner, vs. RON ZABARTE,
respondent.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no
genuine issue as to any material fact, other than the amount of
damages. If this verity is evident from the pleadings and the
supporting affidavits, depositions and admissions on file with
the court, the moving party is entitled to such remedy as a
matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45
of the Rules of Court, challenging the August 31, 1999
Decision of the Court of Appeals (CA), which affirmed the
Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil
Case No. 64107; and the January 20, 2000 CA Resolution
which denied reconsideration.
The assailed CA Decision disposed as follows:
WHEREFORE, finding no error in the judgment appealed from,
the same is AFFIRMED."
The Facts
The facts of this case, as narrated by the Court of Appeals, are
as follows:
It appears that on 24 January 1994, [Respondent] Ron Zabarte
commenced [an action] to enforce the money judgment
rendered by the Superior Court for the State of California,
County of Contra Costa, U.S.A. On 18 March 1994, [petitioner]
filed his Answer with the following special and affirmative
defenses:
xxx xxx
xxx
8) The Superior Court for the State of California, County
of Contra Costa[,] did not properly acquire jurisdiction over the
subject matter of and over the persons involved in [C]ase
#C21-00265.
9) The Judgment on Stipulations for Entry in Judgment
in Case #C21-00265 dated December 12, 1991 was obtained
without the assistance of counsel for [petitioner] and without
sufficient notice to him and therefore, was rendered in clear
violation of [petitioners] constitutional rights to substantial and
procedural due process.
10) The Judgment on Stipulation for Entry in Judgment in
Case #C21-00265 dated December 12, 1991 was procured by
means of fraud or collusion or undue influence and/or based on
a clear mistake of fact and law.
11) The Judgment on Stipulation for Entry in Judgment in
Case #C21-00265 dated December 12, 1991 is contrary to the
laws, public policy and canons of morality obtaining in the
Philippines and the enforcement of such judgment in the
Philippines would result in the unjust enrichment of
[respondent] at the expense of [petitioner] in this case.
12) The Judgment on Stipulation for Entry in Judgment in
Case #C21-00265 dated December 12, 1991 is null and void
and unenforceable in the Philippines.
13) In the transaction, which is the subject matter in Case
#C21-00265, [petitioner] is not in any way liable, in fact and in
law, to [respondent] in this case, as contained in [petitioners]
Answer to Complaint in Case #C21-00265 dated April 1, 1991,
Annex B of [respondents] Complaint dated December 6, 1993.
14) [Respondent] is guilty of misrepresentation or
falsification in the filing of his Complaint in this case dated
December 6, 1993. Worse, [respondent] has no capacity to sue
in the Philippines.
15) Venue has been improperly laid in this case.
(Record, pp. 42-44)
On 1 August 1994, [respondent] filed a [M]otion for
[S]ummary [J]udgment under Rule 34 of the Rules of
Court alleging that the [A]nswer filed by [petitioner] failed
to tender any genuine issue as to the material facts. In
his [O]pposition to [respondents] motion, [petitioner]
demurred as follows:
2) [Petitioner] begs to disagree[;] in support hereof, [he]
wishes to mention that in his Answer with Special and
Affirmative Defenses dated March 16, 1994 [petitioner] has
interposed that the Judgment on Stipulations for Entry in
Judgment is null and void, fraudulent, illegal and
unenforceable, the same having been obtained by means of
fraud, collusion, undue influence and/or clear mistake of fact
and law. In addition, [he] has maintained that said Judgment on
Stipulations for Entry in Judgment was obtained without the
assistance of counsel for [petitioner] and without sufficient
notice to him and therefore, was rendered in violation of his
constitutional rights to substantial and procedural due process.
The [M]otion for [S]ummary [J]udgment was set for
hearing on 12 August 1994 during which [respondent]
marked and submitted in evidence the following:
Exhibit A - x x x Judgment on Stipulation For
Entry In Judgment of the Supreme
Court of the State of California[,]
County of Contra Costa[,] signed by
Hon. Ellen James, Judge of the
Superior Court.
Exhibit B - x x x Certificate of Authentication of
the [O]rder signed by the Hon. Ellen
James, issued by the Consulate
General of the Republic of the
Philippines.
Exhibit C - [R]eturn of the [W]rit of
[E]xecution (writ unsatisfied) issued
by the sheriff/marshall, County of
Santa Clara, State of California.
Exhibit D - [W]rit of [E]xecution
Exhibit 'E' [P]roof of [S]ervice of
copies of [W]rit of [E]xecution,
[N]otice of [L]evy, [M]emorandum of
[G]arnishee, [E]xemptions from
[E]nforcement of [J]udgment.
Exhibit F - Certification issued by the
Secretary of State, State of
California that Stephen Weir is the
duly elected, qualified and acting
[c]ounty [c]lerk of the County of
Contra Costa of the State of
California.
Exhibit G - Certificate of
[A]uthentication of the [W]rit of
[E]xecution.
On 6 April 1995, the court a quo issued an [O]rder granting
[respondents] [M]otion for [S]ummary [J]udgment [and] likewise
granting [petitioner] ten (10) days to submit opposing affidavits,
after which the case would be deemed submitted for resolution
(Record, pp. 152-153). [Petitioner] filed a [M]otion for
[R]econsideration of the aforesaid [O]rder and [respondent]
filed [C]omment. On 30 June 1995, [petitioner] filed a [M]otion
to [D]ismiss on the ground of lack of jurisdiction over the
subject matter of the case and forum-non-conveniens (Record,
pp. 166-170). In his [O]pposition to the [M]otion (Record, pp.
181-182) [respondent] contended that [petitioner could] no
longer question the jurisdiction of the lower court on the ground
that [the latters] Answer had failed to raise the issue of
jurisdiction. [Petitioner] countered by asserting in his Reply that
jurisdiction [could] not be fixed by agreement of the parties.
The lower court dismissed [his] [M]otion for [R]econsideration
and [M]otion [to] [D]ismiss (Record, pp. 196-198), x x x.
The RTC eventually rendered its February 21, 1997 Decision,
which disposed as follows:
WHEREFORE, judgment is hereby rendered, ordering
[petitioner] to pay [respondent] the following amounts:
1. The amount of U.S. dollars $241,991.33, with the
interest of legal rate from October 18, 1991, or its peso
equivalent, pursuant to the [J]udgment of [S]tipulation for
[E]ntry in [J]udgment dated December 19, 1991;
2. The amount of P30,000.00 as attorneys fees;
3. To pay the costs of suit.
The claim for moral damages, not having been substantiated, it
is hereby denied.
Ruling of the Court of Appeals
Affirming the trial court, the Court of Appeals held that
petitioner was estopped from assailing the judgment that had
become final and had, in fact, been partially executed. The CA
also ruled that summary judgment was proper, because
petitioner had failed to tender any genuine issue of fact and
was merely maneuvering to delay the full effects of the
judgment.
Citing Ingenohl v. Olsen, the CA also rejected petitioners
argument that the RTC should have dismissed the action for
the enforcement of a foreign judgment, on the ground of forum
non conveniens. It reasoned out that the recognition of the
foreign judgment was based on comity, reciprocity and res
judicata.
Hence, this Petition.
Issue
In his Memorandum, petitioner submits this lone but all-
embracing issue:
Whether or not the Court of Appeals acted in a manner x x x
contrary to law when it affirmed the Order of the trial court
granting respondents Motion for Summary Judgment and
rendering judgment against the petitioner.
In his discussion, petitioner contends that the CA erred in ruling
in this wise:
1. That his Answer failed to tender a genuine issue of
fact regarding the following:
(a) the jurisdiction of a foreign court over the
subject matter
(b) the validity of the foreign judgment
(c) the judgments conformity to Philippine laws,
public policy, canons of morality, and norms against
unjust enrichment
2. That the principle of forum non conveniens was
inapplicable to the instant case.
This Courts Ruling
The Petition has no merit.
First Question: Summary Judgment
Petitioner vehemently insists that summary judgment is
inappropriate to resolve the case at bar, arguing that his
Answer allegedly raised genuine and material factual matters
which he should have been allowed to prove during trial.
On the other hand, respondent argues that the alleged genuine
issues of fact raised by petitioner are mere conclusions of law,
or propositions arrived at not by any process of natural
reasoning from a fact or a combination of facts stated but by
the application of the artificial rules of law to the facts pleaded.
The RTC granted respondents Motion for Summary Judgment
because petitioner, in his Answer, admitted the existence of the
Judgment on Stipulation for Entry in Judgment. Besides, he
had already paid $5,000 to respondent, as provided in the
foreign judgment sought to be enforced. Hence, the trial court
ruled that, there being no genuine issue as to any material fact,
the case should properly be resolved through summary
judgment. The CA affirmed this ruling.
We concur with the lower courts. Summary judgment is a
procedural device for the prompt disposition of actions in which
the pleadings raise only a legal issue, and not a genuine issue
as to any material fact. By genuine issue is meant a question of
fact that calls for the presentation of evidence. It should be
distinguished from an issue that is sham, contrived, set in bad
faith and patently unsubstantial.
Summary judgment is resorted to in order to avoid long drawn
out litigations and useless delays. When affidavits, depositions
and admissions on file show that there are no genuine issues
of fact to be tried, the Rules allow a party to pierce the
allegations in the pleadings and to obtain immediate relief by
way of summary judgment. In short, since the facts are not in
dispute, the court is allowed to decide the case summarily by
applying the law to the material facts.
Petitioner contends that by allowing summary judgment, the
two courts a quo prevented him from presenting evidence to
substantiate his claims. We do not agree. Summary judgment
is based on facts directly proven by affidavits, depositions or
admissions. In this case, the CA and the RTC both merely
ruled that trial was not necessary to resolve the case.
Additionally and correctly, the RTC specifically ordered
petitioner to submit opposing affidavits to support his
contentions that (1) the Judgment on Stipulation for Entry in
Judgment was procured on the basis of fraud, collusion, undue
influence, or a clear mistake of law or fact; and (2) that it was
contrary to public policy or the canons of morality.
Again, in its Order dated November 29, 1995, the trial court
clarified that the opposing affidavits were for [petitioner] to spell
out the facts or circumstances [that] would constitute lack of
jurisdiction over the subject matter of and over the persons
involved in Case No. C21-00265, and that would render the
judgment therein null and void. In this light, petitioners
contention that he was not allowed to present evidence to
substantiate his claims is clearly untenable.
For summary judgment to be valid, Rule 34, Section 3 of the
Rules of Court, requires (a) that there must be no genuine
issue as to any material fact, except for the amount of
damages; and (b) that the party presenting the motion for
summary judgment must be entitled to a judgment as a matter
of law. As mentioned earlier, petitioner admitted that a foreign
judgment had been rendered against him and in favor of
respondent, and that he had paid $5,000 to the latter in partial
compliance therewith. Hence, respondent, as the party
presenting the Motion for Summary Judgment, was shown to
be entitled to the judgment.
The CA made short shrift of the first requirement. To show that
petitioner had raised no genuine issue, it relied instead on the
finality of the foreign judgment which was, in fact, partially
executed. Hence, we shall show in the following discussion
how the defenses presented by petitioner failed to tender any
genuine issue of fact, and why a full-blown trial was not
necessary for the resolution of the issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265,
which involved partnership interest, was vested in the
Securities and Exchange Commission, not in the Superior
Court of California, County of Contra Costa.
We disagree. In the absence of proof of California law on the
jurisdiction of courts, we presume that such law, if any, is
similar to Philippine law. We base this conclusion on the
presumption of identity or similarity, also known as processual
presumption. The Complaint, which respondent filed with the
trial court, was for the enforcement of a foreign judgment. He
alleged therein that the action of the foreign court was for the
collection of a sum of money, breach of promissory notes, and
damages.
In our jurisdiction, such a case falls under the jurisdiction of
civil courts, not of the Securities and Exchange Commission
(SEC). The jurisdiction of the latter is exclusively over matters
enumerated in Section 5, PD 902-A, prior to its latest
amendment. If the foreign court did not really have jurisdiction
over the case, as petitioner claims, it would have been very
easy for him to show this. Since jurisdiction is determined by
the allegations in a complaint, he only had to submit a copy of
the complaint filed with the foreign court. Clearly, this issue did
not warrant trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the
form of a Compromise Agreement, cannot be executed without
the parties being assisted by their chosen lawyers. The reason
for this, he points out, is to eliminate collusion, undue influence
and/or improper exertion of ascendancy by one party over the
other. He alleges that he discharged his counsel during the
proceedings, because he felt that the latter was not properly
attending to the case. The judge, however, did not allow him to
secure the services of another counsel. Insisting that petitioner
settle the case with respondent, the judge practically imposed
the settlement agreement on him. In his Opposing Affidavit,
petitioner states:
It is true that I was initially represented by a counsel in the
proceedings in #C21-00625. I discharged him because I then
felt that he was not properly attending to my case or was not
competent enough to represent my interest. I asked the Judge
for time to secure another counsel but I was practically
discouraged from engaging one as the Judge was insistent that
I settle the case at once with the [respondent]. Being a
foreigner and not a lawyer at that I did not know what to do. I
felt helpless and the Judge and [respondents] lawyer were the
ones telling me what to do. Under ordinary circumstances, their
directives should have been taken with a grain of salt
especially so [since respondents] counsel, who was telling me
what to do, had an interest adverse to mine. But [because] time
constraints and undue influence exerted by the Judge and
[respondents] counsel on me disturbed and seriously affected
my freedom to act according to my best judgment and belief. In
point of fact, the terms of the settlement were practically
imposed on me by the Judge seconded all the time by
[respondents] counsel. I was then helpless as I had no counsel
to assist me and the collusion between the Judge and
[respondents] counsel was becoming more evident by the way
I was treated in the Superior Court of [t]he State of California. I
signed the Judgment on Stipulation for Entry in Judgment
without any lawyer assisting me at the time and without being
fully aware of its terms and stipulations.
The manifestation of petitioner that the judge and the counsel
for the opposing party had pressured him would gain credibility
only if he had not been given sufficient time to engage the
services of a new lawyer. Respondents Affidavit dated May 23,
1994, clarified, however, that petitioner had sufficient time, but
he failed to retain a counsel. Having dismissed his lawyer as
early as June 19, 1991, petitioner directly handled his own
defense and negotiated a settlement with respondent and his
counsel in December 1991. Respondent also stated that
petitioner, ignoring the judges reminder of the importance of
having a lawyer, argued that he would be the one to settle the
case and pay anyway. Eventually, the Compromise Agreement
was presented in court and signed before Judge Ellen James
on January 3, 1992. Hence, petitioners rights to counsel and to
due process were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the
norm against unjust enrichment because the judge made him
shoulder all the liabilities in the case, even if there were two
other defendants, G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the
foreign judgment, even if there are other defendants who are
not being held liable together with him. First, the foreign
judgment itself does not mention these other defendants, their
participation or their liability to respondent. Second, petitioners
undated Opposing Affidavit states: [A]lthough myself and these
entities were initially represented by Atty. Lawrence L.
Severson of the Law Firm Kouns, Quinlivan & Severson, x x x I
discharged x x x said lawyer. Subsequently, I assumed the
representation for myself and these firms and this was allowed
by the Superior Court of the State of California without any
authorization from G.G.P. & Sons, Inc. and the Genesis Group.
Clearly, it was petitioner who chose to represent the other
defendants; hence, he cannot now be allowed to impugn a
decision based on this ground.
In any event, contrary to petitioners contention, unjust
enrichment or solutio indebiti does not apply to this case. This
doctrine contemplates payment when there is no duty to pay,
and the person who receives the payment has no right to
receive it. In this case, petitioner merely argues that the other
two defendants whom he represented were liable together with
him. This is not a case of unjust enrichment.
We do not see, either, how the foreign judgment could be
contrary to law, morals, public policy or the canons of morality
obtaining in the country. Petitioner owed money, and the
judgment required him to pay it. That is the long and the short
of this case.
In addition, the maneuverings of petitioner before the trial court
reinforce our belief that his claims are unfounded. Instead of
filing opposing affidavits to support his affirmative defenses, he
filed a Motion for Reconsideration of the Order allowing
summary judgment, as well as a Motion to Dismiss the action
on the ground of forum non conveniens. His opposing affidavits
were filed only after the Order of November 29, 1995 had
denied both Motions. Such actuation was considered by the
trial court as a dilatory ploy which justified the resolution of the
action by summary judgment. According to the CA, petitioners
allegations sought to delay the full effects of the judgment;
hence, summary judgment was proper. On this point, we
concur with both courts.
Second Question: Forum Non Conveniens
Petitioner argues that the RTC should have refused to
entertain the Complaint for enforcement of the foreign
judgment on the principle of forum non conveniens. He claims
that the trial court had no jurisdiction, because the case
involved partnership interest, and there was difficulty in
ascertaining the applicable law in California. All the aspects of
the transaction took place in a foreign country, and respondent
is not even Filipino.
We disagree. Under the principle of forum non conveniens,
even if the exercise of jurisdiction is authorized by law, courts
may nonetheless refuse to entertain a case for any of the
following practical reasons:
1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case
transpired in a foreign jurisdiction or the material witnesses
have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a
practice known as forum shopping[,] merely to secure
procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non-
residents or aliens when the docket may already be
overcrowded;
4) The inadequacy of the local judicial machinery for
effectuating the right sought to be maintained; and
The difficulty of ascertaining foreign law.
None of the aforementioned reasons barred the RTC from
exercising its jurisdiction. In the present action, there was no
more need for material witnesses, no forum shopping or
harassment of petitioner, no inadequacy in the local machinery
to enforce the foreign judgment, and no question raised as to
the application of any foreign law.
Authorities agree that the issue of whether a suit should be
entertained or dismissed on the basis of the above-mentioned
principle depends largely upon the facts of each case and on
the sound discretion of the trial court. Since the present action
lodged in the RTC was for the enforcement of a foreign
judgment, there was no need to ascertain the rights and the
obligations of the parties based on foreign laws or contracts.
The parties needed only to perform their obligations under the
Compromise Agreement they had entered into.
Under Section 48, Rule 39 of the 1997 Rules of Civil
Procedure, a judgment in an action in personam rendered by a
foreign tribunal clothed with jurisdiction is presumptive
evidence of a right as between the parties and their
successors-in-interest by a subsequent title.
Also, under Section 5(n) of Rule 131, a court -- whether in the
Philippines or elsewhere -- enjoys the presumption that it is
acting in the lawful exercise of its jurisdiction, and that it is
regularly performing its official duty. Its judgment may,
however, be assailed if there is evidence of want of jurisdiction,
want of notice to the party, collusion, fraud or clear mistake of
law or fact. But precisely, this possibility signals the need for a
local trial court to exercise jurisdiction. Clearly, the application
of forum non coveniens is not called for.
The grounds relied upon by petitioner are contradictory. On the
one hand, he insists that the RTC take jurisdiction over the
enforcement case in order to invalidate the foreign judgment;
yet, he avers that the trial court should not exercise jurisdiction
over the same case on the basis of forum non conveniens. Not
only do these defenses weaken each other, but they bolster
the finding of the lower courts that he was merely maneuvering
to avoid or delay payment of his obligation.
WHEREFORE, the Petition is hereby DENIED and the assailed
Decision and Resolution AFFIRMED. Double costs against
petitioner. SO ORDERED.
[G.R. No. 139325. April 12, 2005]
PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES,
HILDA B. NARCISO, SR. MARIANI DIMARANAN, SFIC, and
JOEL C. LAMANGAN in their behalf and on behalf of the Class
Plaintiffs in Class Action No. MDL 840, United States District
Court of Hawaii, petitioners, vs. HON. SANTIAGO JAVIER
RANADA, in his capacity as Presiding Judge of Branch 137,
Regional Trial Court, Makati City, and the ESTATE OF
FERDINAND E. MARCOS, through its court appointed legal
representatives in Class Action MDL 840, United States District
Court of Hawaii, namely: Imelda R. Marcos and Ferdinand
Marcos, Jr., respondents.
DECISION
TINGA, J.:
Our martial law experience bore strange unwanted fruits, and
we have yet to finish weeding out its bitter crop. While the
restoration of freedom and the fundamental structures and
processes of democracy have been much lauded, according to
a significant number, the changes, however, have not
sufficiently healed the colossal damage wrought under the
oppressive conditions of the martial law period. The cries of
justice for the tortured, the murdered, and the desaparecidos
arouse outrage and sympathy in the hearts of the fair-minded,
yet the dispensation of the appropriate relief due them cannot
be extended through the same caprice or whim that
characterized the ill-wind of martial rule. The damage done
was not merely personal but institutional, and the proper
rebuke to the iniquitous past has to involve the award of
reparations due within the confines of the restored rule of law.
The petitioners in this case are prominent victims of human
rights violations who, deprived of the opportunity to directly
confront the man who once held absolute rule over this
country, have chosen to do battle instead with the earthly
representative, his estate. The clash has been for now
interrupted by a trial court ruling, seemingly comported to legal
logic, that required the petitioners to pay a whopping filing fee
of over Four Hundred Seventy-Two Million Pesos
(P472,000,000.00) in order that they be able to enforce a
judgment awarded them by a foreign court. There is an
understandable temptation to cast the struggle within the
simplistic confines of a morality tale, and to employ short-cuts
to arrive at what might seem the desirable solution. But easy,
reflexive resort to the equity principle all too often leads to a
result that may be morally correct, but legally wrong.
Nonetheless, the application of the legal principles involved in
this case will comfort those who maintain that our substantive
and procedural laws, for all their perceived ambiguity and
susceptibility to myriad interpretations, are inherently fair and
just. The relief sought by the petitioners is expressly mandated
by our laws and conforms to established legal principles. The
granting of this petition for certiorari is warranted in order to
correct the legally infirm and unabashedly unjust ruling of the
respondent judge.
The essential facts bear little elaboration. On 9 May 1991, a
complaint was filed with the United States District Court (US
District Court), District of Hawaii, against the Estate of former
Philippine President Ferdinand E. Marcos (Marcos Estate). The
action was brought forth by ten Filipino citizens who each
alleged having suffered human rights abuses such as arbitrary
detention, torture and rape in the hands of police or military
forces during the Marcos regime. The Alien Tort Act was
invoked as basis for the US District Courts jurisdiction over the
complaint, as it involved a suit by aliens for tortious violations
of international law. These plaintiffs brought the action on their
own behalf and on behalf of a class of similarly situated
individuals, particularly consisting of all current civilian citizens
of the Philippines, their heirs and beneficiaries, who between
1972 and 1987 were tortured, summarily executed or had
disappeared while in the custody of military or paramilitary
groups. Plaintiffs alleged that the class consisted of
approximately ten thousand (10,000) members; hence, joinder
of all these persons was impracticable.
The institution of a class action suit was warranted under Rule
23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure,
the provisions of which were invoked by the plaintiffs.
Subsequently, the US District Court certified the case as a
class action and created three (3) sub-classes of torture,
summary execution and disappearance victims. Trial ensued,
and subsequently a jury rendered a verdict and an award of
compensatory and exemplary damages in favor of the plaintiff
class. Then, on 3 February 1995, the US District Court,
presided by Judge Manuel L. Real, rendered a Final Judgment
(Final Judgment) awarding the plaintiff class a total of One
Billion Nine Hundred Sixty Four Million Five Thousand Eight
Hundred Fifty Nine Dollars and Ninety Cents
($1,964,005,859.90). The Final Judgment was eventually
affirmed by the US Court of Appeals for the Ninth Circuit, in a
decision rendered on 17 December 1996.
On 20 May 1997, the present petitioners filed Complaint with
the Regional Trial Court, City of Makati (Makati RTC) for the
enforcement of the Final Judgment. They alleged that they are
members of the plaintiff class in whose favor the US District
Court awarded damages. They argued that since the Marcos
Estate failed to file a petition for certiorari with the US Supreme
Court after the Ninth Circuit Court of Appeals had affirmed the
Final Judgment, the decision of the US District Court had
become final and executory, and hence should be recognized
and enforced in the Philippines, pursuant to Section 50, Rule
39 of the Rules of Court then in force.
On 5 February 1998, the Marcos Estate filed a motion to
dismiss, raising, among others, the non-payment of the correct
filing fees. It alleged that petitioners had only paid Four
Hundred Ten Pesos (P410.00) as docket and filing fees,
notwithstanding the fact that they sought to enforce a monetary
amount of damages in the amount of over Two and a Quarter
Billion US Dollars (US$2.25 Billion). The Marcos Estate cited
Supreme Court Circular No. 7, pertaining to the proper
computation and payment of docket fees. In response, the
petitioners claimed that an action for the enforcement of a
foreign judgment is not capable of pecuniary estimation; hence,
a filing fee of only Four Hundred Ten Pesos (P410.00) was
proper, pursuant to Section 7(c) of Rule 141.
On 9 September 1998, respondent Judge Santiago Javier
Ranada of the Makati RTC issued the subject Order dismissing
the complaint without prejudice. Respondent judge opined that
contrary to the petitioners submission, the subject matter of the
complaint was indeed capable of pecuniary estimation, as it
involved a judgment rendered by a foreign court ordering the
payment of definite sums of money, allowing for easy
determination of the value of the foreign judgment. On that
score, Section 7(a) of Rule 141 of the Rules of Civil Procedure
would find application, and the RTC estimated the proper
amount of filing fees was approximately Four Hundred Seventy
Two Million Pesos, which obviously had not been paid.
Not surprisingly, petitioners filed a Motion for Reconsideration,
which Judge Ranada denied in an Order dated 28 July 1999.
From this denial, petitioners filed a Petition for Certiorari under
Rule 65 assailing the twin orders of respondent judge. They
prayed for the annulment of the questioned orders, and an
order directing the reinstatement of Civil Case No. 97-1052 and
the conduct of appropriate proceedings thereon.
Petitioners submit that their action is incapable of pecuniary
estimation as the subject matter of the suit is the enforcement
of a foreign judgment, and not an action for the collection of a
sum of money or recovery of damages. They also point out that
to require the class plaintiffs to pay Four Hundred Seventy Two
Million Pesos (P472,000,000.00) in filing fees would negate
and render inutile the liberal construction ordained by the Rules
of Court, as required by Section 6, Rule 1 of the Rules of Civil
Procedure, particularly the inexpensive disposition of every
action.
Petitioners invoke Section 11, Article III of the Bill of Rights of
the Constitution, which provides that Free access to the courts
and quasi-judicial bodies and adequate legal assistance shall
not be denied to any person by reason of poverty, a mandate
which is essentially defeated by the required exorbitant filing
fee. The adjudicated amount of the filing fee, as arrived at by
the RTC, was characterized as indisputably unfair, inequitable,
and unjust.
The Commission on Human Rights (CHR) was permitted to
intervene in this case. It urged that the petition be granted and
a judgment rendered, ordering the enforcement and execution
of the District Court judgment in accordance with Section 48,
Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the
Makati RTC erred in interpreting the action for the execution of
a foreign judgment as a new case, in violation of the principle
that once a case has been decided between the same parties
in one country on the same issue with finality, it can no longer
be relitigated again in another country. The CHR likewise
invokes the principle of comity, and of vested rights.
The Courts disposition on the issue of filing fees will prove a
useful jurisprudential guidepost for courts confronted with
actions enforcing foreign judgments, particularly those lodged
against an estate. There is no basis for the issuance a limited
pro hac vice ruling based on the special circumstances of the
petitioners as victims of martial law, or on the emotionally-
charged allegation of human rights abuses.
An examination of Rule 141 of the Rules of Court readily
evinces that the respondent judge ignored the clear letter of the
law when he concluded that the filing fee be computed based
on the total sum claimed or the stated value of the property in
litigation.
In dismissing the complaint, the respondent judge relied on
Section 7(a), Rule 141 as basis for the computation of the filing
fee of over P472 Million. The provision states:
SEC. 7. Clerk of Regional Trial Court.-
(a) For filing an action or a permissive
counterclaim or money claim against an estate not
based on judgment, or for filing with leave of court a
third-party, fourth-party, etc., complaint, or a complaint
in intervention, and for all clerical services in the same
time, if the total sum claimed, exclusive of interest, or
the started value of the property in litigation, is:
1. Less than P 100,00.00 P 500.00
2. P 100,000.00 or more - P 800.00
but less than P 150,000.00
3. P 150,000.00 or more but - P 1,000.00
less than P 200,000.00
4. P 200,000.00 or more but
less than P 250,000.00 - P 1,500.00
5. P 250,000.00 or more but
less than P 300,00.00 - P 1,750.00
6. P 300,000.00 or more but
not more than P 400,000.00 - P 2,000.00
7. P 350,000.00 or more but not
more than P400,000.00 - P 2,250.00
8. For each P 1,000.00 in excess of
P 400,000.00 - P 10.00
...
(Emphasis
supplied)
Obviously, the above-quoted provision covers, on one hand,
ordinary actions, permissive counterclaims, third-party, etc.
complaints and complaints-in-interventions, and on the other,
money claims against estates which are not based on
judgment. Thus, the relevant question for purposes of the
present petition is whether the action filed with the lower court
is a money claim against an estate not based on judgment.
Petitioners complaint may have been lodged against an estate,
but it is clearly based on a judgment, the Final Judgment of the
US District Court. The provision does not make any distinction
between a local judgment and a foreign judgment, and where
the law does not distinguish, we shall not distinguish.
A reading of Section 7 in its entirety reveals several instances
wherein the filing fee is computed on the basis of the amount of
the relief sought, or on the value of the property in litigation.
The filing fee for requests for extrajudicial foreclosure of
mortgage is based on the amount of indebtedness or the
mortgagees claim. In special proceedings involving properties
such as for the allowance of wills, the filing fee is again based
on the value of the property. The aforecited rules evidently
have no application to petitioners complaint.
Petitioners rely on Section 7(b), particularly the proviso on
actions where the value of the subject matter cannot be
estimated. The provision reads in full:
SEC. 7. Clerk of Regional Trial Court.-
(b) For filing
1. Actions where the value
of the subject matter
cannot be estimated --- P
600.00
2. Special civil actions except
judicial foreclosure which
shall be governed by
paragraph (a) above ---
P 600.00
3. All other actions not
 involving property --- P 600.00
In a real action, the assessed value of the property, or if there
is none, the estimated value, thereof shall be alleged by the
claimant and shall be the basis in computing the fees.
It is worth noting that the provision also provides that in real
actions, the assessed value or estimated value of the property
shall be alleged by the claimant and shall be the basis in
computing the fees. Yet again, this provision does not apply in
the case at bar. A real action is one where the plaintiff seeks
the recovery of real property or an action affecting title to or
recovery of possession of real property. Neither the complaint
nor the award of damages adjudicated by the US District Court
involves any real property of the Marcos Estate.
Thus, respondent judge was in clear and serious error when he
concluded that the filing fees should be computed on the basis
of the schematic table of Section 7(a), as the action involved
pertains to a claim against an estate based on judgment. What
provision, if any, then should apply in determining the filing
fees for an action to enforce a foreign judgment?
To resolve this question, a proper understanding is required on
the nature and effects of a foreign judgment in this jurisdiction.
The rules of comity, utility and convenience of nations have
established a usage among civilized states by which final
judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious under certain
conditions that may vary in different countries. This principle
was prominently affirmed in the leading American case of
Hilton v. Guyot and expressly recognized in our jurisprudence
beginning with Ingenholl v. Walter E. Olsen & Co. The
conditions required by the Philippines for recognition and
enforcement of a foreign judgment were originally contained in
Section 311 of the Code of Civil Procedure, which was taken
from the California Code of Civil Procedure which, in turn, was
derived from the California Act of March 11, 1872. Remarkably,
the procedural rule now outlined in Section 48, Rule 39 of the
Rules of Civil Procedure has remained unchanged down to the
last word in nearly a century. Section 48 states:
SEC. 48. 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;
In either case, the judgment or final order 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.
There is an evident distinction between a foreign judgment in
an action in rem and one in personam. For an action in rem,
the foreign judgment is deemed conclusive upon the title to the
thing, while in an action in personam, the foreign judgment is
presumptive, and not conclusive, of a right as between the
parties and their successors in interest by a subsequent title.
However, in both cases, the foreign judgment is susceptible to
impeachment in our local courts on the grounds of want of
jurisdiction or notice to the party, collusion, fraud, or clear
mistake of law or fact. Thus, the party aggrieved by the foreign
judgment is entitled to defend against the enforcement of such
decision in the local forum. It is essential that there should be
an opportunity to challenge the foreign judgment, in order for
the court in this jurisdiction to properly determine its efficacy.
It is clear then that it is usually necessary for an action to be
filed in order to enforce a foreign judgment, even if such
judgment has conclusive effect as in the case of in rem actions,
if only for the purpose of allowing the losing party an
opportunity to challenge the foreign judgment, and in order for
the court to properly determine its efficacy. Consequently, the
party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.
The rules are silent as to what initiatory procedure must be
undertaken in order to enforce a foreign judgment in the
Philippines. But there is no question that the filing of a civil
complaint is an appropriate measure for such purpose. A civil
action is one by which a party sues another for the
enforcement or protection of a right, and clearly an action to
enforce a foreign judgment is in essence a vindication of a right
prescinding either from a conclusive judgment upon title or the
presumptive evidence of a right. Absent perhaps a statutory
grant of jurisdiction to a quasi-judicial body, the claim for
enforcement of judgment must be brought before the regular
courts.
There are distinctions, nuanced but discernible, between the
cause of action arising from the enforcement of a foreign
judgment, and that arising from the facts or allegations that
occasioned the foreign judgment. They may pertain to the
same set of facts, but there is an essential difference in the
right-duty correlatives that are sought to be vindicated. For
example, in a complaint for damages against a tortfeasor, the
cause of action emanates from the violation of the right of the
complainant through the act or omission of the respondent. On
the other hand, in a complaint for the enforcement of a foreign
judgment awarding damages from the same tortfeasor, for the
violation of the same right through the same manner of action,
the cause of action derives not from the tortious act but from
the foreign judgment itself.
More importantly, the matters for proof are different. Using the
above example, the complainant will have to establish before
the court the tortious act or omission committed by the
tortfeasor, who in turn is allowed to rebut these factual
allegations or prove extenuating circumstances. Extensive
litigation is thus conducted on the facts, and from there the
right to and amount of damages are assessed. On the other
hand, in an action to enforce a foreign judgment, the matter left
for proof is the foreign judgment itself, and not the facts from
which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are
generally restricted to a review of jurisdiction of the foreign
court, the service of personal notice, collusion, fraud, or
mistake of fact or law. The limitations on review is in
consonance with a strong and pervasive policy in all legal
systems to limit repetitive litigation on claims and issues.
Otherwise known as the policy of preclusion, it seeks to protect
party expectations resulting from previous litigation, to
safeguard against the harassment of defendants, to insure that
the task of courts not be increased by never-ending litigation of
the same disputes, and in a larger sense to promote what Lord
Coke in the Ferrers Case of 1599 stated to be the goal of all
law: rest and quietness. If every judgment of a foreign court
were reviewable on the merits, the plaintiff would be forced
back on his/her original cause of action, rendering immaterial
the previously concluded litigation.
Petitioners appreciate this distinction, and rely upon it to
support the proposition that the subject matter of the
complaintthe enforcement of a foreign judgmentis incapable of
pecuniary estimation. Admittedly the proposition, as it applies
in this case, is counter-intuitive, and thus deserves strict
scrutiny. For in all practical intents and purposes, the matter at
hand is capable of pecuniary estimation, down to the last cent.
In the assailed Order, the respondent judge pounced upon this
point without equivocation:
The Rules use the term where the value of the subject matter
cannot be estimated. The subject matter of the present case is
the judgment rendered by the foreign court ordering defendant
to pay plaintiffs definite sums of money, as and for
compensatory damages. The Court finds that the value of the
foreign judgment can be estimated; indeed, it can even be
easily determined. The Court is not minded to distinguish
between the enforcement of a judgment and the amount of
said judgment, and separate the two, for purposes of
determining the correct filing fees. Similarly, a plaintiff suing on
promissory note for P1 million cannot be allowed to pay only
P400 filing fees (sic), on the reasoning that the subject matter
of his suit is not the P1 million, but the enforcement of the
promissory note, and that the value of such enforcement
cannot be estimated.
The jurisprudential standard in gauging whether the subject
matter of an action is capable of pecuniary estimation is well-
entrenched. The Marcos Estate cites Singsong v. Isabela
Sawmill and Raymundo v. Court of Appeals, which ruled:
[I]n determining whether an action is one the subject matter of
which is not capable of pecuniary estimation this Court has
adopted the criterion of first ascertaining the nature of the
principal action or remedy sought. If it is primarily for the
recovery of a sum of money, the claim is considered capable of
pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the courts of first instance would depend
on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money,
where the money claim is purely incidental to, or a
consequence of, the principal relief sought, this Court has
considered such actions as cases where the subject of the
litigation may not be estimated in terms of money, and are
cognizable exclusively by courts of first instance (now Regional
Trial Courts).
On the other hand, petitioners cite the ponencia of Justice JBL
Reyes in Lapitan v. Scandia, from which the rule in Singsong
and Raymundo actually derives, but which incorporates this
additional nuance omitted in the latter cases:
xxx However, where the basic issue is something other than
the right to recover a sum of money, where the money claim is
purely incidental to, or a consequence of, the principal relief
sought, like in suits to have the defendant perform his part
of the contract (specific performance) and in actions for
support, or for annulment of judgment or to foreclose a
mortgage, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in
terms of money, and are cognizable exclusively by courts of
first instance.
Petitioners go on to add that among the actions the Court has
recognized as being incapable of pecuniary estimation include
legality of conveyances and money deposits, validity of a
mortgage, the right to support, validity of documents, rescission
of contracts, specific performance, and validity or annulment of
judgments. It is urged that an action for enforcement of a
foreign judgment belongs to the same class.
This is an intriguing argument, but ultimately it is self-evident
that while the subject matter of the action is undoubtedly the
enforcement of a foreign judgment, the effect of a providential
award would be the adjudication of a sum of money. Perhaps
in theory, such an action is primarily for the enforcement of the
foreign judgment, but there is a certain obtuseness to that sort
of argument since there is no denying that the enforcement of
the foreign judgment will necessarily result in the award of a
definite sum of money.
But before we insist upon this conclusion past beyond the point
of reckoning, we must examine its possible ramifications.
Petitioners raise the point that a declaration that an action for
enforcement of foreign judgment may be capable of pecuniary
estimation might lead to an instance wherein a first level court
such as the Municipal Trial Court would have jurisdiction to
enforce a foreign judgment. But under the statute defining the
jurisdiction of first level courts, B.P. 129, such courts are not
vested with jurisdiction over actions for the enforcement of
foreign judgments.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal
Trial Courts and Municipal Circuit Trial Courts in civil cases.
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts shall exercise:
 (1) Exclusive original jurisdiction over civil actions and
probate proceedings, testate and intestate, including the
grant of provisional remedies in proper cases, where the
value of the personal property, estate, or amount of the
demand does not exceed One hundred thousand pesos
(P100,000.00) or, in Metro Manila where such personal
property, estate, or amount of the demand does not
exceed Two hundred thousand pesos (P200,000.00)
exclusive of interest damages of whatever kind, attorney's
fees, litigation expenses, and costs, the amount of which
must be specifically alleged: Provided, That where there
are several claims or causes of action between the same
or different parties, embodied in the same complaint, the
amount of the demand shall be the totality of the claims in
all the causes of action, irrespective of whether the
causes of action arose out of the same or different
transactions;
(2) Exclusive original jurisdiction over cases of forcible
entry and unlawful detainer: Provided, That when, in such
cases, the defendant raises the question of ownership in
his pleadings and the question of possession cannot be
resolved without deciding the issue of ownership, the
issue of ownership shall be resolved only to determine the
issue of possession.
(3) Exclusive original jurisdiction in all civil actions which
involve title to, or possession of, real property, or any
interest therein where the assessed value of the property
or interest therein does not exceed Twenty thousand
pesos (P20,000.00) or, in civil actions in Metro Manila,
where such assessed value does not exceed Fifty
thousand pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorney's fees, litigation
expenses and costs: Provided, That value of such
property shall be determined by the assessed value of the
adjacent lots.
Section 33 of B.P. 129 refers to instances wherein the cause of
action or subject matter pertains to an assertion of rights and
interests over property or a sum of money. But as earlier
pointed out, the subject matter of an action to enforce a foreign
judgment is the foreign judgment itself, and the cause of action
arising from the adjudication of such judgment.
An examination of Section 19(6), B.P. 129 reveals that the
instant complaint for enforcement of a foreign judgment, even if
capable of pecuniary estimation, would fall under the
jurisdiction of the Regional Trial Courts, thus negating the fears
of the petitioners. Indeed, an examination of the provision
indicates that it can be relied upon as jurisdictional basis with
respect to actions for enforcement of foreign judgments,
provided that no other court or office is vested jurisdiction over
such complaint:
Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall
exercise exclusive original jurisdiction:
xxx
(6) In all cases not within the exclusive jurisdiction of any court,
tribunal, person or body exercising jurisdiction or any court,
tribunal, person or body exercising judicial or quasi-judicial
functions.
Thus, we are comfortable in asserting the obvious, that the
complaint to enforce the US District Court judgment is one
capable of pecuniary estimation. But at the same time, it is also
an action based on judgment against an estate, thus placing it
beyond the ambit of Section 7(a) of Rule 141. What provision
then governs the proper computation of the filing fees over the
instant complaint? For this case and other similarly situated
instances, we find that it is covered by Section 7(b)(3),
involving as it does, other actions not involving property.
Notably, the amount paid as docket fees by the petitioners on
the premise that it was an action incapable of pecuniary
estimation corresponds to the same amount required for other
actions not involving property. The petitioners thus paid the
correct amount of filing fees, and it was a grave abuse of
discretion for respondent judge to have applied instead a
clearly inapplicable rule and dismissed the complaint.
There is another consideration of supreme relevance in this
case, one which should disabuse the notion that the doctrine
affirmed in this decision is grounded solely on the letter of the
procedural rule. We earlier adverted to the the internationally
recognized policy of preclusion, as well as the principles of
comity, utility and convenience of nations as the basis for the
evolution of the rule calling for the recognition and enforcement
of foreign judgments. The US Supreme Court in Hilton v. Guyot
relied heavily on the concept of comity, as especially derived
from the landmark treatise of Justice Story in his
Commentaries on the Conflict of Laws of 1834. Yet the notion
of comity has since been criticized as one of dim contours or
suffering from a number of fallacies. Other conceptual bases
for the recognition of foreign judgments have evolved such as
the vested rights theory or the modern doctrine of obligation.
There have been attempts to codify through treaties or
multilateral agreements the standards for the recognition and
enforcement of foreign judgments, but these have not borne
fruition. The members of the European Common Market
accede to the Judgments Convention, signed in 1978, which
eliminates as to participating countries all of such obstacles to
recognition such as reciprocity and rvision au fond. The most
ambitious of these attempts is the Convention on the
Recognition and Enforcement of Foreign Judgments in Civil
and Commercial Matters, prepared in 1966 by the Hague
Conference of International Law. While it has not received the
ratifications needed to have it take effect, it is recognized as
representing current scholarly thought on the topic. Neither the
Philippines nor the United States are signatories to the
Convention.
Yet even if there is no unanimity as to the applicable theory
behind the recognition and enforcement of foreign judgments
or a universal treaty rendering it obligatory force, there is
consensus that the viability of such recognition and
enforcement is essential. Steiner and Vagts note:
. . . The notion of unconnected bodies of national law on
private international law, each following a quite separate path,
is not one conducive to the growth of a transnational
community encouraging travel and commerce among its
members. There is a contemporary resurgence of writing
stressing the identity or similarity of the values that systems of
public and private international law seek to further a community
interest in common, or at least reasonable, rules on these
matters in national legal systems. And such generic principles
as reciprocity play an important role in both fields.
Salonga, whose treatise on private international law is of
worldwide renown, points out:
Whatever be the theory as to the basis for recognizing foreign
judgments, there can be little dispute that the end is to protect
the reasonable expectations and demands of the parties.
Where the parties have submitted a matter for adjudication in
the court of one state, and proceedings there are not tainted
with irregularity, they may fairly be expected to submit, within
the state or elsewhere, to the enforcement of the judgment
issued by the court.
There is also consensus as to the requisites for recognition of a
foreign judgment and the defenses against the enforcement
thereof. As earlier discussed, the exceptions enumerated in
Section 48, Rule 39 have remain unchanged since the time
they were adapted in this jurisdiction from long standing
American rules. The requisites and exceptions as delineated
under Section 48 are but a restatement of generally accepted
principles of international law. Section 98 of The Restatement,
Second, Conflict of Laws, states that a valid judgment rendered
in a foreign nation after a fair trial in a contested proceeding will
be recognized in the United States, and on its face, the term
valid brings into play requirements such notions as valid
jurisdiction over the subject matter and parties. Similarly, the
notion that fraud or collusion may preclude the enforcement of
a foreign judgment finds affirmation with foreign jurisprudence
and commentators, as well as the doctrine that the foreign
judgment must not constitute a clear mistake of law or fact.
And finally, it has been recognized that public policy as a
defense to the recognition of judgments serves as an umbrella
for a variety of concerns in international practice which may
lead to a denial of recognition.
The viability of the public policy defense against the
enforcement of a foreign judgment has been recognized in this
jurisdiction. This defense allows for the application of local
standards in reviewing the foreign judgment, especially when
such judgment creates only a presumptive right, as it does in
cases wherein the judgment is against a person. The defense
is also recognized within the international sphere, as many civil
law nations adhere to a broad public policy exception which
may result in a denial of recognition when the foreign court, in
the light of the choice-of-law rules of the recognizing court,
applied the wrong law to the case. The public policy defense
can safeguard against possible abuses to the easy resort to
offshore litigation if it can be demonstrated that the original
claim is noxious to our constitutional values.
There is no obligatory rule derived from treaties or conventions
that requires the Philippines to recognize foreign judgments, or
allow a procedure for the enforcement thereof. However,
generally accepted principles of international law, by virtue of
the incorporation clause of the Constitution, form part of the
laws of the land even if they do not derive from treaty
obligations. The classical formulation in international law sees
those customary rules accepted as binding result from the
combination two elements: the established, widespread, and
consistent practice on the part of States; and a psychological
element known as the opinion juris sive necessitates (opinion
as to law or necessity). Implicit in the latter element is a belief
that the practice in question is rendered obligatory by the
existence of a rule of law requiring it.
While the definite conceptual parameters of the recognition and
enforcement of foreign judgments have not been authoritatively
established, the Court can assert with certainty that such an
undertaking is among those generally accepted principles of
international law. As earlier demonstrated, there is a
widespread practice among states accepting in principle the
need for such recognition and enforcement, albeit subject to
limitations of varying degrees. The fact that there is no binding
universal treaty governing the practice is not indicative of a
widespread rejection of the principle, but only a disagreement
as to the imposable specific rules governing the procedure for
recognition and enforcement.
Aside from the widespread practice, it is indubitable that the
procedure for recognition and enforcement is embodied in the
rules of law, whether statutory or jurisprudential, adopted in
various foreign jurisdictions. In the Philippines, this is
evidenced primarily by Section 48, Rule 39 of the Rules of
Court which has existed in its current form since the early
1900s. Certainly, the Philippine legal system has long ago
accepted into its jurisprudence and procedural rules the
viability of an action for enforcement of foreign judgment, as
well as the requisites for such valid enforcement, as derived
from internationally accepted doctrines. Again, there may be
distinctions as to the rules adopted by each particular state, but
they all prescind from the premise that there is a rule of law
obliging states to allow for, however generally, the recognition
and enforcement of a foreign judgment. The bare principle, to
our mind, has attained the status of opinio juris in international
practice.
This is a significant proposition, as it acknowledges that the
procedure and requisites outlined in Section 48, Rule 39 derive
their efficacy not merely from the procedural rule, but by virtue
of the incorporation clause of the Constitution. Rules of
procedure are promulgated by the Supreme Court, and could
very well be abrogated or revised by the high court itself. Yet
the Supreme Court is obliged, as are all State components, to
obey the laws of the land, including generally accepted
principles of international law which form part thereof, such as
those ensuring the qualified recognition and enforcement of
foreign judgments.
Thus, relative to the enforcement of foreign judgments in the
Philippines, it emerges that there is a general right recognized
within our body of laws, and affirmed by the Constitution, to
seek recognition and enforcement of foreign judgments, as well
as a right to defend against such enforcement on the grounds
of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
The preclusion of an action for enforcement of a foreign
judgment in this country merely due to an exhorbitant
assessment of docket fees is alien to generally accepted
practices and principles in international law. Indeed, there are
grave concerns in conditioning the amount of the filing fee on
the pecuniary award or the value of the property subject of the
foreign decision. Such pecuniary award will almost certainly be
in foreign denomination, computed in accordance with the
applicable laws and standards of the forum. The vagaries of
inflation, as well as the relative low-income capacity of the
Filipino, to date may very well translate into an award virtually
unenforceable in this country, despite its integral validity, if the
docket fees for the enforcement thereof were predicated on the
amount of the award sought to be enforced. The theory
adopted by respondent judge and the Marcos Estate may even
lead to absurdities, such as if applied to an award involving real
property situated in places such as the United States or
Scandinavia where real property values are inexorably high.
We cannot very well require that the filing fee be computed
based on the value of the foreign property as determined by
the standards of the country where it is located.
As crafted, Rule 141 of the Rules of Civil Procedure avoids
unreasonableness, as it recognizes that the subject matter of
an action for enforcement of a foreign judgment is the foreign
judgment itself, and not the right-duty correlatives that resulted
in the foreign judgment. In this particular circumstance, given
that the complaint is lodged against an estate and is based on
the US District Courts Final Judgment, this foreign judgment
may, for purposes of classification under the governing
procedural rule, be deemed as subsumed under Section
7(b)(3) of Rule 141, i.e., within the class of all other actions not
involving property. Thus, only the blanket filing fee of minimal
amount is required.
Finally, petitioners also invoke Section 11, Article III of the
Constitution, which states that [F]ree access to the courts and
quasi-judicial bodies and adequate legal assistance shall not
be denied to any person by reason of poverty. Since the
provision is among the guarantees ensured by the Bill of
Rights, it certainly gives rise to a demandable right. However,
now is not the occasion to elaborate on the parameters of this
constitutional right. Given our preceding discussion, it is not
necessary to utilize this provision in order to grant the relief
sought by the petitioners. It is axiomatic that the
constitutionality of an act will not be resolved by the courts if
the controversy can be settled on other grounds or unless the
resolution thereof is indispensable for the determination of the
case.
One more word. It bears noting that Section 48, Rule 39
acknowledges that the Final Judgment is not conclusive yet,
but presumptive evidence of a right of the petitioners against
the Marcos Estate. Moreover, the Marcos Estate is not
precluded to present evidence, if any, of want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of
law or fact. This ruling, decisive as it is on the question of filing
fees and no other, does not render verdict on the enforceability
of the Final Judgment before the courts under the jurisdiction of
the Philippines, or for that matter any other issue which may
legitimately be presented before the trial court. Such issues are
to be litigated before the trial court, but within the confines of
the matters for proof as laid down in Section 48, Rule 39. On
the other hand, the speedy resolution of this claim by the trial
court is encouraged, and contumacious delay of the decision
on the merits will not be brooked by this Court.
WHEREFORE, the petition is GRANTED. The assailed orders
are NULLIFIED and SET ASIDE, and a new order
REINSTATING Civil Case No. 97-1052 is hereby issued. No
costs. SO ORDERED.
HERALD BLACK DACASIN vs SHARON DEL MUNDO
DACASIN; G.R. No. 168785, February 5, 2010; CARPIO, J.:
The Case
For reviewis a dismissalof a suit to enforce a post-
foreign divorce child custody agreement for lack of jurisdiction.
The Facts
Petitioner Herald Dacasin (petitioner), American, and
respondent Sharon Del Mundo Dacasin (respondent), Filipino,
were married in Manila in April 1994. They have one daughter,
Stephanie, born on 21 September 1995. In June 1999,
respondent sought and obtained from the Circuit Court, 19th
Judicial Circuit, Lake County, Illinois (Illinois court) a divorce
decree against petitioner. In its ruling, the Illinois court
dissolved the marriage of petitioner and respondent, awarded
to respondent sole custody of Stephanie and retained
jurisdiction over the case for enforcement purposes.
On 28 January 2002, petitioner and respondent
executed in Manila a contract (Agreement) for the joint custody
of Stephanie. The parties chose Philippine courts as exclusive
forum to adjudicate disputes arising from the Agreement.
Respondent undertook to obtain from the Illinois court an order
relinquishing jurisdiction to Philippine courts.
In 2004, petitioner sued respondent in the Regional
Trial Court of Makati City, Branch 60 (trial court) to enforce the
Agreement. Petitioner alleged that in violation of the
Agreement, respondent exercised sole custody over
Stephanie.
Respondent sought the dismissal of the complaint for,
among others, lack of jurisdiction because of the Illinois courts
retention of jurisdiction to enforce the divorce decree.
The Ruling of the Trial Court
In its Order dated 1 March 2005, the trial court
sustained respondents motion and dismissed the case for lack
of jurisdiction. The trial court held that: (1) it is precluded from
taking cognizance over the suit considering the Illinois courts
retention of jurisdiction to enforce its divorce decree, including
its order awarding sole custody of Stephanie to respondent; (2)
the divorce decree is binding on petitioner following the
nationality rule prevailing in this jurisdiction;and (3) the
Agreement is void for contravening Article 2035, paragraph 5
of the Civil Codeprohibiting compromise agreements on
jurisdiction.
Petitioner sought reconsideration, raising the new
argument that the divorce decree obtained by respondent is
void. Thus, the divorce decree is no bar to the trial courts
exercise of jurisdiction over the case.
In its Order dated 23 June 2005, the trial court denied
reconsideration, holding that unlike in the case of respondent,
the divorce decree is binding on petitioner under the laws of his
nationality.
Hence, this petition.
Petitioner submits the following alternative theories for
the validity of the Agreement to justify its enforcement by the
trial court: (1) the Agreement novated the valid divorce decree,
modifying the terms of child custody from sole (maternal) to
joint;or (2) the Agreement is independent of the divorce decree
obtained by respondent.
The Issue
The question is whether the trial court has jurisdiction
to take cognizance of petitioners suit and enforce the
Agreement on the joint custody of the parties child.
The Ruling of the Court
The trial court has jurisdiction to entertain petitioners
suit but not to enforce the Agreement which is void. However,
factual and equity considerations militate against the dismissal
of petitioners suit and call for the remand of the case to settle
the question of Stephanies custody.
Regional Trial Courts Vested With Jurisdiction
to Enforce Contracts
Subject matter jurisdiction is conferred by law. At the
time petitioner filed his suit in the trial court, statutory law vests
on Regional Trial Courts exclusive original jurisdiction over civil
actions incapable of pecuniary estimation.An action for specific
performance, such as petitioners suit to enforce the Agreement
on joint child custody, belongs to this species of actions.Thus,
jurisdiction-wise, petitioner went to the right court.
Indeed, the trial courts refusal to entertain petitioners
suit was grounded not on its lack of power to do so but on its
thinking that the Illinois courts divorce decree stripped it of
jurisdiction. This conclusion is unfounded. What the Illinois
court retained was jurisdiction x x x for the purpose of
enforcing all and sundry the various provisions of [its]
Judgment for Dissolution.Petitioners suit seeks the
enforcement not of the various provisions of the divorce decree
but of the post-divorce Agreement on joint child custody. Thus,
the action lies beyond the zone of the Illinois courts so-called
retained jurisdiction.
Petitioners Suit Lacks Cause of Action
 The foregoing notwithstanding, the trial court cannot
enforce the Agreement which is contrary to law.
In this jurisdiction, parties to a contract are free to
stipulate the terms of agreement subject to the minimum ban
on stipulations contrary to law, morals, good customs, public
order, or public policy.Otherwise, the contract is denied legal
existence, deemed inexistent and void from the beginning.For
lack of relevant stipulation in the Agreement, these and other
ancillary Philippine substantive law serve as default
parameters to test the validity of the Agreements joint child
custody stipulations.
At the time the parties executed the Agreement on 28 January
2002, two facts are undisputed: (1) Stephanie was under seven
years old (having been born on 21 September 1995); and (2)
petitioner and respondent were no longer married under the
laws of the United States because of the divorce decree. The
relevant Philippine law on child custody for spouses separated
in fact or in law (under the second paragraph of Article 213 of
the Family Code) is also undisputed: no child under seven
years of age shall be separated from the mother x x x. (This
statutory awarding of sole parental custodyto the mother is
mandatory,grounded on sound policy consideration,subject
only to a narrow exception not alleged to obtain here.) Clearly
then, the Agreements object to establish a post-divorce joint
custody regime between respondent and petitioner over their
child under seven years old contravenes Philippine law.
The Agreement is not only void ab initio for being
contrary to law, it has also been repudiated by the mother
when she refused to allow joint custody by the father. The
Agreement would be valid if the spouses have not divorced or
separated because the law provides for joint parental authority
when spouses live together.However, upon separation of the
spouses, the mother takes sole custody under the law if the
child is below seven years old and any agreement to the
contrary is void. Thus, the law suspends the joint custody
regime for (1) children under seven of (2) separated or
divorced spouses. Simply put, for a child within this age
bracket (and for commonsensical reasons), the law decides for
the separated or divorced parents how best to take care of the
child and that is to give custody to the separated mother.
Indeed, the separated parents cannot contract away the
provision in the Family Code on the maternal custody of
children below seven years anymore than they can privately
agree that a mother who is unemployed, immoral, habitually
drunk, drug addict, insane or afflicted with a communicable
disease will have sole custody of a child under seven as these
are reasons deemed compelling to preclude the application of
the exclusive maternal custody regime under the second
paragraph of Article 213.
It will not do to argue that the second paragraph of
Article 213 of the Family Code applies only to judicial custodial
agreements based on its text that No child under seven years
of age shall be separated from the mother, unless the court
finds compelling reasons to order otherwise. To limit this
provisions enforceability to court sanctioned agreements while
placing private agreements beyond its reach is to sanction a
double standard in custody regulation of children under seven
years old of separated parents. This effectively empowers
separated parents, by the simple expedient of avoiding the
courts, to subvert a legislative policy vesting to the separated
mother sole custody of her children under seven years of age
to avoid a tragedy where a mother has seen her baby torn
away from her.This ignores the legislative basis that [n]o man
can sound the deep sorrows of a mother who is deprived of her
child of tender age.
It could very well be that Article 213s bias favoring
one separated parent (mother) over the other (father)
encourages paternal neglect, presumes incapacity for joint
parental custody, robs the parents of custodial options, or
hijacks decision-making between the separated
parents.However, these are objections which question the laws
wisdom not its validity or uniform enforceability. The forum to
air and remedy these grievances is the legislature, not this
Court. At any rate, the rules seeming harshness or
undesirability is tempered by ancillary agreements the
separated parents may wish to enter such as granting the
father visitation and other privileges. These arrangements are
not inconsistent with the regime of sole maternal custody under
the second paragraph of Article 213 which merely grants to the
mother final authority on the care and custody of the minor
under seven years of age, in case of disagreements.
Further, the imposed custodial regime under the second
paragraph of Article 213 is limited in duration, lasting only until
the childs seventh year. From the eighth year until the childs
emancipation, the law gives the separated parents freedom,
subject to the usual contractual limitations, to agree on custody
regimes they see fit to adopt. Lastly, even supposing that
petitioner and respondent are not barred from entering into the
Agreement for the joint custody of Stephanie, respondent
repudiated the Agreement by asserting sole custody over
Stephanie. Respondents act effectively brought the parties
back to ambit of the default custodial regime in the second
paragraph of Article 213 of the Family Code vesting on
respondent sole custody of Stephanie.
Nor can petitioner rely on the divorce decrees alleged
invalidity - not because the Illinois court lacked jurisdiction or
that the divorce decree violated Illinois law, but because the
divorce was obtained by his Filipino spouse- to support the
Agreements enforceability. The argument that foreigners in this
jurisdiction are not bound by foreign divorce decrees is hardly
novel. Van Dorn v. Romillosettled the matter by holding that an
alien spouse of a Filipino is bound by a divorce decree
obtained abroad.There, we dismissed the alien divorcees
Philippine suit for accounting of alleged post-divorce conjugal
property and rejected his submission that the foreign divorce
(obtained by the Filipino spouse) is not valid in this jurisdiction
in this wise:
There can be no question as to
the validity of that Nevada divorce in any
of the States of the United States. The
decree is binding on private respondent
as an American citizen. For instance,
private respondent cannot sue petitioner, as
her husband, in any State of the Union.
What he is contending in this case is that
the divorce is not valid and binding in this
jurisdiction, the same being contrary to
local law and public policy.
It is true that owing to the nationality principle embodied in
Article 15 of the Civil Code, only Philippine nationals are
covered by the policy against absolute divorces the same
being considered contrary to our concept of public policy and
morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they
are valid according to their national law. In this case, the
divorce in Nevada released private respondent from the
marriage from the standards of American law, under which
divorce dissolves the marriage.
xxxx
Thus, pursuant to his national law, private respondent is no
longer the husband of petitioner. He would have no standing to
sue in the case below as petitioners husband entitled to
exercise control over conjugal assets. As he is bound by the
Decision of his own countrys Court, which validly exercised
jurisdiction over him, and whose decision he does not
repudiate, he is estopped by his own representation before
said Court from asserting his right over the alleged conjugal
property. (Emphasis supplied)
We reiterated Van Dorn in Pilapil v. Ibay-Somerato
dismiss criminal complaints for adultery filed by the alien
divorcee (who obtained the foreign divorce decree) against his
former Filipino spouse because he no longer qualified as
offended spouse entitled to file the complaints under Philippine
procedural rules. Thus, it should be clear by now that a foreign
divorce decree carries as much validity against the alien
divorcee in this jurisdiction as it does in the jurisdiction of the
aliens nationality, irrespective of who obtained the divorce.
The Facts of the Case and Nature of Proceeding
Justify Remand
Instead of ordering the dismissal of petitioners suit,
the logical end to its lack of cause of action, we remand the
case for the trial court to settle the question of Stephanies
custody. Stephanie is now nearly 15 years old, thus removing
the case outside of the ambit of the mandatory maternal
custody regime under Article 213 and bringing it within
coverage of the default standard on child custody proceedings
the best interest of the child.As the question of custody is
already before the trial court and the childs parents, by
executing the Agreement, initially showed inclination to share
custody, it is in the interest of swift and efficient rendition of
justice to allow the parties to take advantage of the courts
jurisdiction, submit evidence on the custodial arrangement best
serving Stephanies interest, and let the trial court render
judgment. This disposition is consistent with the settled
doctrine that in child custody proceedings, equity may be
invoked to serve the childs best interest.
WHEREFORE, we REVERSE the Orders dated 1
March 2005 and 23 June 2005 of the Regional Trial Court of
Makati City, Branch 60. The case is REMANDED for further
proceedings consistent with this ruling. SO ORDERED.
GERBERT R. CORPUZ, - versus -DAISYLYN TIROL
STO. TOMAS and The SOLICITOR GENERAL; G.R. No.
186571; August 11, 2010; BRION, J.:
Before the Court is a direct appeal from the decision
of the Regional Trial Court (RTC) of Laoag City, Branch 11,
elevated via a petition for review on certiorari under Rule 45 of
the Rules of Court (present petition).
Petitioner Gerbert R. Corpuz was a former Filipino
citizen who acquired Canadian citizenship through
naturalization on November 29, 2000. On January 18, 2005,
Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina,
in Pasig City. Due to work and other professional
commitments, Gerbert left for Canada soon after the wedding.
He returned to the Philippines sometime in April 2005 to
surprise Daisylyn, but was shocked to discover that his wife
was having an affair with another man. Hurt and disappointed,
Gerbert returned to Canada and filed a petition for divorce. The
Superior Court of Justice, Windsor, Ontario, Canada granted
Gerberts petition for divorce on December 8, 2005. The divorce
decree took effect a month later, on January 8, 2006.
Two years after the divorce, Gerbert has moved on
and has found another Filipina to love. Desirous of marrying his
new Filipina fiance in the Philippines, Gerbert went to the Pasig
City Civil Registry Office and registered the Canadian divorce
decree on his and Daisylyns marriage certificate. Despite the
registration of the divorce decree, an official of the National
Statistics Office (NSO) informed Gerbert that the marriage
between him and Daisylyn still subsists under Philippine law; to
be enforceable, the foreign divorce decree must first be
judicially recognized by a competent Philippine court, pursuant
to NSO Circular No. 4, series of 1982.
Accordingly, Gerbert filed a petition for judicial
recognition of foreign divorce and/or declaration of
marriage as dissolved (petition) with the RTC. Although
summoned, Daisylyn did not file any responsive pleading but
submitted instead a notarized letter/manifestation to the trial
court. She offered no opposition to Gerberts petition and, in
fact, alleged her desire to file a similar case herself but was
prevented by financial and personal circumstances. She, thus,
requested that she be considered as a party-in-interest with a
similar prayer to Gerberts.
In its October 30, 2008 decision, the RTC denied
Gerberts petition. The RTC concluded that Gerbert was not
the proper party to institute the action for judicial recognition of
the foreign divorce decree as he is a naturalized Canadian
citizen. It ruled that only the Filipino spouse can avail of the
remedy, under the second paragraph of Article 26 of the Family
Code, in order for him or her to be able to remarry under
Philippine law. Article 26 of the Family Code reads:
Art. 26. All marriages solemnized
outside the Philippines, in accordance with
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4), (5)
and (6), 36, 37 and 38.
Where a marriage between a
Filipino citizen and a foreigner is validly
celebrated and a divorce is thereafter
validly obtained abroad by the alien
spouse capacitating him or her to
remarry, the Filipino spouse shall
likewise have capacity to remarry under
Philippine law.
This conclusion, the RTC stated, is consistent with the
legislative intent behind the enactment of the second
paragraph of Article 26 of the Family Code, as determined by
the Court in Republic v. Orbecido III; the provision was enacted
to avoid the absurd situation where the Filipino spouse remains
married to the alien spouse who, after obtaining a divorce, is
no longer married to the Filipino spouse.
THE PETITION
From the RTCs ruling, Gerbert filed the present
petition.
Gerbert asserts that his petition before the RTC is
essentially for declaratory relief, similar to that filed in
Orbecido; he, thus, similarly asks for a determination of his
rights under the second paragraph of Article 26 of the Family
Code. Taking into account the rationale behind the second
paragraph of Article 26 of the Family Code, he contends that
the provision applies as well to the benefit of the alien spouse.
He claims that the RTC ruling unduly stretched the doctrine in
Orbecido by limiting the standing to file the petition only to the
Filipino spouse an interpretation he claims to be contrary to the
essence of the second paragraph of Article 26 of the Family
Code. He considers himself as a proper party, vested with
sufficient legal interest, to institute the case, as there is a
possibility that he might be prosecuted for bigamy if he marries
his Filipina fiance in the Philippines since two marriage
certificates, involving him, would be on file with the Civil
Registry Office. The Office of the Solicitor General and
Daisylyn, in their respective Comments, both support Gerberts
position.
Essentially, the petition raises the issue of whether
the second paragraph of Article 26 of the Family Code
extends to aliens the right to petition a court of this
jurisdiction for the recognition of a foreign divorce decree.
THE COURTS RULING
The
alien
spouse
can Where a marriage between a
claim Filipino citizen and a foreigner is validly
no right celebrated and a divorce is thereafter
under validly obtained abroad by the alien
the spouse capacitating him or her to
second remarry, the Filipino spouse shall
paragra likewise have capacity to remarry under
ph of Philippine law.
Article
26 of
the
Family Through the second paragraph of Article 26 of the Family
Code as Code, EO 227 effectively incorporated into the law this Courts
the holding in Van Dorn v. Romillo, Jr. and Pilapil v. Ibay-Somera.
substan In both cases, the Court refused to acknowledge the alien
tive spouses assertion of marital rights after a foreign courts
right it divorce decree between the alien and the Filipino. The Court,
establis thus, recognized that the foreign divorce had already severed
hes is in the marital bond between the spouses. The Court reasoned in
favor of Van Dorn v. Romillo that:
the
Filipino
spouse
To maintain x x x that, under our
laws, [the Filipino spouse] has to be
considered still married to [the alien
The resolution of the issue requires a review of the spouse] and still subject to a wife's
legislative history and intent behind the second paragraph of obligations x x x cannot be just. [The
Article 26 of the Family Code. Filipino spouse] should not be obliged to live
together with, observe respect and fidelity,
and render support to [the alien spouse]. The
latter should not continue to be one of her
The Family Code recognizes only two types of heirs with possible rights to conjugal
defective marriages void and voidable marriages. In both property. She should not be discriminated
cases, the basis for the judicial declaration of absolute nullity or against in her own country if the ends of
annulment of the marriage exists before or at the time of the justice are to be served.
marriage. Divorce, on the other hand, contemplates the
dissolution of the lawful union for cause arising after the
marriage. Our family laws do not recognize absolute divorce
between Filipino citizens.

Recognizing the reality that divorce is a possibility in
marriages between a Filipino and an alien, President Corazon
C. Aquino, in the exercise of her legislative powers under the
Freedom Constitution, enacted Executive Order No. (EO) 227,
amending Article 26 of the Family Code to its present wording,
as follows:
Art. 26. All marriages solemnized
outside the Philippines, in accordance with
the laws in force in the country where they
were solemnized, and valid there as such,
shall also be valid in this country, except
those prohibited under Articles 35(1), (4), (5)
and (6), 36, 37 and 38.
As the RTC correctly stated, the provision was
included in the law to avoid the absurd situation where the
Filipino spouse remains married to the alien spouse who, after
obtaining a divorce, is no longer married to the Filipino spouse.
The legislative intent is for the benefit of the Filipino spouse, by
clarifying his or her marital status, settling the doubts created
by the divorce decree. Essentially, the second paragraph of
Article 26 of the Family Code provided the Filipino spouse
a substantive right to have his or her marriage to the alien
spouse considered as dissolved, capacitating him or her
to remarry. Without the second paragraph of Article 26 of the
Family Code, the judicial recognition of the foreign decree of
divorce, whether in a proceeding instituted precisely for that
purpose or as a related issue in another proceeding, would be
of no significance to the Filipino spouse since our laws do not
recognize divorce as a mode of severing the marital bond;
Article 17 of the Civil Code provides that the policy against
absolute divorces cannot be subverted by judgments
promulgated in a foreign country. The inclusion of the second
paragraph in Article 26 of the Family Code provides the direct
exception to this rule and serves as basis for recognizing the
dissolution of the marriage between the Filipino spouse and his
or her alien spouse.
Additionally, an action based on the second
paragraph of Article 26 of the Family Code is not limited to the
recognition of the foreign divorce decree. If the court finds that
the decree capacitated the alien spouse to remarry, the courts
can declare that the Filipino spouse is likewise capacitated to
contract another marriage. No court in this jurisdiction,
however, can make a similar declaration for the alien spouse
(other than that already established by the decree), whose
status and legal capacity are generally governed by his
national law.
Given the rationale and intent behind the enactment,
and the purpose of the second paragraph of Article 26 of the
Family Code, the RTC was correct in limiting the applicability of
the provision for the benefit of the Filipino spouse. In other
words, only the Filipino spouse can invoke the second
paragraph of Article 26 of the Family Code; the alien spouse
can claim no right under this provision.
We qualify our above conclusion i.e., that the second
paragraph of Article 26 of the Family Code bestows no rights in
favor of aliens with the complementary statement that this
conclusion is not sufficient basis to dismiss Gerberts petition
before the RTC. In other words, the unavailability of the second
paragraph of Article 26 of the Family Code to aliens does not
necessarily strip Gerbert of legal interest to petition the RTC for
the recognition of his foreign divorce decree. The foreign
divorce decree itself, after its authenticity and conformity with
the aliens national law have been duly proven according to our
rules of evidence, serves as a presumptive evidence of right in
favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules
of Court which provides for the effect of foreign judgments.
This Section states:
SEC. 48. Effect of foreign
judgments or final orders.The effect of a
judgment or final order of a tribunal of a
foreign country, having jurisdiction to
render the judgment or final order is as
follows:
(a) In case of a judgment
or final order upon a
specific thing, the
judgment or final order is
conclusive upon the title of
the thing; and

The
foreign (b) In case of a judgment
divorce or final order against a
decree person, the judgment or
is final order is
presum presumptive evidence of
ptive a right as between the
evidenc parties and their
e of a successors in interest by
right a subsequent title.
that
clothes
the
party In either case, the judgment or final
with order may be repelled by evidence of a want
legal of jurisdiction, want of notice to the party,
interest collusion, fraud, or clear mistake of law or
to fact.
petition
for its
recognit
ion in To our mind, direct involvement or being the subject of the
this foreign judgment is sufficient to clothe a party with the requisite
jurisdict interest to institute an action before our courts for the
ion recognition of the foreign judgment. In a divorce situation, we
have declared, no less, that the divorce obtained by an alien
abroad may be recognized in the Philippines, provided the
divorce is valid according to his or her national law.
The starting point in any recognition of a foreign
divorce judgment is the acknowledgment that our courts do not
take judicial notice of foreign judgments and laws. Justice
Herrera explained that, as a rule, no sovereign is bound to give
effect within its dominion to a judgment rendered by a tribunal
of another country. This means that the foreign judgment and
its authenticity must be proven as facts under our rules on
evidence, together with the aliens applicable national law to
show the effect of the judgment on the alien himself or herself.
The recognition may be made in an action instituted specifically
for the purpose or in another action where a party invokes the
foreign decree as an integral aspect of his claim or defense.
In Gerberts case, since both the foreign divorce
decree and the national law of the alien, recognizing his or her
capacity to obtain a divorce, purport to be official acts of a
sovereign authority, Section 24, Rule 132 of the Rules of Court
comes into play. This Section requires proof, either by (1)
official publications or (2) copies attested by the officer having
legal custody of the documents. If the copies of official records
are not kept in the Philippines, these must be (a) accompanied
by a certificate issued by the proper diplomatic or consular
officer in the Philippine foreign service stationed in the foreign
country in which the record is kept and (b) authenticated by the
seal of his office.
The records show that Gerbert attached to his petition
a copy of the divorce decree, as well as the required
certificates proving its authenticity, but failed to include a copy
of the Canadian law on divorce. Under this situation, we can, at
this point, simply dismiss the petition for insufficiency of
supporting evidence, unless we deem it more appropriate to
remand the case to the RTC to determine whether the divorce
decree is consistent with the Canadian divorce law.
We deem it more appropriate to take this latter course
of action, given the Article 26 interests that will be served and
the Filipina wifes (Daisylyns) obvious conformity with the
petition. A remand, at the same time, will allow other interested
parties to oppose the foreign judgment and overcome a
petitioners presumptive evidence of a right by proving want of
jurisdiction, want of notice to a party, collusion, fraud, or clear
mistake of law or fact. Needless to state, every precaution
must be taken to ensure conformity with our laws before a
recognition is made, as the foreign judgment, once recognized,
shall have the effect of res judicata between the parties, as
provided in Section 48, Rule 39 of the Rules of Court.
In fact, more than the principle of comity that is served
by the practice of reciprocal recognition of foreign judgments
between nations, the res judicata effect of the foreign
judgments of divorce serves as the deeper basis for extending
judicial recognition and for considering the alien spouse bound
by its terms. This same effect, as discussed above, will not
obtain for the Filipino spouse were it not for the substantive
rule that the second paragraph of Article 26 of the Family Code
provides.
Conside
rations
beyond
the
recognit
ion of
the
foreign
divorce
decree
As a matter of housekeeping concern, we note that
the Pasig City Civil Registry Office has already recorded
the divorce decree on Gerbert and Daisylyns marriage
certificate based on the mere presentation of the decree.
We consider the recording to be legally improper; hence, the
need to draw attention of the bench and the bar to what had
been done.
Article 407 of the Civil Code states that [a]cts, events
and judicial decrees concerning the civil status of persons shall
be recorded in the civil register. The law requires the entry in
the civil registry of judicial decrees that produce legal
consequences touching upon a persons legal capacity and
status, i.e., those affecting all his personal qualities and
relations, more or less permanent in nature, not ordinarily
terminable at his own will, such as his being legitimate or
illegitimate, or his being married or not.
A judgment of divorce is a judicial decree, although a
foreign one, affecting a persons legal capacity and status that
must be recorded. In fact, Act No. 3753 or the Law on Registry
of Civil Status specifically requires the registration of divorce
decrees in the civil registry:
 Sec. 1. Civil Register. A civil register is themselves do not ipso facto authorize the decrees
established for recording the civil status registration. The law should be read in relation with the
of persons, in which shall be entered: requirement of a judicial recognition of the foreign judgment
before it can be given res judicata effect. In the context of the
present case, no judicial order as yet exists recognizing the
foreign divorce decree. Thus, the Pasig City Civil Registry
(a) births; Office acted totally out of turn and without authority of law
when it annotated the Canadian divorce decree on Gerbert and
(b) deaths;
Daisylyns marriage certificate, on the strength alone of the
(c) marriages; foreign decree presented by Gerbert.

(d) annulments of marriages;

(e) divorces; Evidently, the Pasig City Civil Registry Office was
aware of the requirement of a court recognition, as it cited NSO
(f) legitimations;
Circular No. 4, series of 1982, and Department of Justice
(g) adoptions; Opinion No. 181, series of 1982 both of which required a final
order from a competent Philippine court before a foreign
(h) acknowledgment of natural judgment, dissolving a marriage, can be registered in the civil
children; registry, but it, nonetheless, allowed the registration of the
decree. For being contrary to law, the registration of the foreign
(i) naturalization; and divorce decree without the requisite judicial recognition is
patently void and cannot produce any legal effect.
(j) changes of name.

xxxx Another point we wish to draw attention to is that the

Sec. 4. Civil Register Books. The local
registrars shall keep and preserve in their
offices the following books, in which they
shall, respectively make the proper entries
concerning the civil status of persons:
recognition that the RTC may extend to the Canadian divorce
decree does not, by itself, authorize the cancellation of the
entry in the civil registry. A petition for recognition of a foreign
judgment is not the proper proceeding, contemplated under the
Rules of Court, for the cancellation of entries in the civil
registry.

Article 412 of the Civil Code declares that no entry in

(1) Birth and death register;
(2) Marriage register, in which
shall be entered not only the
marriages solemnized but also
divorces and dissolved
marriages.
(3) Legitimation, acknowledgment,
adoption, change of name and
naturalization register.
a civil register shall be changed or corrected, without judicial
order. The Rules of Court supplements Article 412 of the Civil
Code by specifically providing for a special remedial
proceeding by which entries in the civil registry may be
judicially cancelled or corrected. Rule 108 of the Rules of Court
sets in detail the jurisdictional and procedural requirements that
must be complied with before a judgment, authorizing the
cancellation or correction, may be annotated in the civil
registry. It also requires, among others, that the verified petition
must be filed with the RTC of the province where the
corresponding civil registry is located; that the civil registrar
and all persons who have or claim any interest must be made
parties to the proceedings; and that the time and place for
hearing must be published in a newspaper of general
circulation. As these basic jurisdictional requirements have not
been met in the present case, we cannot consider the petition
Gerbert filed with the RTC as one filed under Rule 108 of the
Rules of Court.

But while the law requires the entry of the divorce decree in the
civil registry, the law and the submission of the decree by
 We hasten to point out, however, that this ruling
should not be construed as requiring two separate proceedings
for the registration of a foreign divorce decree in the civil
registry one for recognition of the foreign decree and another
specifically for cancellation of the entry under Rule 108 of the
Rules of Court. The recognition of the foreign divorce decree
may be made in a Rule 108 proceeding itself, as the object of
special proceedings (such as that in Rule 108 of the Rules of
Court) is precisely to establish the status or right of a party or a
particular fact. Moreover, Rule 108 of the Rules of Court can
serve as the appropriate adversarial proceeding by which the
applicability of the foreign judgment can be measured and
tested in terms of jurisdictional infirmities, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.

WHEREFORE, we GRANT the petition for review on

certiorari, and REVERSE the October 30, 2008 decision of the
Regional Trial Court of Laoag City, Branch 11, as well as its
February 17, 2009 order. We order the REMAND of the case
to the trial court for further proceedings in accordance with our
ruling above. Let a copy of this Decision be furnished the Civil
Registrar General. No costs.

SO ORDERED.