Republic of the Philippines

SUPREME COURT
Manila GUTIERREZ, JR., J.:

FIRST DIVISION Questioned in these consolidated petitions for review on certiorari are
the decisions of the Court of First Instance of Manila, Branch XVII,
G.R. No. L-34382 July 20, 1983 dismissing the complaints in Civil Case No. 71923 and in Civil Case
No. 71694, on the ground that plaintiff therein, now appellant, had
THE HOME INSURANCE COMPANY, petitioner, failed to prove its capacity to sue.
vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE There is no dispute over the facts of these cases for recovery of
TRANSPORTATION, INC. and HON. A. MELENCIO-HERRERA, maritime damages. In L-34382, the facts are found in the decision of
Presiding Judge of the Manila Court of First Instance, Branch the respondent court which stated:
XVII, respondents.
On or about January 13, 1967, S. Kajita & Co., on
G.R. No. L-34383 July 20, 1983 behalf of Atlas Consolidated Mining & Development
Corporation, shipped on board the SS "Eastern Jupiter'
THE HOME INSURANCE COMPANY, petitioner, from Osaka, Japan, 2,361 coils of "Black Hot Rolled
vs. Copper Wire Rods." The said VESSEL is owned and
N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or operated by defendant Eastern Shipping Lines
GUACODS, INC., and HON. A. MELENCIO-HERRERA, Presiding (CARRIER). The shipment was covered by Bill of
Judge of the Manila Court of First Instance, Branch Lading No. O-MA-9, with arrival notice to Phelps Dodge
XVII, respondents. Copper Products Corporation of the Philippines
(CONSIGNEE) at Manila. The shipment was insured
No. L-34382. with plaintiff against all risks in the amount of
P1,580,105.06 under its Insurance Policy No. AS-
73633.
Zapa Law Office for petitioner.
xxx xxx xxx
Bito, Misa & Lozada Law Office for respondents.
The coils discharged from the VESSEL numbered
No. L-34383.
2,361, of which 53 were in bad order. What the
CONSIGNEE ultimately received at its warehouse was
Zapa Law Office for petitioner. the same number of 2,361 coils with 73 coils loose and
partly cut, and 28 coils entangled, partly cut, and which
Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents. had to be considered as scrap. Upon weighing at
 CONSIGNEE's warehouse, the 2,361 coils were found
to weight 263,940.85 kilos as against its invoiced
weight of 264,534.00 kilos or a net loss/shortage of
593.15 kilos, according to Exhibit "A", or 1,209,56 lbs.,
according to the claims presented by the consignee
against the plaintiff (Exhibit "D-1"), the CARRIER
(Exhibit "J-1"), and the TRANSPORTATION
COMPANY (Exhibit "K- l").
For the loss/damage suffered by the cargo, plaintiff
paid the consignee under its insurance policy the
amount of P3,260.44, by virtue of which plaintiff
became subrogated to the rights and actions of the
CONSIGNEE. Plaintiff made demands for payment
against the CARRIER and the TRANSPORTATION
COMPANY for reimbursement of the aforesaid amount
but each refused to pay the same. ...
The facts of L-34383 are found in the decision of the lower court as
follows:
On or about December 22, 1966, the Hansa Transport
Kontor shipped from Bremen, Germany, 30 packages
of Service Parts of Farm Equipment and Implements on
board the VESSEL, SS "NEDER RIJN" owned by the
defendant, N. V. Nedlloyd Lijnen, and represented in
the Philippines by its local agent, the defendant
Columbian Philippines, Inc. (CARRIER). The shipment
was covered by Bill of Lading No. 22 for transportation
to, and delivery at, Manila, in favor of the consignee,
international Harvester Macleod, Inc. (CONSIGNEE).
The shipment was insured with plaintiff company under
its Cargo Policy No. AS-73735 "with average terms" for
P98,567.79.
xxx xxx xxx
The packages discharged from the VESSEL numbered
29, of which seven packages were found to be in bad
order. What the CONSIGNEE ultimately received at its
warehouse was the same number of 29 packages with
9 packages in bad order. Out of these 9 packages, 1
package was accepted by the CONSIGNEE in good
order due to the negligible damages sustained. Upon
inspection at the consignee's warehouse, the contents
of 3 out of the 8 cases were also found to be complete
and intact, leaving 5 cases in bad order. The contents
of these 5 packages showed several items missing in
the total amount of $131.14; while the contents of the
undelivered 1 package were valued at $394.66, or a
total of $525.80 or P2,426.98.
For the short-delivery of 1 package and the missing
items in 5 other packages, plaintiff paid the
CONSIGNEE under its Insurance Cargo Policy the
amount of P2,426.98, by virtue of which plaintiff
became subrogated to the rights and actions of the
CONSIGNEE. Demands were made on defendants
CARRIER and CONSIGNEE for reimbursement thereof
but they failed and refused to pay the same.
In both cases, the petitioner-appellant made the following averment
regarding its capacity to sue:
The plaintiff is a foreign insurance company duly authorized to do
business in the Philippines through its agent, Mr. VICTOR H. BELLO,
of legal age and with office address at Oledan Building, Ayala Avenue,
Makati, Rizal.
In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed
its answer and alleged that it:
Denies the allegations of Paragraph I which refer to plaintiff's capacity
to sue for lack of knowledge or information sufficient to form a belief as
to the truth thereof.
Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its
answer admitting the allegations of the complaint, regarding the
capacity of plaintiff-appellant. The pertinent paragraph of this answer
reads as follows:
Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and
3 of the heading Parties.
In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen,
Columbian Philippines, Inc. and Guacods, Inc., filed their answers.
They denied the petitioner-appellant's capacity to sue for lack of
knowledge or information sufficient to form a belief as to the truth
thereof.
As earlier stated, the respondent court dismissed the complaints in the
two cases on the same ground, that the plaintiff failed to prove its
capacity to sue. The court reasoned as follows:
In the opinion of the Court, if plaintiff had the capacity
to sue, the Court should hold that a) defendant Eastern
Shipping Lines should pay plaintiff the sum of
P1,630.22 with interest at the legal rate from January 5,
1968, the date of the institution of the Complaint, until
fully paid; b) defendant Angel Jose Transportation, Inc.
should pay plaintiff the sum of P1,630.22 also with
interest at the legal rate from January 5, 1968 until fully
paid; c) the counterclaim of defendant Angel Jose
transportation, Inc. should be ordered dismissed; and
d) each defendant to pay one-half of the costs.
The Court is of the opinion that Section 68 of the
Corporation Law reflects a policy designed to protect
the public interest. Hence, although defendants have
not raised the question of plaintiff's compliance with
that provision of law, the Court has resolved to take the
matter into account.
A suing foreign corporation, like plaintiff, has to plead
affirmatively and prove either that the transaction upon
which it bases its complaint is an isolated one, or that it
is licensed to transact business in this country, failing
which, it will be deemed that it has no valid cause of
action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring
Co., Inc., 17 SCRA 1037). In view of the number of
cases filed by plaintiff before this Court, of which
judicial cognizance can be taken, and under the ruling
in Far East International Import and Export Corporation
vs. Hankai Koayo Co., 6 SCRA 725, it has to be held
that plaintiff is doing business in the Philippines.
Consequently, it must have a license under Section 68
of the Corporation Law before it can be allowed to sue.
The situation of plaintiff under said Section 68 has been
described as follows in Civil Case No. 71923 of this
Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd
Lijnen, of which judicial cognizance can also be taken:
Exhibit "R",presented by plaintiff is a
certified copy of a license, dated July 1,
1967, issued by the Office of the
Insurance Commissioner authorizing
plaintiff to transact insurance business
in this country. By virtue of Section 176
of the Insurance Law, it has to be
presumed that a license to transact
business under Section 68 of the
Corporation Law had previously been
issued to plaintiff. No copy thereof,
however, was submitted for a reason least unenforceable,
unknown. The date of that license must and prevents the
not have been much anterior to July 1, maintenance by the
1967. The preponderance of the corporation of any
evidence would therefore call for the action on such
finding that the insurance contract contracts. Although the
involved in this case, which was usual construction is to
executed at Makati, Rizal, on February the contrary, and to the
8, 1967, was contracted before plaintiff effect that only the
was licensed to transact business in the remedy for enforcement
Philippines. is affected thereby, a
statute prohibiting a
This Court views Section 68 of the non-complying
Corporation Law as reflective of a basic corporation from suing
public policy. Hence, it is of the opinion in the state courts on
that, in the eyes of Philippine law, the any contract has been
insurance contract involved in this case held by some courts to
must be held void under the provisions render the contract void
of Article 1409 (1) of the Civil Code, and and unenforceable by
could not be validated by subsequent the corporation, even
procurement of the license. That view of after its has complied
the Court finds support in the following with the statute." (36
citation: Am. Jur. 2d 299-300).

According to many xxx xxx xxx

authorities, a
constitutional or The said Civil Case No. 71923 was dismissed by this
statutory prohibition Court. As the insurance contract involved herein was
against a foreign executed on January 20, 1967, the instant case should
corporation doing also be dismissed.
business in the state,
unless such corporation We resolved to consolidate the two cases when we gave due course to
has complied with the petition.
conditions prescribed, is
effective to make the The petitioner raised the following assignments of errors:
contracts of such
corporation void, or at
 First Assignment of Error
THE HONORABLE TRIAL COURT ERRED IN
CONSIDERING AS AN ISSUE THE LEGAL
EXISTENCE OR CAPACITY OF PLAINTIFF-
APPELLANT.
Second Assignment of Error
THE HONORABLE TRIAL COURT ERRED IN
DISMISSING THE COMPLAINT ON THE FINDING
THAT PLAINTIFF-APPELLANT HAS NO CAPACITY
TO SUE.
On the basis of factual and equitable considerations, there is no
question that the private respondents should pay the obligations found
by the trial court as owing to the petitioner. Only the question of validity
of the contracts in relation to lack of capacity to sue stands in the way
of the petitioner being given the affirmative relief it seeks. Whether or
not the petitioner was engaged in single acts or solitary transactions
and not engaged in business is likewise not in issue. The petitioner
was engaged in business without a license. The private respondents'
obligation to pay under the terms of the contracts has been proved.
When the complaints in these two cases were filed, the petitioner had
already secured the necessary license to conduct its insurance
business in the Philippines. It could already filed suits.
Petitioner was, therefore, telling the truth when it averred in its
complaints that it was a foreign insurance company duly authorized to
do business in the Philippines through its agent Mr. Victor H. Bello.
However, when the insurance contracts which formed the basis of
these cases were executed, the petitioner had not yet secured the
necessary licenses and authority. The lower court, therefore, declared
that pursuant to the basic public policy reflected in the Corporation
Law, the insurance contracts executed before a license was secured
must be held null and void. The court ruled that the contracts could not
be validated by the subsequent procurement of the license.
The applicable provisions of the old Corporation Law, Act 1459, as
amended are:
Sec. 68. No foreign corporation or corporations formed,
organized, or existing under any laws other than those
of the Philippine Islands shall be permitted to transact
business in the Philippine Islands until after it shall
have obtained a license for that purpose from the chief
of the Mercantile Register of the Bureau of Commerce
and Industry, (Now Securities and Exchange
Commission. See RA 5455) upon order of the
Secretary of Finance (Now Monetary Board) in case of
banks, savings, and loan banks, trust corporations, and
banking institutions of all kinds, and upon order of the
Secretary of Commerce and Communications (Now
Secretary of Trade. See 5455, section 4 for other
requirements) in case of all other foreign corporations.
...
xxx xxx xxx
Sec. 69. No foreign corporation or corporation formed,
organized, or existing under any laws other than those
of the Philippine Islands shall be permitted to transact
business in the Philippine Islands or maintain by itself
or assignee any suit for the recovery of any debt, claim,
or demand whatever, unless it shall have the license
prescribed in the section immediately preceding. Any
officer, director, or agent of the corporation or any
person transacting business for any foreign corporation
not having the license prescribed shag be punished by
imprisonment for not less than six months nor more
than two years or by a fine of not less than two hundred
 pesos nor more than one thousand pesos, or by both
such imprisonment and fine, in the discretion of the
court.
As early as 1924, this Court ruled in the leading case of Marshall Wells
Co. v. Henry W. Elser & Co. (46 Phil. 70) that the object of Sections 68
and 69 of the Corporation Law was to subject the foreign corporation
doing business in the Philippines to the jurisdiction of our courts. The
Marshall Wells Co. decision referred to a litigation over an isolated act
for the unpaid balance on a bill of goods but the philosophy behind the
law applies to the factual circumstances of these cases. The Court
stated:
xxx xxx xxx
Defendant isolates a portion of one sentence of section
69 of the Corporation Law and asks the court to give it
a literal meaning Counsel would have the law read
thus: "No foreign corporation shall be permitted to
maintain by itself or assignee any suit for the recovery
of any debt, claim, or demand whatever, unless it shall
have the license prescribed in section 68 of the law."
Plaintiff, on the contrary, desires for the court to
consider the particular point under discussion with
reference to all the law, and thereafter to give the law a
common sense interpretation.
The object of the statute was to subject the foreign
corporation doing business in the Philippines to the
jurisdiction of its courts. The object of the statute was
not to prevent the foreign corporation from performing
single acts, but to prevent it from acquiring a domicile
for the purpose of business without taking the steps
necessary to render it amenable to suit in the local
courts. The implication of the law is that it was never
the purpose of the Legislature to exclude a foreign
corporation which happens to obtain an isolated order
for business from the Philippines, from securing
redress in the Philippine courts, and thus, in effect, to
permit persons to avoid their contracts made with such
foreign corporations. The effect of the statute
preventing foreign corporations from doing business
and from bringing actions in the local courts, except on
compliance with elaborate requirements, must not be
unduly extended or improperly applied. It should not be
construed to extend beyond the plain meaning of its
terms, considered in connection with its object, and in
connection with the spirit of the entire law.
(State vs. American Book Co. [1904], 69 Kan, 1;
American De Forest Wireless Telegraph
Co. vs. Superior Court of City & Country of San
Francisco and Hebbard [1908], 153 Cal., 533; 5
Thompson on Corporations, 2d ed., chap. 184.)
Confronted with the option of giving to the Corporation
Law a harsh interpretation, which would disastrously
embarrass trade, or of giving to the law a reasonable
interpretation, which would markedly help in the
development of trade; confronted with the option of
barring from the courts foreign litigants with good
causes of action or of assuming jurisdiction of their
cases; confronted with the option of construing the law
to mean that any corporation in the United States,
which might want to sell to a person in the Philippines
must send some representative to the Islands before
the sale, and go through the complicated formulae
provided by the Corporation Law with regard to the
obtaining of the license, before the sale was made, in
order to avoid being swindled by Philippine citizens, or
of construing the law to mean that no foreign
corporation doing business in the Philippines can
maintain any suit until it shall possess the necessary
license;-confronted with these options, can anyone
 doubt what our decision will be? The law simply means
that no foreign corporation shall be permitted "to
transact business in the Philippine Islands," as this
phrase is known in corporation law, unless it shall have
the license required by law, and, until it complies with
the law, shall not be permitted to maintain any suit in
the local courts. A contrary holding would bring the law
to the verge of unconstitutionality, a result which should
be and can be easily avoided. (Sioux Remedy
Co. vs. Cope and Cope, supra; Perkins, Philippine
Business Law, p. 264.)
To repeat, the objective of the law was to subject the foreign
corporation to the jurisdiction of our courts. The Corporation Law must
be given a reasonable, not an unduly harsh, interpretation which does
not hamper the development of trade relations and which fosters
friendly commercial intercourse among countries.
The objectives enunciated in the 1924 decision are even more relevant
today when we view commercial relations in terms of a world economy,
when the tendency is to re-examine the political boundaries separating
one nation from another insofar as they define business requirements
or restrict marketing conditions.
We distinguish between the denial of a right to take remedial action
and the penal sanction for non-registration.
Insofar as transacting business without a license is concerned, Section
69 of the Corporation Law imposed a penal sanction-imprisonment for
not less than six months nor more than two years or payment of a fine
not less than P200.00 nor more than P1,000.00 or both in the
discretion of the court. There is a penalty for transacting business
without registration.
And insofar as litigation is concerned, the foreign corporation or its
assignee may not maintain any suit for the recovery of any debt, claim,
or demand whatever. The Corporation Law is silent on whether or not
the contract executed by a foreign corporation with no capacity to sue
is null and void ab initio.
We are not unaware of the conflicting schools of thought both here and
abroad which are divided on whether such contracts are void or merely
voidable. Professor Sulpicio Guevarra in his book Corporation
Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234)
cites an Illinois decision which holds the contracts void and a Michigan
statute and decision declaring them merely voidable:
xxx xxx xxx
Where a contract which is entered into by a foreign
corporation without complying with the local
requirements of doing business is rendered void either
by the express terms of a statute or by statutory
construction, a subsequent compliance with the statute
by the corporation will not enable it to maintain an
action on the contract. (Perkins Mfg. Co. v. Clinton
Const. Co., 295 P. 1 [1930]. See also Diamond Glue
Co. v. U.S. Glue Co., supra see note 18.) But where
the statute merely prohibits the maintenance of a suit
on such contract (without expressly declaring the
contract "void"), it was held that a failure to comply with
the statute rendered the contract voidable and not void,
and compliance at any time before suit was sufficient.
(Perkins Mfg. Co. v. Clinton Const. Co., supra.)
Notwithstanding the above decision, the Illinois statute
provides, among other things that a foreign corporation
that fails to comply with the conditions of doing
business in that state cannot maintain a suit or action,
etc. The court said: 'The contract upon which this suit
was brought, having been entered into in this state
when appellant was not permitted to transact business
in this state, is in violation of the plain provisions of the
statute, and is therefore null and void, and no action
can be maintained thereon at any time, even if the
corporation shall, at some time after the making of the
contract, qualify itself to transact business in this state
by a compliance with our laws in reference to foreign
corporations that desire to engage in business here.
(United Lead Co. v. J.M. Ready Elevator Mfg. Co., 222
Ill. 199, 73 N.N. 567 [1906].)
A Michigan statute provides: "No foreign corporation
subject to the provisions of this Act, shall maintain any
action in this state upon any contract made by it in this
state after the taking effect of this Act, untilit shall have
fully complied with the requirement of this Act, and
procured a certificate to that effect from the Secretary
of State," It was held that the above statute does not
render contracts of a foreign corporation that fails to
comply with the statute void, but they may be enforced
only after compliance therewith. (Hastings Industrial
Co. v. Moral, 143 Mich. 679,107 N.E. 706 [1906];
Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W.
799 [1909]; Despres, Bridges & Noel v. Zierleyn, 163
Mich. 399, 128 N.W. 769 [1910]).
It has also been held that where the law provided that a
corporation which has not complied with the statutory
requirements "shall not maintain an action until such
compliance". "At the commencement of this action the
plaintiff had not filed the certified copy with the country
clerk of Madera County, but it did file with the officer
several months before the defendant filed his amended
answer, setting up this defense, as that at the time this
defense was pleaded by the defendant the plaintiff had
complied with the statute. The defense pleaded by the
defendant was therefore unavailable to him to prevent
the plaintiff from thereafter maintaining the action.
Section 299 does not declare that the plaintiff shall not
commence an action in any county unless it has filed a
certified copy in the office of the county clerk, but
merely declares that it shall not maintain an action until
it has filled it. To maintain an action is not the same as
to commence an action, but implies that the action has
already been commenced." (See also Kendrick &
Roberts Inc. v. Warren Bros. Co., 110 Md. 47, 72 A.
461 [1909]).
In another case, the court said: "The very fact that the
prohibition against maintaining an action in the courts
of the state was inserted in the statute ought to be
conclusive proof that the legislature did not intend or
understand that contracts made without compliance
with the law were void. The statute does not fix any
time within which foreign corporations shall comply with
the Act. If such contracts were void, no suits could be
prosecuted on them in any court. ... The primary
purpose of our statute is to compel a foreign
corporation desiring to do business within the state to
submit itself to the jurisdiction of the courts of this state.
The statute was not intended to exclude foreign
corporations from the state. It does not, in terms,
render invalid contracts made in this state by non-
complying corporations. The better reason, the wiser
and fairer policy, and the greater weight lie with those
decisions which hold that where, as here, there is a
prohibition with a penalty, with no express or implied
declarations respecting the validity of enforceability of
contracts made by qualified foreign corporations, the
contracts ... are enforceable ... upon compliance with
the law." (Peter & Burghard Stone Co. v. Carper, 172
N.E. 319 [1930].)
Our jurisprudence leans towards the later view. Apart from the
objectives earlier cited from Marshall Wells Co. v. Henry W. Elser &
Co (supra), it has long been the rule that a foreign corporation actually
doing business in the Philippines without license to do so may be sued
in our courts. The defendant American corporation in General
Corporation of the Philippines v. Union Insurance Society of Canton
Ltd et al. (87 Phil. 313) entered into insurance contracts without the
necessary license or authority. When summons was served on the
agent, the defendant had not yet been registered and authorized to do
business. The registration and authority came a little less than two
months later. This Court ruled:
Counsel for appellant contends that at the time of the
service of summons, the appellant had not yet been
authorized to do business. But, as already stated,
section 14, Rule 7 of the Rules of Court makes no
distinction as to corporations with or without authority to
do business in the Philippines. The test is whether a
foreign corporation was actually doing business here.
Otherwise, a foreign corporation illegally doing
business here because of its refusal or neglect to
obtain the corresponding license and authority to do
business may successfully though unfairly plead such
neglect or illegal act so as to avoid service and thereby
impugn the jurisdiction of the local courts. It would
indeed be anomalous and quite prejudicial, even
disastrous, to the citizens in this jurisdiction who in all
good faith and in the regular course of business accept
and pay for shipments of goods from America, relying
for their protection on duly executed foreign marine
insurance policies made payable in Manila and duly
endorsed and delivered to them, that when they go to
court to enforce said policies, the insurer who all along
has been engaging in this business of issuing similar
marine policies, serenely pleads immunity to local
jurisdiction because of its refusal or neglect to obtain
the corresponding license to do business here thereby
compelling the consignees or purchasers of the goods
insured to go to America and sue in its courts for
redress.
There is no question that the contracts are enforceable. The
requirement of registration affects only the remedy.
Significantly, Batas Pambansa Blg. 68, the Corporation Code of the
Philippines has corrected the ambiguity caused by the wording of
Section 69 of the old Corporation Law.
Section 133 of the present Corporation Code provides:
SEC. 133. Doing business without a license.-No foreign
corporation transacting business in the Philippines
without a license, or its successors or assigns, shag be
permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency in the
Philippines; but such corporation may be sued or
proceeded against before Philippine courts or
administrative tribunals on any valid cause of action
recognized under Philippine laws.
The old Section 69 has been reworded in terms of non-access to
courts and administrative agencies in order to maintain or intervene in
any action or proceeding.
The prohibition against doing business without first securing a license
is now given penal sanction which is also applicable to other violations
of the Corporation Code under the general provisions of Section 144 of
the Code.
It is, therefore, not necessary to declare the contract nun and void even
as against the erring foreign corporation. The penal sanction for the
violation and the denial of access to our courts and administrative
bodies are sufficient from the viewpoint of legislative policy.
Our ruling that the lack of capacity at the time of the execution of the
contracts was cured by the subsequent registration is also
strengthened by the procedural aspects of these cases.
The petitioner averred in its complaints that it is a foreign insurance
company, that it is authorized to do business in the Philippines, that its
agent is Mr. Victor H. Bello, and that its office address is the Oledan
Building at Ayala Avenue, Makati. These are all the averments required
by Section 4, Rule 8 of the Rules of Court. The petitioner sufficiently
alleged its capacity to sue. The private respondents countered either
with an admission of the plaintiff's jurisdictional averments or with a
general denial based on lack of knowledge or information sufficient to
form a belief as to the truth of the averments.
In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian
Phil. Inc. is ordered to pay the petitioner the sum of P2,426.98 with
interest at the legal rate from February 1, 1968 until fully paid, the sum
of P500.00 attorney's fees, and costs, The complaint against Guacods,
Inc. is dismissed.
SO ORDERED.

We find the general denials inadequate to attack the foreign

corporations lack of capacity to sue in the light of its positive averment
that it is authorized to do so. Section 4, Rule 8 requires that "a party
desiring to raise an issue as to the legal existence of any party or the
capacity of any party to sue or be sued in a representative capacity
shall do so by specific denial, which shag include such supporting
particulars as are particularly within the pleader's knowledge. At the
very least, the private respondents should have stated particulars in
their answers upon which a specific denial of the petitioner's capacity
to sue could have been based or which could have supported its denial
for lack of knowledge. And yet, even if the plaintiff's lack of capacity to
sue was not properly raised as an issue by the answers, the petitioner
introduced documentary evidence that it had the authority to engage in
the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the

respondent court are reversed and set aside.

In L-34382, respondent Eastern Shipping Lines is ordered to pay the

petitioner the sum of P1,630.22 with interest at the legal rate from
January 5, 1968 until fully paid and respondent Angel Jose
Transportation Inc. is ordered to pay the petitioner the sum of
P1,630.22 also with interest at the legal rate from January 5, 1968 until
fully paid. Each respondent shall pay one-half of the costs. The
counterclaim of Angel Jose Transportation Inc. is dismissed.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 115849 January 24, 1996
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers
Bank of the Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of
DEMETRIO DEMETRIA, and JOSE JANOLO,respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by
bank officers in an exchange of letters and/or in a meeting with the
buyers constitute a perfected and enforceable contract of sale over
101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of
"apparent authority" apply in this case? If so, may the Central Bank-
appointed conservator of Producers Bank (now First Philippine
International Bank) repudiate such "apparent authority" after said
contract has been deemed perfected? During the pendency of a suit
for specific performance, does the filing of a "derivative suit" by the
majority shareholders and directors of the distressed bank to prevent
the enforcement or implementation of the sale violate the ban against
forum-shopping?
Simply stated, these are the major questions brought before this Court
in the instant Petition for review on certiorariunder Rule 45 of the Rules
of Court, to set aside the Decision promulgated January 14, 1994 of
the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the
Resolution promulgated June 14, 1994 denying the motion for
reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by
the elimination of the damages awarded under paragraphs 3, 4
and 6 of its dispositive portion and the reduction of the award in
paragraph 5 thereof to P75,000.00, to be assessed against
defendant bank. In all other aspects, said decision is hereby
AFFIRMED.
All references to the original plaintiffs in the decision and its
dispositive portion are deemed, herein and hereafter, to legally
refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial court's2 decision dated July 10, 1991,
on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiffs and against the defendants as
follows:
1. Declaring the existence of a perfected contract to buy and
sell over the six (6) parcels of land situated at Don Jose, Sta.
Rosa, Laguna with an area of 101 hectares, more or less,
covered by and embraced in Transfer Certificates of Title Nos.
T-106932 to T-106937, inclusive, of the Land Records of
Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half
Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon
finality of this decision and receipt from the plaintiffs the
amount of P5.5 Million, to execute in favor of said plaintiffs a
deed of absolute sale over the aforementioned six (6) parcels
 of land, and to immediately deliver to the plaintiffs the owner's
copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for
purposes of registration of the same deed and transfer of the
six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay
plaintiffs Jose A. Janolo and Demetrio Demetria the sums of
P200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay
plaintiffs the sum of P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the
plaintiffs the amount of P400,000.00 for and by way of
attorney's fees;
6. Ordering the defendants to pay the plaintiffs, jointly and
severally, actual and moderate damages in the amount of
P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and
reply to sur-rejoinder, the petition was given due course in a Resolution
dated January 18, 1995. Thence, the parties filed their respective
memoranda and reply memoranda. The First Division transferred this
case to the Third Division per resolution dated October 23, 1995. After
carefully deliberating on the aforesaid submissions, the Court assigned
the case to the undersigned ponentefor the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank
of the Philippines; petitioner Bank, for brevity) is a banking institution
organized and existing under the laws of the Republic of the
Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is
of legal age and was, at all times material to this case, Head-Manager
of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal
age and is the assignee of original plaintiffs-appellees Demetrio
Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision
and Resolution sought to be set aside through this petition.
The Facts
The facts of this case are summarized in the respondent Court's
Decision3 as follows:
(1) In the course of its banking operations, the defendant
Producer Bank of the Philippines acquired six parcels of land
with a total area of 101 hectares located at Don Jose, Sta.
Rose, Laguna, and covered by Transfer Certificates of Title
Nos. T-106932 to T-106937. The property used to be owned by
BYME Investment and Development Corporation which had
them mortgaged with the bank as collateral for a loan. The
original plaintiffs, Demetrio Demetria and Jose O. Janolo,
wanted to purchase the property and thus initiated negotiations
for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the
suggestion of BYME investment's legal counsel, Jose Fajardo,
met with defendant Mercurio Rivera, Manager of the Property
Management Department of the defendant bank. The meeting
was held pursuant to plaintiffs' plan to buy the property (TSN of
Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo,
following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30,
1987 (Exh. "B"), as follows:
 August 30, 1987 JP M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila
The Producers Bank of the Philippines
Makati, Metro Manila
Attention: JOSE O. JANOLO
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept. Dear Sir:

Gentleman: Thank you for your letter-offer to buy our six (6) parcels of
acquired lots at Sta. Rosa, Laguna (formerly owned by Byme
Industrial Corp.). Please be informed however that the bank's
I have the honor to submit my formal offer to purchase your
counter-offer is at P5.5 million for more than 101 hectares on
properties covered by titles listed hereunder located at Sta.
lot basis.
Rosa, Laguna, with a total area of 101 hectares, more or less.
We shall be very glad to hear your position on the on the
TCT NO. AREA matter.
T-106932 113,580 sq. m.
T-106933 70,899 sq. m. Best regards.
T-106934 52,246 sq. m.
(4) On September 17, 1987, plaintiff Janolo, responding to
T-106935 96,768 sq. m. Rivera's aforequoted reply, wrote (Exh. "D"):
T-106936 187,114 sq. m.
T-106937 481,481 sq. m. September 17, 1987

My offer is for PESOS: THREE MILLION FIVE HUNDRED Producers Bank

THOUSAND (P3,500,000.00) PESOS, in cash. Paseo de Roxas
Makati, Metro Manila
Kindly contact me at Telephone Number 921-1344.
Attention: Mr. Mercurio Rivera
(3) On September 1, 1987, defendant Rivera made on behalf of
the bank a formal reply by letter which is hereunder quoted Gentlemen:
(Exh. "C"):
In reply to your letter regarding my proposal to purchase your
101-hectare lot located at Sta. Rosa, Laguna, I would like to
September 1, 1987
amend my previous offer and I now propose to buy the said lot
at P4.250 million in CASH..
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolo's foregoing letter of
September 17, 1987. What took place was a meeting on
September 28, 1987 between the plaintiffs and Luis Co, the
Senior Vice-President of defendant bank. Rivera as well as
Fajardo, the BYME lawyer, attended the meeting. Two days
later, or on September 30, 1987, plaintiff Janolo sent to the
bank, through Rivera, the following letter (Exh. "E"):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land
in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are
pleased to inform you that we are accepting your offer for us to
purchase the property at Sta. Rosa, Laguna, formerly owned
by Byme Investment, for a total price of PESOS: FIVE
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On October 12, 1987, the conservator of the bank (which
has been placed under conservatorship by the Central Bank
since 1984) was replaced by an Acting Conservator in the
person of defendant Leonida T. Encarnacion. On November 4,
1987, defendant Rivera wrote plaintiff Demetria the following
letter (Exh. "F"):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from
Byme investment Corp. located at Sta. Rosa, Laguna is under
study yet as of this time by the newly created committee for
submission to the newly designated Acting Conservator of the
bank.
For your information.
(7) What thereafter transpired was a series of demands by the
plaintiffs for compliance by the bank with what plaintiff
considered as a perfected contract of sale, which demands
were in one form or another refused by the bank. As detailed
by the trial court in its decision, on November 17, 1987,
plaintiffs through a letter to defendant Rivera (Exhibit "G")
tendered payment of the amount of P5.5 million "pursuant to
(our) perfected sale agreement." Defendants refused to receive
both the payment and the letter. Instead, the parcels of land
involved in the transaction were advertised by the bank for sale
to any interested buyer (Exh, "H" and "H-1"). Plaintiffs
demanded the execution by the bank of the documents on
what was considered as a "perfected agreement." Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O.
Janolo, to purchase your 101-hectare lot located in Sta. Rosa,
Laguna, and which are covered by TCT No. T-106932 to
106937.
From the documents at hand, it appears that your counter-offer
dated September 1, 1987 of this same lot in the amount of P5.5
million was accepted by our client thru a letter dated
September 30, 1987 and was received by you on October 5,
1987.
In view of the above circumstances, we believe that an
agreement has been perfected. We were also informed that
despite repeated follow-up to consummate the purchase, you
now refuse to honor your commitment. Instead, you have
advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal
demand upon you to consummate and execute the necessary
actions/documentation within three (3) days from your receipt
hereof. We are ready to remit the agreed amount of P5.5
million at your advice. Otherwise, we shall be constrained to file
the necessary court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged
receipt of the foregoing letter and stated, in its communication
of December 2, 1987 (Exh. "I"), that said letter has been
"referred . . . to the office of our Conservator for proper
disposition" However, no response came from the Acting
Conservator. On December 14, 1987, the plaintiffs made a
second tender of payment (Exh. "L" and "L-1"), this time
through the Acting Conservator, defendant Encarnacion.
Plaintiffs' letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION
Central Bank Conservator
We are sending you herewith, in - behalf of our client, Mr.
JOSE O. JANOLO, MBTC Check No. 258387 in the amount of
P5.5 million as our agreed purchase price of the 101-hectare
lot covered by TCT Nos. 106932, 106933, 106934, 106935,
106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent
from your offer of P5.5 Million as the purchase price of the said
lots. Please inform us of the date of documentation of the sale
immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four
months. Then, on May 3, 1988, plaintiff, through counsel, made
a final demand for compliance by the bank with its obligations
under the considered perfected contract of sale (Exhibit "N").
As recounted by the trial court (Original Record, p. 656), in a
reply letter dated May 12, 1988 (Annex "4" of defendant's
answer to amended complaint), the defendants through Acting
Conservator Encarnacion repudiated the authority of defendant
Rivera and claimed that his dealings with the plaintiffs,
particularly his counter-offer of P5.5 Million are unauthorized or
illegal. On that basis, the defendants justified the refusal of the
tenders of payment and the non-compliance with the
obligations under what the plaintiffs considered to be a
perfected contract of sale.
 (10) On May 16, 1988, plaintiffs filed a suit for specific
performance with damages against the bank, its Manager
Rivers and Acting Conservator Encarnacion. The basis of the
suit was that the transaction had with the bank resulted in a
perfected contract of sale, The defendants took the position
that there was no such perfected sale because the defendant
Rivera is not authorized to sell the property, and that there was
no meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co),
through counsel Sycip Salazar Hernandez and Gatmaitan, filed
a motion to intervene in the trial court, alleging that as owner of
80% of the Bank's outstanding shares of stock, he had a
substantial interest in resisting the complaint. On July 8, 1991,
the trial court issued an order denying the motion to intervene
on the ground that it was filed after trial had already been
concluded. It also denied a motion for reconsideration filed
thereafter. From the trial court's decision, the Bank, petitioner
Rivera and conservator Encarnacion appealed to the Court of
Appeals which subsequently affirmed with modification the said
judgment. Henry Co did not appeal the denial of his motion for
intervention.
In the course of the proceedings in the respondent Court, Carlos
Ejercito was substituted in place of Demetria and Janolo, in view of the
assignment of the latters' rights in the matter in litigation to said private
respondent.
On July 11, 1992, during the pendency of the proceedings in the Court
of Appeals, Henry Co and several other stockholders of the Bank,
through counsel Angara Abello Concepcion Regala and Cruz, filed an
action (hereafter, the "Second Case") — purportedly a "derivative suit"
— with the Regional Trial Court of Makati, Branch 134, docketed as
Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to
declare any perfected sale of the property as unenforceable and to
stop Ejercito from enforcing or implementing the sale"4 In his answer,
Janolo argued that the Second Case was barred by litis pendentia by
virtue of the case then pending in the Court of Appeals. During the pre-
trial conference in the Second Case, plaintiffs filed a Motion for Leave
of Court to Dismiss the Case Without Prejudice. "Private respondent
opposed this motion on the ground, among others, that plaintiff's act of
forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this
motion is still pending in the Makati RTC.
In their Petition6 and Memorandum7 , petitioners summarized their
position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale
was perfected between Ejercito (in substitution of Demetria and
Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an
enforceable contract of sale between the parties.
III.
The Court of Appeals erred in declaring that the conservator
does not have the power to overrule or revoke acts of previous
management.
IV.
The findings and conclusions of the Court of Appeals do not
conform to the evidence on record.
On the other hand, petitioners prayed for dismissal of the instant suit
on the ground8 that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals
are supported by the evidence on record and may no longer be
questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected
contract between Demetria and Janolo (substituted by;
respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator,
apart from being estopped from repudiating the agency and the
contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may
be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable
under the statute of frauds?
4) Did the bank conservator have the unilateral power to
repudiate the authority of the bank officers and/or to revoke the
said contract?
5) Did the respondent Court commit any reversible error in its
findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the
Supreme Court promulgated Revised Circular No. 28-91 requiring that
a party "must certify under oath . . . [that] (a) he has not (t)heretofore
commenced any other action or proceeding involving the same issues
in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; (b) to the best of his knowledge, no such action or proceeding
is pending" in said courts or agencies. A violation of the said circular
entails sanctions that include the summary dismissal of the multiple
petitions or complaints. To be sure, petitioners have included a
VERIFICATION/CERTIFICATION in their Petition stating "for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional
Trial Court of Makati, Branch 134, involving a derivative suit filed by
stockholders of petitioner Bank against the conservator and other
defendants but which is the subject of a pending Motion to Dismiss
Without Prejudice.9
Private respondent Ejercito vigorously argues that in spite of this
verification, petitioners are guilty of actual forum shopping because the
instant petition pending before this Court involves "identical parties or
interests represented, rights asserted and reliefs sought (as that)
currently pending before the Regional Trial Court, Makati Branch 134
in the Second Case. In fact, the issues in the two cases are so
interwined that a judgement or resolution in either case will
constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping
because:
1) In the earlier or "First Case" from which this proceeding
arose, the Bank was impleaded as a defendant, whereas in the
"Second Case" (assuming the Bank is the real party in interest
in a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of
the corporation under the circumstances";
3) Although the CERTIFICATION/VERIFICATION (supra)
signed by the Bank president and attached to the Petition
identifies the action as a "derivative suit," it "does not mean that
it is one" and "(t)hat is a legal question for the courts to decide";
4) Petitioners did not hide the Second Case at they mentioned
it in the said VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private
international law.12 , where non-resident litigants are given the option to
choose the forum or place wherein to bring their suit for various
reasons or excuses, including to secure procedural advantages, to
annoy and harass the defendant, to avoid overcrowded dockets, or to
select a more friendly venue. To combat these less than honorable
excuses, the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse impositions on
its jurisdiction where it is not the most "convenient" or available forum
and the parties are not precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum shopping "occurs
when a party attempts to have his action tried in a particular court or
jurisdiction where he feels he will receive the most favorable judgment
or verdict." Hence, according to Words and Phrases14 , "a litigant is
open to the charge of "forum shopping" whenever he chooses a forum
with slight connection to factual circumstances surrounding his suit,
and litigants should be encouraged to attempt to settle their differences
without imposing undue expenses and vexatious situations on the
courts".
In the Philippines, forum shopping has acquired a connotation
encompassing not only a choice of venues, as it was originally
understood in conflicts of laws, but also to a choice of remedies. As to
the first (choice of venues), the Rules of Court, for example, allow a
plaintiff to commence personal actions "where the defendant or any of
the defendants resides or may be found, or where the plaintiff or any of
the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]).
As to remedies, aggrieved parties, for example, are given a choice of
pursuing civil liabilities independently of the criminal, arising from the
same set of facts. A passenger of a public utility vehicle involved in a
vehicular accident may sue on culpa contractual, culpa aquiliana or
culpa criminal — each remedy being available independently of the
others — although he cannot recover more than once.
In either of these situations (choice of venue or choice of
remedy), the litigant actually shops for a forum of his action,
This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the
forum of their actions, litigants, through the encouragement of
their lawyers, file their actions in all available courts, or invoke
all relevant remedies simultaneously. This practice had not only
resulted to (sic) conflicting adjudications among different courts
and consequent confusion enimical (sic) to an orderly
administration of justice. It had created extreme inconvenience
to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept —
which is unethical professional legal practice. And this
 necessitated or had given rise to the formulation of rules and
canons discouraging or altogether prohibiting the practice. 15
What therefore originally started both in conflicts of laws and in our
domestic law as a legitimate device for solving problems has been
abused and mis-used to assure scheming litigants of dubious reliefs.
To avoid or minimize this unethical practice of subverting justice, the
Supreme Court, as already mentioned, promulgated Circular 28-91.
And even before that, the Court had prescribed it in the Interim Rules
and Guidelines issued on January 11, 1983 and had struck down in
several cases 16 the inveterate use of this insidious malpractice. Forum
shopping as "the filing of repetitious suits in different courts" has been
condemned by Justice Andres R. Narvasa (now Chief Justice)
in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et
al., "as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?
There is forum-shopping whenever, as a result of an adverse
opinion in one forum, a party seeks a favorable opinion (other
than by appeal or certiorari) in another. The principle applies
not only with respect to suits filed in the courts but also in
connection with litigations commenced in the courts while an
administrative proceeding is pending, as in this case, in order
to defeat administrative processes and in anticipation of an
unfavorable administrative ruling and a favorable court ruling.
This is specially so, as in this case, where the court in which
the second suit was brought, has no jurisdiction.18
The test for determining whether a party violated the rule against forum
shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19 ,
also by Chief Justice Narvasa, and that is, forum shopping exists
where the elements of litis pendentia are present or where a final
judgment in one case will amount to res judicata in the other, as
follows:
There thus exists between the action before this Court and
RTC Case No. 86-36563 identity of parties, or at least such
parties as represent the same interests in both actions, as well
as identity of rights asserted and relief prayed for, the relief
being founded on the same facts, and the identity on the two
preceding particulars is such that any judgment rendered in the
other action, will, regardless of which party is successful,
amount to res adjudicata in the action under consideration: all
the requisites, in fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and
RTC Case No. 86-36563, an identity as regards parties, or
interests represented, rights asserted and relief sought, as well
as basis thereof, to a degree sufficient to give rise to the
ground for dismissal known as auter action pendant or lis
pendens. That same identity puts into operation the sanction of
twin dismissals just mentioned. The application of this sanction
will prevent any further delay in the settlement of the
controversy which might ensue from attempts to seek
reconsideration of or to appeal from the Order of the Regional
Trial Court in Civil Case No. 86-36563 promulgated on July 15,
1986, which dismissed the petition upon grounds which appear
persuasive.
Consequently, where a litigant (or one representing the same interest
or person) sues the same party against whom another action or actions
for the alleged violation of the same right and the enforcement of the
same relief is/are still pending, the defense of litis pendencia in one
case is bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest.
In either case, forum shopping could be cited by the other party as a
ground to ask for summary dismissal of the two 20 (or more) complaints
or petitions, and for imposition of the other sanctions, which are direct
contempt of court, criminal prosecution, and disciplinary action against
the erring lawyer.
Applying the foregoing principles in the case before us and comparing
it with the Second Case, it is obvious that there exist identity of parties
or interests represented, identity of rights or causes and identity of
reliefs sought.
In an earlier case 23 but with the same logic and vigor, we held:
Very simply stated, the original complaint in the court a quo which gave
rise to the instant petition was filed by the buyer (herein private
respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the
other hand, the complaint 21 in the Second Case seeks to declare such
purported sale involving the same real property "as unenforceable as
against the Bank", which is the petitioner herein. In other words, in the
Second Case, the majority stockholders, in representation of the Bank,
are seeking to accomplish what the Bank itself failed to do in the
original case in the trial court. In brief, the objective or the relief being
sought, though worded differently, is the same, namely, to enable the
petitioner Bank to escape from the obligation to sell the property to
respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22 , this
Court ruled that the filing by a party of two apparently different actions,
but with the same objective, constituted forum shopping:
In the attempt to make the two actions appear to be different,
petitioner impleaded different respondents therein — PNOC in
the case before the lower court and the COA in the case before
this Court and sought what seems to be different reliefs.
Petitioner asks this Court to set aside the questioned letter-
directive of the COA dated October 10, 1988 and to direct said
body to approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the
PNOC from conducting a rebidding and from selling to other
parties the vessel "T/T Andres Bonifacio", and for an extension
of time for it to comply with the paragraph 1 of the
memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are
ostensibly different, the ultimate objective in both actions is the
same, that is, approval of the sale of vessel in favor of
petitioner and to overturn the letter-directive of the COA of
October 10, 1988 disapproving the sale. (emphasis supplied).
In other words, the filing by the petitioners of the instant special
civil action for certiorari and prohibition in this Court despite the
pendency of their action in the Makati Regional Trial Court, is a
species of forum-shopping. Both actions unquestionably
involve the same transactions, the same essential facts and
circumstances. The petitioners' claim of absence of identity
simply because the PCGG had not been impleaded in the RTC
suit, and the suit did not involve certain acts which transpired
after its commencement, is specious. In the RTC action, as in
the action before this Court, the validity of the contract to
purchase and sell of September 1, 1986, i.e., whether or not it
had been efficaciously rescinded, and the propriety of
implementing the same (by paying the pledgee banks the
amount of their loans, obtaining the release of the pledged
shares, etc.) were the basic issues. So, too, the relief was the
same: the prevention of such implementation and/or the
restoration of the status quo ante. When the acts sought to be
restrained took place anyway despite the issuance by the Trial
Court of a temporary restraining order, the RTC suit did not
become functus oficio. It remained an effective vehicle for
obtention of relief; and petitioners' remedy in the premises was
plain and patent: the filing of an amended and supplemental
pleading in the RTC suit, so as to include the PCGG as
defendant and seek nullification of the acts sought to be
enjoined but nonetheless done. The remedy was certainly not
the institution of another action in another forum based on
essentially the same facts, The adoption of this latter recourse
renders the petitioners amenable to disciplinary action and both
 their actions, in this Court as well as in the Court a quo,
dismissible.
In the instant case before us, there is also identity of parties, or at
least, of interests represented. Although the plaintiffs in the Second
Case (Henry L. Co. et al.) are not name parties in the First Case, they
represent the same interest and entity, namely, petitioner Bank,
because:
Firstly, they are not suing in their personal capacities, for they have no
direct personal interest in the matter in controversy. They are not
principally or even subsidiarily liable; much less are they direct parties
in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show
that the stockholders are bringing a "derivative suit". In the caption
itself, petitioners claim to have brought suit "for and in behalf of the
Producers Bank of the Philippines" 24 . Indeed, this is the very essence
of a derivative suit:
An individual stockholder is permitted to institute a derivative
suit on behalf of the corporation wherein he holdsstock in order
to protect or vindicate corporate rights, whenever the officials of
the corporation refuse to sue, or are the ones to be sued or
hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the
corporation as the real party in interest. (Gamboa v. Victoriano,
90 SCRA 40, 47 [1979]; emphasis supplied).
In the face of the damaging admissions taken from the complaint in the
Second Case, petitioners, quite strangely, sought to deny that the
Second Case was a derivative suit, reasoning that it was brought, not
by the minority shareholders, but by Henry Co et al., who not only own,
hold or control over 80% of the outstanding capital stock, but also
constitute the majority in the Board of Directors of petitioner Bank. That
being so, then they really represent the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of
interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the
personality Of the Bank is separate and distinct from its shareholders.
But the rulings of this Court are consistent: "When the fiction is urged
as a means of perpetrating a fraud or an illegal act or as a vehicle for
the evasion of an existing obligation, the circumvention of statutes, the
achievement or perfection of a monopoly or generally the perpetration
of knavery or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be
lifted to allow for its consideration merely as an aggregation of
individuals." 25
In addition to the many cases 26 where the corporate fiction has been
disregarded, we now add the instant case, and declare herewith that
the corporate veil cannot be used to shield an otherwise blatant
violation of the prohibition against forum-shopping. Shareholders,
whether suing as the majority in direct actions or as the minority in a
derivative suit, cannot be allowed to trifle with court processes,
particularly where, as in this case, the corporation itself has not been
remiss in vigorously prosecuting or defending corporate causes and in
using and applying remedies available to it. To rule otherwise would be
to encourage corporate litigants to use their shareholders as fronts to
circumvent the stringent rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum
shopping, even assuming arguendo that there is identity of parties,
causes of action and reliefs sought, "because it (the Bank) was the
defendant in the (first) case while it was the plaintiff in the other
(Second Case)",citing as authority Victronics Computers, Inc.,
vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where Court
held:
The rule has not been extended to a defendant who, for
reasons known only to him, commences a new action against
 the plaintiff — instead of filing a responsive pleading in the
other case — setting forth therein, as causes of action, specific
denials, special and affirmative defenses or even
counterclaims, Thus, Velhagen's and King's motion to dismiss
Civil Case No. 91-2069 by no means negates the charge of
forum-shopping as such did not exist in the first place.
(emphasis supplied)
Petitioner pointed out that since it was merely the defendant in the
original case, it could not have chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in
factual setting between Victronics and the present suit. In the former,
as underscored in the above-quoted Court ruling, the defendants did
not file any responsive pleading in the first case. In other words, they
did not make any denial or raise any defense or counter-claim therein
In the case before us however, petitioners filed a responsive pleading
to the complaint — as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter–
claims in their responsive pleadings, the petitioners became plaintiffs
themselves in the original case, giving unto themselves the very
remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether
forum-shopping exists or not is the vexation caused the courts and
parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or to
grant the same or substantially the same reliefs, in the process
creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue. In this case, this is exactly the
problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties front enforcing or
implementing the said sale. Indeed, a final decision in one would
constitute res judicata in the other 28 .
The foregoing conclusion finding the existence of forum-shopping
notwithstanding, the only sanction possible now is the dismissal of both
cases with prejudice, as the other sanctions cannot be imposed
because petitioners' present counsel entered their appearance only
during the proceedings in this Court, and the Petition's
VERIFICATION/CERTIFICATION contained sufficient allegations as to
the pendency of the Second Case to show good faith in observing
Circular 28-91. The Lawyers who filed the Second Case are not before
us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision.
However, petitioners themselves (and particularly Henry Co, et al.) as
litigants are admonished to strictly follow the rules against forum-
shopping and not to trifle with court proceedings and processes They
are warned that a repetition of the same will be dealt with more
severely.
Having said that, let it be emphasized that this petition should be
dismissed not merely because of forum-shopping but also because of
the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not
there was, on the basis of the facts established, a perfected contract of
sale as the ultimate issue. Holding that a valid contract has been
established, respondent Court stated:
There is no dispute that the object of the transaction is that
property owned by the defendant bank as acquired assets
consisting of six (6) parcels of land specifically identified under
Transfer Certificates of Title Nos. T-106932 to T-106937. It is
likewise beyond cavil that the bank intended to sell the
property. As testified to by the Bank's Deputy Conservator,
Jose Entereso, the bank was looking for buyers of the property.
It is definite that the plaintiffs wanted to purchase the property
and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management
Department of the defendant bank, in early August 1987. The
procedure in the sale of acquired assets as well as the nature
and scope of the authority of Rivera on the matter is clearly
delineated in the testimony of Rivera himself, which testimony
was relied upon by both the bank and by Rivera in their appeal
briefs. Thus (TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was
turned over to me and then I published it in the form of
an inter-office memorandum distributed to all branches
that these are acquired assets for sale. I was instructed
to advertise acquired assets for sale so on that basis, I
have to entertain offer; to accept offer, formal offer and
upon having been offered, I present it to the
Committee. I provide the Committee with necessary
information about the property such as original loan of
the borrower, bid price during the foreclosure, total
claim of the bank, the appraised value at the time the
property is being offered for sale and then the
information which are relative to the evaluation of the
bank to buy which the Committee considers and it is
the Committee that evaluate as against the exposure of
the bank and it is also the Committee that submit to the
Conservator for final approval and once approved, we
have to execute the deed of sale and it is the
Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987
regarding their purpose of buying the property, dealt with and
talked to the right person. Necessarily, the agenda was the
price of the property, and plaintiffs were dealing with the bank
official authorized to entertain offers, to accept offers and to
present the offer to the Committee before which the said official
is authorized to discuss information relative to price
determination. Necessarily, too, it being inherent in his
authority, Rivera is the officer from whom official information
regarding the price, as determined by the Committee and
approved by the Conservator, can be had. And Rivera
confirmed his authority when he talked with the plaintiff in
August 1987. The testimony of plaintiff Demetria is clear on this
point (TSN of May 31,1990, pp. 27-28):
Q: When you went to the Producers Bank and talked
with Mr. Mercurio Rivera, did you ask him point-blank
his authority to sell any property?
A: No, sir. Not point blank although it came from him,
(W)hen I asked him how long it would take because he
was saying that the matter of pricing will be passed
upon by the committee. And when I asked him how
long it will take for the committee to decide and he said
the committee meets every week. If I am not mistaken
Wednesday and in about two week's (sic) time, in effect
what he was saying he was not the one who was to
decide. But he would refer it to the committee and he
would relay the decision of the committee to me.
Q — Please answer the question.
A — He did not say that he had the authority (.) But he
said he would refer the matter to the committee and he
would relay the decision to me and he did just like that.
"Parenthetically, the Committee referred to was the Past Due
Committee of which Luis Co was the Head, with Jose Entereso
as one of the members.
What transpired after the meeting of early August 1987 are
consistent with the authority and the duties of Rivera and the
bank's internal procedure in the matter of the sale of bank's
assets. As advised by Rivera, the plaintiffs made a formal offer
by a letter dated August 20, 1987 stating that they would buy at
the price of P3.5 Million in cash. The letter was for the attention
of Mercurio Rivera who was tasked to convey and accept such
offers. Considering an aspect of the official duty of Rivera as
some sort of intermediary between the plaintiffs-buyers with
their proposed buying price on one hand, and the bank
Committee, the Conservator and ultimately the bank itself with
the set price on the other, and considering further the
discussion of price at the meeting of August resulting in a
formal offer of P3.5 Million in cash, there can be no other
logical conclusion than that when, on September 1, 1987,
Rivera informed plaintiffs by letter that "the bank's counter-offer
is at P5.5 Million for more than 101 hectares on lot basis," such
counter-offer price had been determined by the Past Due
Committee and approved by the Conservator after Rivera had
duly presented plaintiffs' offer for discussion by the Committee
of such matters as original loan of borrower, bid price during
foreclosure, total claim of the bank, and market value. Tersely
put, under the established facts, the price of P5.5 Million was,
as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before
this Court, that the P5.5 Million price was not discussed by the
Committee and that price. As correctly characterized by the
trial court, this is not credible. The testimonies of Luis Co and
Jose Entereso on this point are at best equivocal and
considering the gratuitous and self-serving character of these
declarations, the bank's submission on this point does not
inspire belief. Both Co ad Entereso, as members of the Past
Due Committee of the bank, claim that the offer of the plaintiff
was never discussed by the Committee. In the same vein, both
Co and Entereso openly admit that they seldom attend the
meetings of the Committee. It is important to note that
negotiations on the price had started in early August and the
plaintiffs had already offered an amount as purchase price,
having been made to understand by Rivera, the official in
charge of the negotiation, that the price will be submitted for
approval by the bank and that the bank's decision will be
relayed to plaintiffs. From the facts, the official bank price. At
any rate, the bank placed its official, Rivera, in a position of
authority to accept offers to buy and negotiate the sale by
having the offer officially acted upon by the bank. The bank
cannot turn around and later say, as it now does, that what
Rivera states as the bank's action on the matter is not in fact
so. It is a familiar doctrine, the doctrine of ostensible authority,
that if a corporation knowingly permits one of its officers, or any
other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing
power to do those acts, the corporation will, as against any one
who has in good faith dealt with the corporation through such
agent, he estopped from denying his authority (Francisco v.
GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94
SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R.
No. 103957, June 14, 1993). 29
Article 1318 of the Civil Code enumerates the requisites of a valid and
perfected contract as follows: "(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; (3) Cause
of the obligation which is established."
There is no dispute on requisite no. 2. The object of the questioned
contract consists of the six (6) parcels of land in Sta. Rosa, Laguna
with an aggregate area of about 101 hectares, more or less, and
covered by Transfer Certificates of Title Nos. T-106932 to T-106937.
There is, however, a dispute on the first and third requisites.
Petitioners allege that "there is no counter-offer made by the Bank, and
any supposed counter-offer which Rivera (or Co) may have made is
unauthorized. Since there was no counter-offer by the Bank, there was
nothing for Ejercito (in substitution of Demetria and Janolo) to
accept." 30 They disputed the factual basis of the respondent Court's
findings that there was an offer made by Janolo for P3.5 million, to
which the Bank counter-offered P5.5 million. We have perused the
evidence but cannot find fault with the said Court's findings of fact.
Verily, in a petition under Rule 45 such as this, errors of fact — if there
be any - are, as a rule, not reviewable. The mere fact that respondent
Court (and the trial court as well) chose to believe the evidence
presented by respondent more than that presented by petitioners is not
by itself a reversible error. In fact, such findings merit serious
consideration by this Court, particularly where, as in this case, said
courts carefully and meticulously discussed their findings. This is basic.
Be that as it may, and in addition to the foregoing disquisitions by the
Court of Appeals, let us review the question of Rivera's authority to act
and petitioner's allegations that the P5.5 million counter-offer was
extinguished by the P4.25 million revised offer of Janolo. Here, there
are questions of law which could be drawn from the factual findings of
the respondent Court. They also delve into the contractual elements of
consent and cause.
The authority of a corporate officer in dealing with third persons may be
actual or apparent. The doctrine of "apparent authority", with special
reference to banks, was laid out in Prudential Bank vs. Court of
Appeals31 , where it was held that:
Conformably, we have declared in countless decisions that the
principal is liable for obligations contracted by the agent. The
agent's apparent representation yields to the principal's true
representation and the contract is considered as entered into
between the principal and the third person (citing National Food
Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in
the interests of the bank or in the course of dealings of
the officers in their representative capacity but not for
acts outside the scape of their authority (9 C.J.S., p.
417). A bank holding out its officers and agents as
worthy of confidence will not be permitted to profit by
the frauds they may thus be enabled to perpetrate in
the apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds even
though no benefit may accrue to the bank therefrom
(10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the
representation is made in the course of its business by
an agent acting within the general scope of his
authority even though, in the particular case, the agent
is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v.
Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR
1021).
Application of these principles is especially necessary because
banks have a fiduciary relationship with the public and their
stability depends on the confidence of the people in their
honesty and efficiency. Such faith will be eroded where banks
do not exercise strict care in the selection and supervision of its
employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that
petitioner Rivera has apparent or implied authority to act for the Bank
in the matter of selling its acquired assets. This evidence includes the
following:
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at
all times material to this case, Manager of the Property
Management Department of the Bank". By his own admission,
Rivera was already the person in charge of the Bank's acquired
assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely
being sold by the Bank. And during the initial meeting between
the buyers and Rivera, the latter suggested that the buyers'
 offer should be no less than P3.3 million (TSN, April 26, 1990,
pp. 16-17);
(c) Rivera received the buyers' letter dated August 30, 1987
offering P3.5 million (TSN, 30 July 1990, p.11);
(d) Rivera signed the letter dated September 1, 1987 offering to
sell the property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated September 17, 1987
containing the buyers' proposal to buy the property for P4.25
million (TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5
million was the final price of the Bank (TSN, January 16, 1990,
p. 18);
(g) Rivera arranged the meeting between the buyers and Luis
Co on September 28, 1994, during which the Bank's offer of
P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp.
34-35). At said meeting, Co, a major shareholder and officer of
the Bank, confirmed Rivera's statement as to the finality of the
Bank's counter-offer of P5.5 million (TSN, January 16, 1990, p.
21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the
Bank referred to Rivera as the officer acting for the Bank in
relation to parties interested in buying assets owned/acquired
by the Bank. In fact, Rivera was the officer mentioned in the
Bank's advertisements offering for sale the property in question
(cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of
Appeals, et. al.32 , the Court, through Justice Jose A. R. Melo, affirmed
the doctrine of apparent authority as it held that the apparent authority
of the officer of the Bank of P.I. in charge of acquired assets is borne
out by similar circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Rivera's apparent
authority through documents and testimony which seek to establish
Rivera's actual authority. These pieces of evidence, however, are
inherently weak as they consist of Rivera's self-serving testimony and
various inter-office memoranda that purport to show his limited actual
authority, of which private respondent cannot be charged with
knowledge. In any event, since the issue is apparent authority, the
existence of which is borne out by the respondent Court's findings, the
evidence of actual authority is immaterial insofar as the liability of a
corporation is concerned 33 .
Petitioners also argued that since Demetria and Janolo were
experienced lawyers and their "law firm" had once acted for the Bank
in three criminal cases, they should be charged with actual knowledge
of Rivera's limited authority. But the Court of Appeals in its Decision (p.
12) had already made a factual finding that the buyers had no notice of
Rivera's actual authority prior to the sale. In fact, the Bank has not
shown that they acted as its counsel in respect to any acquired assets;
on the other hand, respondent has proven that Demetria and Janolo
merely associated with a loose aggrupation of lawyers (not a
professional partnership), one of whose members (Atty. Susana
Parker) acted in said criminal cases.
Petitioners also alleged that Demetria's and Janolo's P4.25 million
counter-offer in the letter dated September 17, 1987 extinguished the
Bank's offer of P5.5 million 34 .They disputed the respondent Court's
finding that "there was a meeting of minds when on 30 September
1987 Demetria and Janolo through Annex "L" (letter dated September
30, 1987) "accepted" Rivera's counter offer of P5.5 million under
Annex "J" (letter dated September 17, 1987)", citingthe late Justice
Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court
rulings starting with Beaumont vs. Prieto 37 .
However, the above-cited authorities and precedents cannot apply in
the instant case because, as found by the respondent Court which
reviewed the testimonies on this point, what was "accepted" by Janolo
in his letter dated September 30, 1987 was the Bank's offer of P5.5
million as confirmed and reiterated to Demetria and Atty. Jose Fajardo
by Rivera and Co during their meeting on September 28, 1987. Note
that the said letter of September 30, 1987 begins with"(p)ursuant to our
discussion last 28 September 1987 . . .
Petitioners insist that the respondent Court should have believed the
testimonies of Rivera and Co that the September 28, 1987 meeting
"was meant to have the offerors improve on their position of P5.5.
million."38 However, both the trial court and the Court of Appeals found
petitioners' testimonial evidence "not credible", and we find no basis for
changing this finding of fact.
Indeed, we see no reason to disturb the lower courts' (both the RTC
and the CA) common finding that private respondents' evidence is
more in keeping with truth and logic — that during the meeting on
September 28, 1987, Luis Co and Rivera "confirmed that the P5.5
million price has been passed upon by the Committee and could no
longer be lowered (TSN of April 27, 1990, pp. 34-35)"39 . Hence,
assuming arguendo that the counter-offer of P4.25 million extinguished
the offer of P5.5 million, Luis Co's reiteration of the said P5.5 million
price during the September 28, 1987 meeting revived the said offer.
And by virtue of the September 30, 1987 letter accepting
this revived offer, there was a meeting of the minds, as the acceptance
in said letter was absolute and unqualified.
We note that the Bank's repudiation, through Conservator
Encarnacion, of Rivera's authority and action, particularly the latter's
counter-offer of P5.5 million, as being "unauthorized and illegal" came
only on May 12, 1988 or more than seven (7) months after Janolo'
acceptance. Such delay, and the absence of any circumstance which
might have justifiably prevented the Bank from acting earlier, clearly
characterizes the repudiation as nothing more than a last-minute
attempt on the Bank's part to get out of a binding contractual
obligation.
Taken together, the factual findings of the respondent Court point to an
implied admission on the part of the petitioners that the written offer
made on September 1, 1987 was carried through during the meeting of
September 28, 1987. This is the conclusion consistent with human
experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer
of P5.5 million was raised for the first time on appeal and should thus
be disregarded.
This Court in several decisions has repeatedly adhered to the
principle that points of law, theories, issues of fact and
arguments not adequately brought to the attention of the trial
court need not be, and ordinarily will not be, considered by a
reviewing court, as they cannot be raised for the first time on
appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145
SCRA 592).40
. . . It is settled jurisprudence that an issue which was neither
averred in the complaint nor raised during the trial in the court
below cannot be raised for the first time on appeal as it would
be offensive to the basic rules of fair play, justice and due
process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo
vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development
Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175
SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30,
1990).41
Since the issue was not raised in the pleadings as an affirmative
defense, private respondent was not given an opportunity in the trial
court to controvert the same through opposing evidence. Indeed, this is
a matter of due process. But we passed upon the issue anyway, if only
to avoid deciding the case on purely procedural grounds, and we
repeat that, on the basis of the evidence already in the record and as
appreciated by the lower courts, the inevitable conclusion is simply that
there was a perfected contract of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged42 :
Even assuming that Luis Co or Rivera did relay a verbal offer to
sell at P5.5 million during the meeting of 28 September 1987,
and it was this verbal offer that Demetria and Janolo accepted
with their letter of 30 September 1987, the contract produced
thereby would be unenforceable by action — there being no
note, memorandum or writing subscribed by the Bank to
evidence such contract. (Please see article 1403[2], Civil
Code.)
Upon the other hand, the respondent Court in its Decision (p, 14)
stated:
. . . Of course, the bank's letter of September 1, 1987 on the
official price and the plaintiffs' acceptance of the price on
September 30, 1987, are not, in themselves, formal contracts
of sale. They are however clear embodiments of the fact that a
contract of sale was perfected between the parties, such
contract being binding in whatever form it may have been
entered into (case citations omitted). Stated simply, the banks'
letter of September 1, 1987, taken together with plaintiffs' letter
dated September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale.
The respondent Court could have added that the written
communications commenced not only from September 1, 1987 but
from Janolo's August 20, 1987 letter. We agree that, taken together,
these letters constitute sufficient memoranda — since they include the
names of the parties, the terms and conditions of the contract, the price
and a description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the
meeting on September 28, 1987 did constitute a "new" offer which was
accepted by Janolo on September 30, 1987. Still, the statute of frauds
will not apply by reason of the failure of petitioners to object to oral
testimony proving petitioner Bank's counter-offer of P5.5 million.
Hence, petitioners — by such utter failure to object — are deemed to
have waived any defects of the contract under the statute of frauds,
pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to
in No. 2 of article 1403, are ratified by the failure to object to
the presentation of oral evidence to prove the same, or by the
acceptance of benefits under them.
As private respondent pointed out in his Memorandum, oral testimony
on the reaffirmation of the counter-offer of P5.5 million is a plenty —
and the silence of petitioners all throughout the presentation makes the
evidence binding on them thus;
A Yes, sir, I think it was September 28, 1987 and I was again
present because Atty. Demetria told me to accompany him we
were able to meet Luis Co at the Bank.
xxx xxx xxx
Q Now, what transpired during this meeting with Luis Co of the
Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be
reduced, sir.
Q What price?
 A The 5.5 million pesos and Mr. Luis Co said that the amount
cited by Mr. Mercurio Rivera is the final price and that is the
price they intends (sic) to have, sir.
Q What do you mean?.
A That is the amount they want, sir.
Q What is the reaction of the plaintiff Demetria to Luis Co's
statement (sic) that the defendant Rivera's counter-offer of 5.5
million was the defendant's bank (sic) final offer?
A He said in a day or two, he will make final acceptance, sir.
Q What is the response of Mr. Luis Co?.
A He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp.
18-21.]
Q What transpired during that meeting between you and Mr.
Luis Co of the defendant Bank?
A We went straight to the point because he being a busy
person, I told him if the amount of P5.5 million could still be
reduced and he said that was already passed upon by the
committee. What the bank expects which was contrary to what
Mr. Rivera stated. And he told me that is the final offer of the
bank P5.5 million and we should indicate our position as soon
as possible.
Q What was your response to the answer of Mr. Luis Co?
A I said that we are going to give him our answer in a few days
and he said that was it. Atty. Fajardo and I and Mr. Mercurio
[Rivera] was with us at the time at his office.
Q For the record, your Honor please, will you tell this Court
who was with Mr. Co in his Office in Producers Bank Building
during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q By Mr. Co you are referring to?
A Mr. Luis Co.
Q After this meeting with Mr. Luis Co, did you and your partner
accede on (sic) the counter offer by the bank?
A Yes, sir, we did.? Two days thereafter we sent our
acceptance to the bank which offer we accepted, the offer of
the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
Q According to Atty. Demetrio Demetria, the amount of P5.5
million was reached by the Committee and it is not within his
power to reduce this amount. What can you say to that
statement that the amount of P5.5 million was reached by the
Committee?
A It was not discussed by the Committee but it was discussed
initially by Luis Co and the group of Atty. Demetrio Demetria
and Atty. Pajardo (sic) in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
 The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract.
It is not disputed that the petitioner Bank was under a conservator
placed by the Central Bank of the Philippines during the time that the
negotiation and perfection of the contract of sale took place. Petitioners
energetically contended that the conservator has the power to revoke
or overrule actions of the management or the board of directors of a
bank, under Section 28-A of Republic Act No. 265 (otherwise known as
the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the
appropriate supervising or examining department, the
Monetary Board finds that a bank or a non-bank financial
intermediary performing quasi-banking functions is in a state of
continuing inability or unwillingness to maintain a state of
liquidity deemed adequate to protect the interest of depositors
and creditors, the Monetary Board may appoint a conservator
to take charge of the assets, liabilities, and the management of
that institution, collect all monies and debts due said institution
and exercise all powers necessary to preserve the assets of
the institution, reorganize the management thereof, and restore
its viability. He shall have the power to overrule or revoke the
actions of the previous management and board of directors of
the bank or non-bank financial intermediary performing quasi-
banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board
shall deem necessary.
In the first place, this issue of the Conservator's alleged authority to
revoke or repudiate the perfected contract of sale was raised for the
first time in this Petition — as this was not litigated in the trial court or
Court of Appeals. As already stated earlier, issues not raised and/or
ventilated in the trial court, let alone in the Court of Appeals, "cannot be
raised for the first time on appeal as it would be offensive to the basic
rules of fair play, justice and due process."43
In the second place, there is absolutely no evidence that the
Conservator, at the time the contract was perfected, actually
repudiated or overruled said contract of sale. The Bank's acting
conservator at the time, Rodolfo Romey, never objected to the sale of
the property to Demetria and Janolo. What petitioners are really
referring to is the letter of Conservator Encarnacion, who took over
from Romey after the sale was perfected on September 30, 1987
(Annex V, petition) which unilaterally repudiated — not the contract —
but the authority of Rivera to make a binding offer — and which
unarguably came months after the perfection of the contract. Said letter
dated May 12, 1988 is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of
Attys. Janolo and Demetria regarding the six (6) parcels of land
located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-
offer to any of your clients nor perfected a "contract to sell and
buy" with any of them for the following reasons.
In the "Inter-Office Memorandum" dated April 25, 1986
addressed to and approved by former Acting Conservator Mr.
Andres I. Rustia, Producers Bank Senior Manager Perfecto M.
Pascua detailed the functions of Property Management
Department (PMD) staff and officers (Annex A.), you will
immediately read that Manager Mr. Mercurio Rivera or any of
his subordinates has no authority, power or right to make any
 alleged counter-offer. In short, your lawyer-clients did not deal
with the authorized officers of the bank.
Moreover, under Sec. 23 and 36 of the Corporation Code of the
Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of the
Central Bank Act (Rep. Act No. 265, as amended), only the
Board of Directors/Conservator may authorize the sale of any
property of the corportion/bank..
Our records do not show that Mr. Rivera was authorized by the
old board or by any of the bank conservators (starting January,
1984) to sell the aforesaid property to any of your clients.
Apparently, what took place were just preliminary
discussions/consultations between him and your clients, which
everyone knows cannot bind the Bank's Board or Conservator.
We are, therefore, constrained to refuse any tender of payment
by your clients, as the same is patently violative of corporate
and banking laws. We believe that this is more than sufficient
legal justification for refusing said alleged tender.
Rest assured that we have nothing personal against your
clients. All our acts are official, legal and in accordance with
law. We also have no personal interest in any of the properties
of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. EDCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and
far-reaching powers to the conservator of a bank, it must be pointed
out that such powers must be related to the "(preservation of) the
assets of the bank, (the reorganization of) the management thereof
and (the restoration of) its viability." Such powers, enormous and
extensive as they are, cannot extend to the post-facto repudiation of
perfected transactions, otherwise they would infringe against the non-
impairment clause of the Constitution 44 . If the legislature itself cannot
revoke an existing valid contract, how can it delegate such non-existent
powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power
to revoke contracts that are, under existing law, deemed to be
defective — i.e., void, voidable, unenforceable or rescissible. Hence,
the conservator merely takes the place of a bank's board of directors.
What the said board cannot do — such as repudiating a contract
validly entered into under the doctrine of implied authority — the
conservator cannot do either. Ineluctably, his power is not unilateral
and he cannot simply repudiate valid obligations of the Bank. His
authority would be only to bring court actions to assail such contracts
— as he has already done so in the instant case. A contrary
understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to
enable a failing bank to become solvent, at the expense of third
parties, by simply getting the conservator to unilaterally revoke all
previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected
contractual rights nor vested interests of the third parties who had dealt
with the Bank.
The Fifth Issue: Were There Reversible Errors of Facts?
Basic is the doctrine that in petitions for review under Rule 45 of the
Rules of Court, findings of fact by the Court of Appeals are not
reviewable by the Supreme Court. In Andres vs. Manufacturers
Hanover & Trust Corporation, 45 , we held:
 . . . The rule regarding questions of fact being raised with this
Court in a petition for certiorari under Rule 45 of the Revised
Rules of Court has been stated in Remalante vs. Tibe, G.R.
No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be
raised in a petition for certiorari under Rule 45 of the Revised
Rules of Court. "The jurisdiction of the Supreme Court in cases
brought to it from the Court of Appeals is limited to reviewing
and revising the errors of law imputed to it, its findings of the
fact being conclusive " [Chan vs. Court of Appeals, G.R. No. L-
27488, June 30, 1970, 33 SCRA 737, reiterating a long line of
decisions]. This Court has emphatically declared that "it is not
the function of the Supreme Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the
lower court" (Tiongco v. De la Merced, G. R. No. L-24426, July
25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No.
L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of
Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA
596). "Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that
they are so glaringly erroneous as to constitute serious abuse
of discretion, such findings must stand, for this Court is not
expected or required to examine or contrast the oral and
documentary evidence submitted by the parties" [Santa Ana,
Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18
SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
The resolution of this petition invites us to closely scrutinize the
facts of the case, relating to the sufficiency of evidence and the
credibility of witnesses presented. This Court so held that it is
not the function of the Supreme Court to analyze or weigh such
evidence all over again. The Supreme Court's jurisdiction is
limited to reviewing errors of law that may have been
committed by the lower court. The Supreme Court is not a trier
of facts. . . .
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and
Goldrock Construction and Development Corp. 47 :
The Court has consistently held that the factual findings of the
trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts
found by the lower courts is allowed are when the conclusion is
a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd,
mistaken or impossible; when there is grave abuse of
discretion in the appreciation of facts; when the judgment is
premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary
to the admissions of both appellant and appellee. After a
careful study of the case at bench, we find none of the above
grounds present to justify the re-evaluation of the findings of
fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South
Sea Surety and Insurance Company Inc. vs. Hon. Court of Appeals, et
al. 48 is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of
the appellate court, . . . (I)t is not the function of this Court to
assess and evaluate all over again the evidence, testimonial
and documentary, adduced by the parties, particularly where,
such as here, the findings of both the trial court and the
appellate court on the matter coincide. (emphasis supplied)
Petitioners, however, assailed the respondent Court's Decision as
"fraught with findings and conclusions which were not only contrary to
the evidence on record but have no bases at all," specifically the
findings that (1) the "Bank's counter-offer price of P5.5 million had
been determined by the past due committee and approved by
conservator Romey, after Rivera presented the same for discussion"
and (2) "the meeting with Co was not to scale down the price and start
negotiations anew, but a meeting on the already determined price of
P5.5 million" Hence, citingPhilippine National Bank vs. Court of
Appeals 49 , petitioners are asking us to review and reverse such factual
findings.
The first point was clearly passed upon by the Court of Appeals 50 ,
thus:
There can be no other logical conclusion than that when, on
September 1, 1987, Rivera informed plaintiffs by letter that "the
bank's counter-offer is at P5.5 Million for more than 101
hectares on lot basis, "such counter-offer price had been
determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs' offer for
discussion by the Committee . . . Tersely put, under the
established fact, the price of P5.5 Million was, as clearly
worded in Rivera's letter (Exh. "E"), the official and definitive
price at which the bank was selling the property. (p. 11, CA
Decision)
xxx xxx xxx
. . . The argument deserves scant consideration. As pointed out
by plaintiff, during the meeting of September 28, 1987 between
the plaintiffs, Rivera and Luis Co, the senior vice-president of
the bank, where the topic was the possible lowering of the
price, the bank official refused it and confirmed that the P5.5
Million price had been passed upon by the Committee and
could no longer be lowered (TSN of April 27, 1990, pp. 34-35)
(p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on
this point, characterizing it as "not credible" and "at best equivocal and
considering the gratuitous and self-serving character of these
declarations, the bank's submissions on this point do not inspire belief."
To become credible and unequivocal, petitioners should have
presented then Conservator Rodolfo Romey to testify on their behalf,
as he would have been in the best position to establish their thesis.
Under the rules on evidence 51 , such suppression gives rise to the
presumption that his testimony would have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but
petitioners' evidence was deemed insufficient by both the trial court
and the respondent Court, and instead, it was respondent's
submissions that were believed and became bases of the conclusions
arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the
findings of fact by the lower courts are valid and correct. But the
petitioners are now asking this Court to disturb these findings to fit the
conclusion they are espousing, This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may
disregard findings of fact by the Court of Appeals 52 . We have studied
both the records and the CA Decision and we find no such exceptions
in this case. On the contrary, the findings of the said Court are
supported by a preponderance of competent and credible evidence.
The inferences and conclusions are seasonably based on evidence
duly identified in the Decision. Indeed, the appellate court patiently
traversed and dissected the issues presented before it, lending
credibility and dependability to its findings. The best that can be said in
favor of petitioners on this point is that the factual findings of
respondent Court did not correspond to petitioners' claims, but were
closer to the evidence as presented in the trial court by private
respondent. But this alone is no reason to reverse or ignore such
factual findings, particularly where, as in this case, the trial court and
the appellate court were in common agreement thereon. Indeed,
conclusions of fact of a trial judge — as affirmed by the Court of
Appeals — are conclusive upon this Court, absent any serious abuse
or evident lack of basis or capriciousness of any kind, because the trial
court is in a better position to observe the demeanor of the witnesses
and their courtroom manner as well as to examine the real evidence
presented.
Epilogue.
In summary, there are two procedural issues involved forum-shopping
and the raising of issues for the first time on appeal [viz., the
extinguishment of the Bank's offer of P5.5 million and the conservator's
powers to repudiate contracts entered into by the Bank's officers] —
which per se could justify the dismissal of the present case. We did not
limit ourselves thereto, but delved as well into the substantive issues —
the perfection of the contract of sale and its enforceability, which
required the determination of questions of fact. While the Supreme
Court is not a trier of facts and as a rule we are not required to look into
the factual bases of respondent Court's decisions and resolutions, we
did so just the same, if only to find out whether there is reason to
disturb any of its factual findings, for we are only too aware of the
depth, magnitude and vigor by which the parties through their
respective eloquent counsel, argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is
operating abnormally under a government-appointed conservator and
"there is need to rehabilitate the Bank in order to get it back on its feet .
. . as many people depend on (it) for investments, deposits and well as
employment. As of June 1987, the Bank's overdraft with the Central
Bank had already reached P1.023 billion . . . and there were (other)
offers to buy the subject properties for a substantial amount of
money." 53
While we do not deny our sympathy for this distressed bank, at the
same time, the Court cannot emotionally close its eyes to overriding
considerations of substantive and procedural law, like respect for
perfected contracts, non-impairment of obligations and sanctions
against forum-shopping, which must be upheld under the rule of law
and blind justice.
This Court cannot just gloss over private respondent's submission that,
while the subject properties may currently command a much higher
price, it is equally true that at the time of the transaction in 1987, the
price agreed upon of P5.5 million was reasonable, considering that the
Bank acquired these properties at a foreclosure sale for no more than
P3.5 million 54 . That the Bank procrastinated and refused to honor its
commitment to sell cannot now be used by it to promote its own
advantage, to enable it to escape its binding obligation and to reap the
benefits of the increase in land values. To rule in favor of the Bank
simply because the property in question has algebraically accelerated
in price during the long period of litigation is to reward lawlessness and
delays in the fulfillment of binding contracts. Certainly, the Court cannot
stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision
and Resolution, the Court hereby DENIES the petition. The assailed
Decision is AFFIRMED. Moreover, petitioner Bank is REPRIMANDED
for engaging in forum-shopping and WARNED that a repetition of the
same or similar acts will be dealt with more severely. Costs against
petitioners.
SO ORDERED.
United States Supreme Court
McGEE v. INTERNATIONAL LIFE INS. CO.(1957)
No. 50
Argued: November 20, 1957Decided: December 16, 1957
Petitioner's son, a resident of California, bought a life insurance policy
from an Arizona corporation, naming petitioner as beneficiary. Later,
respondent, a Texas corporation, agreed to assume the insurance
obligations of the Arizona corporation and mailed a reinsurance
certificate to petitioner's son in California, offering to insure him in
accordance with his policy. He accepted this offer and paid premiums
by mail from his California home to respondent's office in Texas.
Neither corporation has ever had any office or agent in California or
done any other business in that State. Petitioner sent proofs of her
son's death to respondent, but it refused to pay the claim. Under a
California statute subjecting foreign corporations to suit in California on
insurance contracts with residents of California, even though such
corporations cannot be served with process within the State, petitioner
sued respondent and obtained judgment in a California court, process
being served only by registered mail to respondent's principal place of
business in Texas. Held:
1. The Due Process Clause of the Fourteenth Amendment did not
preclude the California court from entering a judgment binding on
respondent, since the suit was based on a contract which had a
substantial connection with California. Pp. 223-224.
2. Respondent's insurance contract was not unconstitutionally impaired
by the fact that the California statute here involved did not become
effective until after respondent had assumed the obligation of the
insurance policy. P. 224.
288 S. W. 2d 579, reversed and remanded.
Arthur J. Mandell argued the cause and filed a brief for petitioner.
Stanley Hornsby argued the cause and filed a brief for
respondent. [355 U.S. 220, 221]
Opinion of the Court by MR. JUSTICE BLACK, announced by MR.
JUSTICE DOUGLAS.
Petitioner, Lulu B. McGee, recovered a judgment in a California state
court against respondent, International Life Insurance Company, on a
contract of insurance. Respondent was not served with process in
California but by registered mail at its principal place of business in
Texas. The California court based its jurisdiction on a state statute
which subjects foreign corporations to suit in California on insurance
contracts with residents of that State even though such corporations
cannot be served with process within its borders. 1
Unable to collect the judgment in California petitioner went to Texas
where she filed suit on the judgment in a Texas court. But the Texas
courts refused to enforce her judgment holding it was void under the
Fourteenth Amendment because service of process outside California
could not give the courts of that State jurisdiction over respondent. 288
S. W. 2d 579. Since the case raised important questions, not only to
California but to other States which have similar laws, we granted
certiorari. 352 U.S. 924 . It is not controverted that if the California
court properly exercised jurisdiction over respondent the Texas courts
erred in refusing to give its judgment full faith and credit. 28 U.S.C.
1738.
The material facts are relatively simple. In 1944, Lowell Franklin, a
resident of California, purchased a life insurance policy from the
Empire Mutual Insurance Company, an Arizona corporation. In 1948
the respondent agreed with Empire Mutual to assume its insurance
obligations. Respondent then mailed a reinsurance certificate to
Franklin in California offering to insure him in accordance with the
terms of the policy he held with Empire Mutual. He accepted this offer
and from that[355 U.S. 220, 222] time until his death in 1950 paid
premiums by mail from his California home to respondent's Texas
office. Petitioner, Franklin's mother, was the beneficiary under the
policy. She sent proofs of his death to the respondent but it refused to
pay claiming that he had committed suicide. It appears that neither
Empire Mutual nor respondent has ever had any office or agent in
California. And so far as the record before us shows, respondent has
never solicited or done any insurance business in California apart from
the policy involved here.
Since Pennoyer v. Neff, 95 U.S. 714 , this Court has held that the Due
Process Clause of the Fourteenth Amendment places some limit on
the power of state courts to enter binding judgments against persons
not served with process within their boundaries. But just where this line
of limitation falls has been the subject of prolific controversy,
particularly with respect to foreign corporations. In a continuing process
of evolution this Court accepted and then abandoned "consent," "doing
business," and "presence" as the standard for measuring the extent of
state judicial power over such corporations. See Henderson, The
Position of Foreign Corporations in American Constitutional Law, c. V.
More recently in International Shoe Co. v. Washington, 326 U.S. 310 ,
the Court decided that "due process requires only that in order to
subject a defendant to a judgment in personam, if he be not present
within the territory of the forum, he have certain minimum contacts with
it such that the maintenance of the suit does not offend `traditional
notions of fair play and substantial justice.'" Id., at 316.
Looking back over this long history of litigation a trend is clearly
discernible toward expanding the permissible scope of state jurisdiction
over foreign corporations and other nonresidents. In part this is
attributable to the fundamental transformation of our national economy
over the years. Today many commercial transactions [355 U.S. 220,
223] touch two or more States and may involve parties separated by
the full continent. With this increasing nationalization of commerce has
come a great increase in the amount of business conducted by mail
across state lines. At the same time modern transportation and
communication have made it much less burdensome for a party sued
to defend himself in a State where he engages in economic activity.
Turning to this case we think it apparent that the Due Process Clause
did not preclude the California court from entering a judgment binding
on respondent. It is sufficient for purposes of due process that the suit
was based on a contract which had substantial connection with that
State. Cf. Hess v. Pawloski, 274 U.S. 352 ; Henry L. Doherty & Co. v.
Goodman, 294 U.S. 623 ; Pennoyer v. Neff, 95 U.S. 714, 735 . 2 The
contract was delivered in California, the premiums were mailed from
there and the insured was a resident of that State when he died. It
cannot be denied that California has a manifest interest in providing
effective means of redress for its residents when their insurers refuse
to pay claims. These residents would be at a severe disadvantage if
they were forced to follow the insurance company to a distant State in
order to hold it legally accountable. When claims were small or
moderate individual claimants frequently could not afford the cost of
bringing an action in a foreign forum - thus in effect making the
company judgment proof. Often the crucial witnesses - as here on the
company's defense of suicide - will be found in the insured's
locality. [355 U.S. 220, 224] Of course there may be inconvenience to
the insurer if it is held amenable to suit in California where it had this
contract but certainly nothing which amounts to a denial of due
process. Cf. Travelers Health Assn. v. Virginia ex rel. State Corporation
Comm'n, 339 U.S. 643 . There is no contention that respondent did not
have adequate notice of the suit or sufficient time to prepare its
defenses and appear.
The California statute became law in 1949, after respondent had
entered into the agreement with Franklin to assume Empire Mutual's
obligation to him. Respondent contends that application of the statute
to this existing contract improperly impairs the obligation of the
contract. We believe that contention is devoid of merit. The statute was
remedial, in the purest sense of that term, and neither enlarged nor
impaired respondent's substantive rights or obligations under the
contract. It did nothing more than to provide petitioner with a California
forum to enforce whatever substantive rights she might have against
respondent. At the same time respondent was given a reasonable time
to appear and defend on the merits after being notified of the suit.
Under such circumstances it had no vested right not to be sued in
California. Cf. Bernheimer v. Converse, 206 U.S. 516 ; National Surety
Co. v. Architectural Decorating Co., 226 U.S. 276 ; Funkhouser v. J. B.
Preston Co., 290 U.S. 163 .

The judgment is reversed and the cause is remanded to the Court of

Civil Appeals of the State of Texas, First Supreme Judicial District, for
further proceedings not inconsistent with this opinion.

It is so ordered.

THE CHIEF JUSTICE took no part in the consideration or decision of

this case.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168667 July 23, 2008
SPOUSES ALFREDO D. VALMONTE and MARIA LOURDES A.
VALMONTE, Petitioners,
vs.
CLARITA ALCALA, JOHN DOE or JANE DOE, Respondents.
DECISION
BRION, J.:
This Petition for Review on Certiorari1 asks us to set aside two Court of
Appeals (CA) resolutions issued in CA–G.R. No. 88918: the first,
issued on April 8, 2005,2 dismissed the Petition for Review filed by the
spouses Alfredo Valmonte and Maria Lourdes Valmonte (the
petitioners); and the second, issued on June 20, 2005,3 denied the
petitioners’ motion for reconsideration.
BACKGROUND FACTS
The present controversy traces its roots to the ejectment suit filed by
the petitioners against Clarita Alcala (the respondent) before the
Metropolitan Trial Court (MTC), Branch 4, in Manila.
The petitioners alleged that they are the unregistered owners of
Apartment No. 1411 located at Echabelita Street, Paco, Manila, as the
petitioner Maria Lourdes is one of the heirs and successors-in-interests
of Cornelio Arreola and Antonina Pascua, the registered owners of the
property.4
Since the petitioners were migrating to the United States, they offered
Apartment No. 1411 for lease to the respondent at the rate of
₱1,500.00 per month beginning January 1980; the latter accepted the
offer. The lease contract, initially verbal, was consummated by the
respondent’s payment of two (2) months’ rental fees and the
petitioners’ delivery to the respondent of the keys to Apartment
No.1411.5
Due to the respondent’s subsequent failure to pay the agreed rentals
despite written demand, the petitioners filed a complaint for unlawful
detainer against her on April 26, 2002 before the MTC.6 As the
petitioners were already US residents at that time, they signed the
required Verification/Certification of Non-Forum Shopping7 of their
complaint before a notary public in the state of Washington on March
18, 2002, and had this Verification/Certification authenticated by the
Philippine Consulate General in San Francisco on March 27, 2002.8
The respondent contended in her defense that the petitioners had no
cause of action against her; she was already the rightful owner of
Apartment No. 1411 by virtue of a sale between her and
petitioners,9 as evidenced by the Memorandum of Agreement dated
August 8, 1987.10
On April 25, 2003, the MTC ruled in the petitioners’ favor.11 The
respondent appealed the MTC decision to the Regional Trial Court
(RTC), Branch 50, Manila, which reversed the MTC ruling in its
decision dated November 3, 2004.12
The petitioners responded to the reversal by filing a Petition for
Review13 (CA Petition) with the CA on March 31, 2005. On the same
date, they also formally manifested14 with the CA that – to comply with
the verification and certification requirements under Sections 1 and 2 of
Rule 42 of the Rules of Court – they were in the meantime submitting a
photostatic copy of the Verification/Certification (executed and
notarized in the State of Washington on March 17, 2005) as the
original was still in the Philippine Consulate in San Francisco for
authentication. They promised to submit the original document as soon
as the consulate completed the authentication process. Indeed, on
April 8, 2005, petitioners submitted to the CA the original authenticated
Verification/Certification and moved that the appellate court consider
the submission as full compliance with the verification requirements of
the Rules.15
Meanwhile, the CA issued a Resolution dated April 8, 2005 (April 8
Resolution) dismissing the petition due to the petitioners’ failure to
attach the complaint, the answer, the position papers filed with
the MTC, the memorandum filed with the RTC, and other material
portions of the record supporting the allegations of the petition. The
petitioners received a copy of this April 8 Resolution on April 15, 2005.
On April 28, 2005, the petitioners moved for the reconsideration16 of
the April 8 Resolution, attaching thereto the missing pleadings. The CA
denied the motion in its Resolution dated June 20, 200517 reasoning
that:
Notwithstanding the petitioners’ superficial explanation for their failure
to attach the pertinent portions of the record, this Court could have
granted the motion since petitioners attached, nonetheless, other
relevant documents to the Motion, if not for the observation that while
the verification/certification was purportedly executed on March 17,
2005, the petition is dated March 31, 2005. Petitioners could not have
actually read and understood the petition or attested to the truth of the
contents thereof because at the time they executed the
verification/certification, the petition was still inexistent.
WHEREFORE, in view of the foregoing, the petitioners’ Motion for
Reconsideration is hereby DENIED for lack of merit. [Emphasis
supplied]
The petitioners now come before this Court on the claim that the
dismissal of their petition by the CA is a reversible error that we should
ASSIGNMENT OF ERROR
The petitioners assert that the CA’s conclusion, drawn from the
variance between the dates of the Verification/Certification they
executed abroad and the CA Petition, is erroneous; the variance does
not mean that they did not actually read the petition before this was
filed in court.
THE COURT’S RULING
We find the petition meritorious. The CA’s conclusion results from
an overly technical reading of the verification requirements, and from a
failure to appreciate the circumstances of parties litigating in Philippine
courts while they are overseas.
Generally, a pleading is not required to be verified unless required by
law or by the Rules of Court.18 One such requirement is found in
Section 1 of Rule 42 which requires a party appealing from a decision
of the RTC rendered in the exercise of its appellate jurisdiction to file a
verified petition for review with the CA.
Verification, when required, is intended to secure an assurance that the
allegations of a pleading are true and correct; are not speculative or
merely imagined; and have been made in good faith.19 To achieve this
purpose, the verification of a pleading is made through an affidavit or
sworn statement confirming that the affiant has read the pleading
whose allegations are true and correct of the affiant’s personal
knowledge or based on authentic records.20
Apparently, the CA concluded that no real verification, as above
required, had been undertaken since the CA Petition was dated March
31, 2005 while the Verification/Certification carried an earlier date –
March 17, 2005; the petition "was still inexistent" when the
Verification/Certification was executed. 1avvphi 1

rectify.
We find this conclusion erroneous for the following reasons:
First, the variance in dates does not necessarily contradict the
categorical declaration made by petitioners in their affidavit that they
read and understood the contents of the pleading. The petitioners’
claim in this regard is that they read a copy of the CA Petition through
an electronic mail (e-mail) sent to them by their lawyers.21 We find this
claim, under the circumstances more fully discussed below, to be a
reasonable explanation of why a variance in dates existed. We should
not lose sight of the reality that pleadings are prepared and signed by
the counsel at the instructions of the client; the latter merely provides
the supporting facts of the pleading and, as needed, verifies that the
allegations are true and correct. In short, the pleading and the
verification are prepared separately and a variance in their dates is a
matter that may satisfactorily be explained. To demand the litigants to
read the very same document that is to be filed before the courts is too
rigorous a requirement; what the Rules require is for a party to read the
contents of a pleading without any specific requirement on the form or
manner in which the reading is to be done. That a client may read the
contents of a pleading without seeing the same pleading to be actually
filed with the court is, in these days of e-mails and other technological
advances in communication, not an explanation that is hard to believe.
Apparently in this case, counsel sent a copy of the draft petition by e-
mail and finalized it as soon as it was approved by the petitioners. The
latter, on the other hand, complied with their end not only by approving
the terms of the petition, but also by sending a copy of their sworn
statement (as yet unauthenticated) in order to file the petition soonest,
thereby complying with the required timeliness for the filing of the
petition. To our mind, beyond the manner of these exchanges, what is
important is that efforts were made to satisfy the objective of the Rule –
to ensure good faith and veracity in the allegations of a pleading –
thereby allowing the courts to act on the case with reasonable certainty
that the petitioners’ real positions have been pleaded.22
Second, the "circumstances" we mentioned above refer to the
petitioners’ unique situation as parties residing overseas who are
litigating locally through their local counsel. While these overseas
litigants are not excused from complying with our Rules such as the
strict observance of the periods for appeal and the verification
requirement, we must take into account the attendant realities brought
into play because they are suing from overseas or via long distance
communications with their counsel. In the verification requirement,
there are added formalities required for the acceptance in the
Philippines of statements sworn overseas before foreign notaries; we
require their authentication by our consulates.23 This is a process
whose completion time may vary depending, among others, on various
factors such as the location of the requesting party from the consulate;
the peculiarities of foreign laws on notaries; the volume of transactions
in a consulate, noting particularly the time of year when the
authentication is requested; and the mode of sending the authenticated
documents to the Philippines. Apparently compelled by one or a
combination of these reasons, the petitioners in fact manifested when
they filed their petition (on March 31, 2005) that they were submitting a
photostatic copy of the Verification/Certification executed in
Washington on March 17, 2005 since the original was still with the
Philippine Consulate in San Francisco for authentication.24 We take
judicial notice that the petitioners’ request for authentication coincided
with the observance of the Holy Week – a traditional period of prayer
and holidays in the Philippines, for the Philippines’ foreign embassies
and consulates, and even for Filipinos overseas.25 We find it significant
that, conformably with their Manifestation, the petitioners’ counsel filed
on April 8, 2005 the duly sworn and authenticated Verification as soon
as counsel received it. Under these circumstances, there is every
reason for an equitable and relaxed application of the rules to the
petitioners’ situation.
Third, we discern utmost good faith on the part of the petitioners when
they filed their Manifestation about their problem, intent, and plan of
compliance with the verification requirement. They in fact stated early
on through this Manifestation that their verification had been executed
on March 17, 2005 in Washington, that is, at a date much earlier than
the filing of their petition and manifestation. Unfortunately, the CA failed
to note the variance in dates at the earliest opportunity; thus, the CA
dismissed the petition on some other ground,26 only to hark back later
on to the variance in dates in their reconsideration of the earlier was made, or that the verification was false. More importantly, the
dismissal. Given this good faith and the early disclosure, it was variance totally lost significance after the petitioners sent from the US
basically unfair for the CA – who had earlier overlooked the variance in and submitted to the CA the required Verification/Certification in
dates – to subsequently make this ground the basis of yet another compliance with their previously manifested intent. As this Court noted
dismissal of the petition. The CA – after overlooking the variance in in a case where compliance with a certificate of non-forum shopping
dates at the first opportunity – should have at least asked for the was at issue, the fact that the Rules require strict compliance merely
petitioners’ explanation on why the variance should not be an underscores its mandatory nature; it cannot be dispensed with or its
additional ground for the dismissal of the petition, instead of reflecting requirements altogether disregarded, but it does not thereby interdict
in their order on reconsideration that it could have granted the motion substantial compliance with its provisions under justifiable
for reconsideration based on attachments already made, but there circumstances, as we find in this case.29
existed another reason – the variance in dates – for maintaining the
dismissal of the petition. WHEREFORE, we hereby GRANT the Petition. The CA Resolutions
dated April 8, 2005 and June 20, 2005 in CA G.R. No. 88918
Fourth, we note that most of the material allegations set forth by are REVERSED and SET ASIDE. The case is REMANDED to the CA
petitioners in their CA Petition are already in their complaint for for appropriate proceedings under CA-GR No. 88918.
unlawful detainer filed before the MTC on April 26, 2002. Attached to
the complaint was a Verification/Certification27 dated March 18, 2002 SO ORDERED.
(authenticated by the Philippine Consulate in San Francisco on March
27, 2002) in which petitioners declared under oath that they had
caused the preparation of the complaint through their lawyers and had
read and understood the allegations of the complaint. The material
facts alleged in the CA Petition are likewise stated in the records of the
case, as part of the findings of facts made by the MTC and the RTC.
Verification as to the truth of these facts in the petition for review before
the CA was, therefore, strictly a redundancy; its filing remained a
necessity only because the Rules on the filing of a petition for review
before the CA require it. This consideration could have led to a more
equitable treatment of the petitioners’ failure to strictly comply with the
Rules, additionally justified by the fact that the failure to comply with
the rules on verification is a formal rather than a jurisdictional defect.28

In sum, we find sufficient justification to rule – under the circumstances

of this case – that the CA committed a reversible error when it
dismissed the petition for failure to strictly follow the verification
requirements. Stated otherwise, we do not consider the variance
between the dates as fatal to the petitioners’ case because the
variance did not necessarily lead to the conclusion that no verification