G.R. No. L-34382 July 20, 1983 Corporation of the Philippines (CONSIGNEE) at Manila.
Corporation of the Philippines (CONSIGNEE) at Manila. The shipment was insured with
THE HOME INSURANCE COMPANY, petitioner,
vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON. A.
MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch
XVII, respondents.
G.R. No. L-34383 July 20, 1983
THE HOME INSURANCE COMPANY, petitioner,
vs.
N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC., and
HON. A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance,
Branch XVII, respondents.
No. L-34382.
Zapa Law Office for petitioner.
Bito, Misa & Lozada Law Office for respondents.
No. L-34383.
Zapa Law Office for petitioner.
Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents.
GUTIERREZ, JR., J.:
Questioned in these consolidated petitions for review on certiorari are the decisions of
the Court of First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case
No. 71923 and in Civil Case No. 71694, on the ground that plaintiff therein, now
appellant, had failed to prove its capacity to sue.
There is no dispute over the facts of these cases for recovery of maritime damages. In L-
34382, the facts are found in the decision of the respondent court which stated:
On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated Mining &
Development Corporation, shipped on board the SS "Eastern Jupiter' from Osaka, Japan,
2,361 coils of "Black Hot Rolled Copper Wire Rods." The said VESSEL is owned and
operated by defendant Eastern Shipping Lines (CARRIER). The shipment was covered by
Bill of Lading No. O-MA-9, with arrival notice to Phelps Dodge Copper Products
plaintiff against all risks in the amount of P1,580,105.06 under its Insurance Policy No.
AS-73633.
xxx xxx xxx
The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad order.
What the CONSIGNEE ultimately received at its warehouse was the same number of
2,361 coils with 73 coils loose and partly cut, and 28 coils entangled, partly cut, and
which 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 unknown. The date of that license must not have been much anterior to
July 1, 1967. The preponderance of the evidence would therefore call for the finding
that the insurance contract involved in this case, which was executed at Makati, Rizal,
on February 8, 1967, was contracted before plaintiff was licensed to transact business in
the Philippines.
This Court views Section 68 of the Corporation Law as reflective of a basic public policy.
Hence, it is of the opinion that, in the eyes of Philippine law, the insurance contract
involved in this case must be held void under the provisions of Article 1409 (1) of the
Civil Code, and could not be validated by subsequent procurement of the license. That
view of the Court finds support in the following citation:
According to many authorities, a constitutional or statutory prohibition against a foreign
corporation doing business in the state, unless such corporation has complied with
conditions prescribed, is effective to make the contracts of such corporation void, or at
least unenforceable, and prevents the maintenance by the corporation of any action on
such contracts. Although the usual construction is to the contrary, and to the effect that
only the remedy for enforcement is affected thereby, a statute prohibiting a non-
complying corporation from suing in the state courts on any contract has been held by
some courts to render the contract void and unenforceable by the corporation, even
after its has complied with the statute." (36 Am. Jur. 2d 299-300).
xxx xxx xxx
The said Civil Case No. 71923 was dismissed by this Court. As the insurance contract
involved herein was executed on January 20, 1967, the instant case should also be
dismissed.
We resolved to consolidate the two cases when we gave due course to the petition.
The petitioner raised the following assignments of errors:
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 it had the authority to engage in the insurance business at the time it filed the
in the Philippines without a license, or its successors or assigns, shag be permitted to complaints.
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 WHEREFORE, the petitions are hereby granted. The decisions of the respondent court
before Philippine courts or administrative tribunals on any valid cause of action are reversed and set aside.
recognized under Philippine laws.
In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum
The old Section 69 has been reworded in terms of non-access to courts and of P1,630.22 with interest at the legal rate from January 5, 1968 until fully paid and
administrative agencies in order to maintain or intervene in any action or proceeding. 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
The prohibition against doing business without first securing a license is now given penal respondent shall pay one-half of the costs. The counterclaim of Angel Jose
sanction which is also applicable to other violations of the Corporation Code under the Transportation Inc. is dismissed.
general provisions of Section 144 of the Code.
In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered
It is, therefore, not necessary to declare the contract nun and void even as against the to pay the petitioner the sum of P2,426.98 with interest at the legal rate from February
erring foreign corporation. The penal sanction for the violation and the denial of access 1, 1968 until fully paid, the sum of P500.00 attorney's fees, and costs, The complaint
to our courts and administrative bodies are sufficient from the viewpoint of legislative against Guacods, Inc. is dismissed.
policy.
SO ORDERED.
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 Teehankee (Chairman), Plana, Escolin and Relova, JJ., concur.
these cases.
Melencio-Herrera and Vasquez, JJ., are on leave.
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.

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
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.
2
The dispositive portion of the trial court's 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 T-106933 70,899 sq. m.
assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
T-106934 52,246 sq. m.
Respondent Court of Appeals is the court which issued the Decision and Resolution
sought to be set aside through this petition.
T-106935 96,768 sq. m.
The Facts
T-106936 187,114 sq. m.
The facts of this case are summarized in the respondent Court's Decision 3 as follows:
T-106937 481,481 sq. m.
(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 My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00)
Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T- PESOS, in cash.
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 Kindly contact me at Telephone Number 921-1344.
original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the
property and thus initiated negotiations for that purpose. (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply
by letter which is hereunder quoted (Exh. "C"):
(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 September 1, 1987
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 JP M-P GUTIERREZ ENTERPRISES
meeting, plaintiff Janolo, following the advice of defendant Rivera, made a formal 142 Charisma St., Doña Andres II
purchase offer to the bank through a letter dated August 30, 1987 (Exh. "B"), as follows: Rosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO

August 30, 1987
Dear Sir:
The Producers Bank of the Philippines
Makati, Metro Manila 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
Attn. Mr. Mercurio Q. Rivera
the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis.
Manager, Property Management Dept.
We shall be very glad to hear your position on the on the matter.
Gentleman:
Best regards.
I have the honor to submit my formal offer to purchase your properties covered by titles
listed hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted reply,
less. wrote (Exh. "D"):

TCT NO. AREA September 17, 1987

T-106932 113,580 sq. m.

Producers Bank Dear Sir:
Paseo de Roxas
Makati, Metro Manila 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
Attention: Mr. Mercurio Rivera committee for submission to the newly designated Acting Conservator of the bank.

Gentlemen: For your information.

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at (7) What thereafter transpired was a series of demands by the plaintiffs for compliance
Sta. Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the by the bank with what plaintiff considered as a perfected contract of sale, which
said lot at P4.250 million in CASH.. 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
Hoping that this proposal meets your satisfaction. (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
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took
letter. Instead, the parcels of land involved in the transaction were advertised by the
place was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the
bank for sale to any interested buyer (Exh, "H" and "H-1"). Plaintiffs demanded the
Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer,
execution by the bank of the documents on what was considered as a "perfected
attended the meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to
agreement." Thus:
the bank, through Rivera, the following letter (Exh. "E"):
Mr. Mercurio Rivera
The Producers Bank of the Philippines
Manager, Producers Bank
Paseo de Roxas, Makati
Paseo de Roxas, Makati
Metro Manila
Metro Manila
Attention: Mr. Mercurio Rivera
Dear Mr. Rivera:
Re: 101 Hectares of Land
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your
in Sta. Rosa, Laguna
101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-
Gentlemen: 106932 to 106937.

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
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.
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 an earlier case 23 but with the same logic and vigor, we held:
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) through opposing evidence. Indeed, this is a matter of due process. But we passed upon
common finding that private respondents' evidence is more in keeping with truth and the issue anyway, if only to avoid deciding the case on purely procedural grounds, and
logic — that during the meeting on September 28, 1987, Luis Co and Rivera "confirmed we repeat that, on the basis of the evidence already in the record and as appreciated by
that the P5.5 million price has been passed upon by the Committee and could no longer the lower courts, the inevitable conclusion is simply that there was a perfected contract
be lowered (TSN of April 27, 1990, pp. 34-35)"39 . Hence, assuming arguendo that the of sale.
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 The Third Issue: Is the Contract Enforceable?
offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there
The petition alleged42 :
was a meeting of the minds, as the acceptance in said letter was absolute and
unqualified. 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
We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's
Janolo accepted with their letter of 30 September 1987, the contract produced thereby
authority and action, particularly the latter's counter-offer of P5.5 million, as being
would be unenforceable by action — there being no note, memorandum or writing
"unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months
subscribed by the Bank to evidence such contract. (Please see article 1403[2], Civil
after Janolo' acceptance. Such delay, and the absence of any circumstance which might
Code.)
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 Upon the other hand, the respondent Court in its Decision (p, 14) stated:
a binding contractual obligation.
. . . Of course, the bank's letter of September 1, 1987 on the official price and the
Taken together, the factual findings of the respondent Court point to an implied plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves, formal
admission on the part of the petitioners that the written offer made on September 1, contracts of sale. They are however clear embodiments of the fact that a contract of
1987 was carried through during the meeting of September 28, 1987. This is the sale was perfected between the parties, such contract being binding in whatever form it
conclusion consistent with human experience, truth and good faith. 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,
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million
constitute in law a sufficient memorandum of a perfected contract of sale.
was raised for the first time on appeal and should thus be disregarded.
The respondent Court could have added that the written communications commenced
This Court in several decisions has repeatedly adhered to the principle that points of
not only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree
law, theories, issues of fact and arguments not adequately brought to the attention of
that, taken together, these letters constitute sufficient memoranda — since they include
the trial court need not be, and ordinarily will not be, considered by a reviewing court,
the names of the parties, the terms and conditions of the contract, the price and a
as they cannot be raised for the first time on appeal (Santos vs. IAC, No. 74243,
description of the property as the object of the contract.
November 14, 1986, 145 SCRA 592).40
But let it be assumed arguendo that the counter-offer during the meeting on September
. . . It is settled jurisprudence that an issue which was neither averred in the complaint
28, 1987 did constitute a "new" offer which was accepted by Janolo on September 30,
nor raised during the trial in the court below cannot be raised for the first time on
1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to
appeal as it would be offensive to the basic rules of fair play, justice and due process
object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence,
(Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos
petitioners — by such utter failure to object — are deemed to have waived any defects
Realty & Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70
of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
[1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).41
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403,
Since the issue was not raised in the pleadings as an affirmative defense, private
are ratified by the failure to object to the presentation of oral evidence to prove the
respondent was not given an opportunity in the trial court to controvert the same
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.

Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.

McGee v. International Life Ins. Co., 355 U.S. 220 (1957)
McGee v. International Life Ins. Co.
No. 50
Argued November 20, 1957
Decided December 16, 1957
355 U.S. 220
CERTIORARI TO THE COURT OF CIVIL APPEALS OF TEXAS,
FIRST SUPREME JUDICIAL DISTRICT
Syllabus
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. 355 U. S. 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. 355 U. S. 224.
288 S.W.2d 579, reversed and remanded.
Page 355 U. S. 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. [Footnote 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
Page 355 U. S. 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
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.

"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 326 U. S. 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
Page 355 U. S. 223
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., Inc., 290 U. S. 163.

touch two or more States, and may involve parties separated by the full continent. With The judgment is reversed, and the cause is remanded to the Court of Civil Appeals of the
this increasing nationalization of commerce has come a great increase in the amount of State of Texas, First Supreme Judicial District, for further proceedings not inconsistent
business conducted by mail across state lines. At the same time, modern transportation with this opinion.
and communication have made it much less burdensome for a party sued to defend
It is so ordered.
himself in a State where he engages in economic activity.
THE CHIEF JUSTICE took no part in the consideration or decision of this case.
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. [Footnote 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.

Page 355 U. S. 224

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 Review 13 (CA Petition)
with the CA on March 31, 2005. On the same date, they also formally manifested 14 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 reconsideration 16 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 rectify.
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.1avvphi1
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 compliance with their previously manifested intent. As this Court noted in a case where
rules to the petitioners’ situation. compliance with a certificate of non-forum shopping was at issue, the fact that the Rules
require strict compliance merely underscores its mandatory nature; it cannot be
Third, we discern utmost good faith on the part of the petitioners when they filed their dispensed with or its requirements altogether disregarded, but it does not thereby
Manifestation about their problem, intent, and plan of compliance with the verification interdict substantial compliance with its provisions under justifiable circumstances, as
requirement. They in fact stated early on through this Manifestation that their we find in this case.29
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 WHEREFORE, we hereby GRANT the Petition. The CA Resolutions dated April 8, 2005
failed to note the variance in dates at the earliest opportunity; thus, the CA dismissed and June 20, 2005 in CA G.R. No. 88918 are REVERSED and SET ASIDE. The case
the petition on some other ground,26 only to hark back later on to the variance in dates is REMANDED to the CA for appropriate proceedings under CA-GR No. 88918.
in their reconsideration of the earlier dismissal. Given this good faith and the early
disclosure, it was basically unfair for the CA – who had earlier overlooked the variance in SO ORDERED.
dates – to subsequently make this ground the basis of yet another dismissal of the
petition. The CA – after overlooking the variance in dates at the first opportunity –
should have at least asked for the petitioners’ explanation on why the variance should
not be an additional ground for the dismissal of the petition, instead of reflecting in
their order on reconsideration that it could have granted the motion for reconsideration
based on attachments already made, but there existed another reason – the variance in
dates – for maintaining the dismissal of the petition.

Fourth, we note that most of the material allegations set forth by petitioners in their CA
Petition are already in their complaint for unlawful detainer filed before the MTC on
April 26, 2002. Attached to the complaint was a Verification/Certification 27 dated March
18, 2002 (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 was made, or that the verification
was false. More importantly, the variance totally lost significance after the petitioners
sent from the US and submitted to the CA the required Verification/Certification in
U.S. Supreme Court
EEOC v. Arabian American Oil Co., 499 U.S. 244 (1991)
Equal Employment Opportunity Commission v.
Arabian American Oil Company
Nos. 89-1838, 89-1845
Argued Jan. 16, 1991
Decided March 26, 1991
499 U.S. 244
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
CHIEF JUSTICE REHNQUIST delivered the opinion of the Court.
These cases present the issue whether Title VII applies extraterritorially to regulate the
employment practices of United States employers who employ United States citizens
abroad. The United States Court of Appeals for the Fifth
Page 499 U. S. 247
Circuit held that it does not, and we agree with that conclusion.
Petitioner Boureslan is a naturalized United States citizen who was born in Lebanon. The
respondents are two Delaware corporations, Arabian. American Oil Company (Aramco),
and its subsidiary, Aramco Service Company (ASC). Aramco's principal place of business
is Dhahran, Saudi Arabia, and it is licensed to do business in Texas. ASC's principal place
of business is Houston, Texas.
In 1979, Boureslan was hired by ASC as a cost engineer in Houston. A year later, he was
transferred, at his request, to work for Aramco in Saudi Arabia. Boureslan remained
with Aramco in Saudi Arabia until he was discharged in 1984. After filing a charge of
discrimination with the Equal Employment Opportunity Commission (EEOC), he
instituted this suit in the United States District Court for the Southern District of Texas
against Aramco and ASC. He sought relief under both state law and Title VII of the Civil
Rights Act of 1964, 78 Stat. 243, as amended, 42 U.S.C. §§ 2000a-2000h-6, on the
ground that he was harassed and ultimately discharged by respondents on account of
his race, religion, and national origin.
Respondents filed a motion for summary judgment on the ground that the District Court
lacked subject matter jurisdiction over Boureslan's claim because the protections of Title
VII do not extend to United States citizens employed abroad by American employers.
The District Court agreed, and dismissed Boureslan's Title VII claim; it also dismissed his
state law claims for lack of pendent jurisdiction, and entered final judgment in favor of
respondents. A panel for the Fifth Circuit affirmed. After vacating the panel's decision
and rehearing the case en banc, the court affirmed the District Court's dismissal of
Boureslan's complaint. Both Boureslan and the EEOC petitioned for certiorari. We
granted both petitions for certiorari to resolve this important issue of statutory
interpretation.
Page 499 U. S. 248
Both parties concede, as they must, that Congress has the authority to enforce its laws
beyond the territorial boundaries of the United States. Cf. Foley Bros., Inc. v. Filardo, 336
U. S. 281, 336 U. S. 284-285 (1949); Benz v. Compania Naviera Hidalgo, S.A., 353 U. S.
138, 353 U. S. 147 (1957). Whether Congress has in fact exercised that authority in this
case is a matter of statutory construction. It is our task to determine whether Congress
intended the protections of Title VII to apply to United States citizens employed by
American employers outside of the United States.
It is a longstanding principle of American law "that legislation of Congress, unless a
contrary intent appears, is meant to apply only within the territorial jurisdiction of the
United States." Foley Bros., 336 U.S. at 336 U. S. 285. This "canon of construction . . . is a
valid approach whereby unexpressed congressional intent may be ascertained." Ibid. It
serves to protect against unintended clashes between our laws and those of other
nations which could result in international discord. See McCulloch v. Sociedad Nacional
de Marineros de Honduras, 372 U. S. 10, 372 U. S. 20-22 (1963).
In applying this rule of construction, we look to see whether
"language in the [relevant act] gives any indication of a congressional purpose to extend
its coverage beyond places over which the United States has sovereignty or has some
measure of legislative control."
Foley Bros., supra, 336 U.S. at 336 U. S. 285. We assume that Congress legislates against
the backdrop of the presumption against extraterritoriality. Therefore, unless there is
"the affirmative intention of the Congress clearly expressed," Benz, supra, 353 U.S.
at 353 U. S. 147, we must presume it "is primarily concerned with domestic
conditions." Foley Bros., supra, 336 U.S. at 336 U. S. 285.
Boureslan and the EEOC contend that the language of Title VII evinces a clearly
expressed intent on behalf of Congress to legislate extraterritorially. They rely
principally on two provisions of the statute. First, petitioners argue that the statute's
definitions of the jurisdictional terms "employer"
Page 499 U. S. 249
and "commerce" are sufficiently broad to include U.S. firms that employ American
citizens overseas. Second, they maintain that the statute's "alien exemption" clause, 42
U.S.C. § 2000e-1, necessarily implies that Congress intended to protect American
citizens from employment discrimination abroad. Petitioners also contend that we
should defer to the EEOC's consistently held position that Title VII applies abroad. We
conclude that petitioners' evidence, while not totally lacking in probative value, falls
short of demonstrating the affirmative congressional intent required to extend the
protections of the Title VII beyond our territorial borders.
Title VII prohibits various discriminatory employment practices based on an individual's
race, color, religion, sex, or national origin. See §§ 2000e-2, 2000e-3. An employer is
subject to Title VII if it has employed 15 or more employees for a specified period and is
"engaged in an industry affecting commerce." An industry affecting commerce is
"any activity, business, or industry in commerce or in which a labor dispute would
hinder or obstruct commerce or the free flow of commerce and includes any activity or
industry 'affecting commerce' within the meaning of the Labor-Management Reporting
and Disclosure Act of 1959 [(LMRDA)] [29 U.S.C. § 401 et seq.]."
§ 2000e(h). "Commerce," in turn, is defined as
"trade, traffic, commerce, transportation, transmission, or communication among the
several States; or between a State and any place outside thereof; or within the District
of Columbia, or a possession of the United States; or between points in the same State
but through a point outside thereof."
§ 2000e(g).
Petitioners argue that, by its plain language, Title VII's "broad jurisdictional language"
reveals Congress's intent to extend the statute's protections to employment
discrimination anywhere in the world by a U.S. employer who affects trade "between a
State and any place outside thereof." More precisely, they assert that, since Title VII
Page 499 U. S. 250
defines "States" to include States, the District of Columbia, and specified territories, the
clause "between a State and any place outside thereof" must be referring to areas
beyond the territorial limit of the United States. Reply Brief for Petitioner 3.
Respondents offer several alternative explanations for the statute's expansive language.
They contend that the "or between a State and any place outside thereof" clause
"provide[s] the jurisdictional nexus required to regulate commerce that is not wholly
within a single state, presumably as it affects both interstate and foreign commerce,"
but not to "regulate conduct exclusively within a foreign country." Brief for Respondents
21, n. 14. They also argue that, since the definitions of the terms "employer,"
"commerce," and "industry affecting commerce" make no mention of "commerce with
foreign nations," Congress cannot be said to have intended that the statute apply
overseas. In support of this argument, petitioners point to Title II of the Civil Rights Act
of 1964, governing public accommodation, which specifically defines commerce as it
applies to foreign nations. Finally, respondents argue that, while language present in the
first bill considered by the House of Representatives contained the terms "foreign
commerce" and "foreign nations," those terms were deleted by the Senate before the
Civil Rights Act of 1964 was passed. They conclude that these deletions "[are]
inconsistent with the notion of a clearly expressed congressional intent to apply Title VII
extraterritorially." Brief for Respondents 7.
We need not choose between these competing interpretations, as we would be
required to do in the absence of the presumption against extraterritorial application
discussed above. Each is plausible, but no more persuasive than that. The language
relied upon by petitioners -- and it is they who must make the affirmative showing -- is
ambiguous, and does not speak directly to the question presented here. The intent of
Congress as to the extraterritorial application of this
Page 499 U. S. 251
statute must be deduced by inference from boilerplate language which can be found in
any number of congressional acts, none of which have ever been held to apply
overseas. See, e.g., Consumer Product Safety Act, 15 U.S.C. § 2052(a)(12); Federal Food,
Drug, and Cosmetic Act, 21 U.S.C. § 321(b); Transportation Safety Act of 1974, 49
U.S.C.App. § 1802(1); Labor-Management Reporting and Disclosure Act of 1959, 29
U.S.C. § 401 et seq.; Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, et seq.
Petitioners' reliance on Title VII's jurisdictional provisions also finds no support in our
case law; we have repeatedly held that even statutes that contain broad language in
their definitions of "commerce" that expressly refer to "foreign commerce" do not apply
abroad. For example, in New York Central R. Co. v. Chisholm, 268 U. S. 29 (1925), we
addressed the extraterritorial application of the Federal Employers Liability Act (FELA),
45 U.S.C. § 51 et seq. FELA provides that common carriers by railroad, while engaging in
"interstate or foreign commerce" or commerce between "any of the States or territories
and any foreign nation or nations," shall be liable in damages to its employees who
suffer injuries resulting from their employment. 45 U.S.C. § 51. Despite this broad
jurisdictional language, we found that the Act "contains no words which definitely
disclose an intention to give it extraterritorial effect," Chisholm, supra, at 268 U. S. 31,
and therefore there was no jurisdiction under FELA for a damages action by a U.S.
citizen employed on a U.S. railroad who suffered fatal injuries at a point 30 miles north
of the U.S. border into Canada.
Similarly, in McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U. S.
10 (1963), we addressed whether Congress intended the National Labor Relations Act
(NLRA), 29 U.S.C. §§ 151-168, to apply overseas. Even though the NLRA contained broad
language that referred by its terms to foreign commerce, 29 U.S.C. § 152(6), this Court
refused to find a congressional intent to apply the statute abroad,
Page 499 U. S. 252
because there was not "any specific language" in the Act reflecting congressional intent
to do so. McCulloch, supra, at 372 U. S. 19.
The EEOC places great weight on an assertedly similar "broad jurisdictional grant in the
Lanham Act" that this Court held applied extraterritorially in Steele v. Bulova Watch
Co., 344 U. S. 280, 344 U. S. 286 (1952). Brief for Petitioner in No. 89-1838, p. 12.
In Steele, we addressed whether the Lanham Act, designed to prevent deceptive and
misleading use of trademarks, applied to acts of a U.S. citizen consummated in Mexico.
The Act defined commerce as "all commerce which may lawfully be regulated by
Congress." 15 U.S.C. § 1127. The stated intent of the statute was "to regulate commerce
within the control of Congress by making actionable the deceptive and misleading use of
marks in such commerce." Ibid. While recognizing that "the legislation of Congress will
not extend beyond the boundaries of the United States unless a contrary legislative
intent appears," the Court concluded that, in light of the fact that the allegedly unlawful
conduct had some effects within the United States, coupled with the Act's "broad
jurisdictional grant" and its "sweeping reach into all commerce which may lawfully be
regulated by Congress,'" the statute was properly interpreted as applying abroad. Steele,
supra, 344 U.S. at 344 U. S. 285, 344 U. S. 287.
The EEOC's attempt to analogize this case to Steele is unpersuasive. The Lanham Act, by
terms, applies to "all commerce which may lawfully be regulated by Congress." The
Constitution gives Congress the power "[t]o regulate Commerce with foreign Nations,
and among the several States, and with the Indian Tribes." U.S.Const., Art. I, § 8, cl. 3.
Since the Act expressly stated that it applied to the extent of Congress's power over
commerce, the Court in Steele concluded that Congress intended that the statute apply
abroad. By contrast, Title VII's more limited boilerplate "commerce" language does not
support such an expansive construction of congressional intent. Moreover, unlike
Page 499 U. S. 253
the language in the Lanham Act, Title VII's definition of "commerce" was derived
expressly from the LMRDA, a statute that this Court had held, prior to the enactment of
Title VII, did not apply abroad. McCulloch, supra,372 U.S. at 372 U. S. 15.
Thus, petitioner's argument based on the jurisdictional language of Title VII fails both as
a matter of statutory language and of our previous case law. Many acts of Congress are
based on the authority of that body to regulate commerce among the several States,
and the parts of these acts setting forth the basis for legislative jurisdiction will
obviously refer to such commerce in one way or another. If we were to permit possible,
or even plausible interpretations of language such as that involved here to override the
presumption against extraterritorial application, there would be little left of the
presumption.
Petitioners argue that Title VII's "alien exemption provision," 42 U.S.C. § 2000e-1,
"clearly manifests an intention" by Congress to protect U.S. citizens with respect to their
employment outside of the United States. The alien exemption provision says that the
statute "shall not apply to an employer with respect to the employment of aliens
outside any State." § 2000e-1. Petitioners contend that, from this language, a negative
inference should be drawn that Congress intended Title VII to cover United
States citizens working abroad for United States employers. There is "[no] other
plausible explanation [that] the alien exemption exists," they argue, because,
"[i]f Congress believed that the statute did not apply extraterritorially, it would have had
no reason to include an exemption for a certain category of individuals employed
outside the United States."
Brief for Petitioner in No. 89-1838, pp. 12-13. Since "[t]he statute's jurisdictional
provisions cannot possibly be read to confer coverage only upon aliens employed
outside the United States," petitioners conclude that
"Congress could not rationally have enacted an exemption for the employment of aliens
abroad if it intended to foreclose
Page 499 U. S. 254
all potential extraterritorial applications of the statute."
Id. at 13.
Respondents resist petitioners' interpretation of the alien exemption provision, and
assert two alternative raisons d'etre for that language. First, they contend that, since
aliens are included in the statute's definition of employee, and the definition of
commerce includes possessions as well as "States," the purpose of the exemption is to
provide that employers of aliens in the possessions of the United States are not covered
by the statute. Thus, the "outside any State" clause means outside any State, but within
the control of the United States. Respondents argue that "[t]his reading of the alien
exemption provision is consistent with and supported by the historical development of
the provision" because Congress's inclusion of the provision was a direct response to
this Court's interpretation of the term "possessions" in the Fair Labor Standards Act
in Vermilya-Brown Co. v. Connell, 335 U. S. 377 (1948), to include leased bases in foreign
nations that were within the control of the United States. Brief for Respondents 27.
They conclude that the alien exemption provision was included "to limit the impact
of Vermilya-Brown by excluding from coverage employers of aliens in areas under U.S.
control that" were not encompassed within Title VII's definition of the term
"State." Id. at 29.
Second, respondents assert that, by negative implication, the exemption "confirm[s] the
coverage of aliens in the United States." Id. at 26. They contend that this interpretation
Page 499 U. S. 255
is consistent with our conclusion in Espinoza v. Farah Mfg. Co., 414 U. S. 86 (1973), that
aliens within the United States are protected from discrimination both because Title VII
uses the term "individual," rather than "citizen," and because of the alien exemption
provision.
If petitioners are correct that the alien exemption clause means that the statute applies
to employers overseas, we see no way of distinguishing in its application between
United States employers and foreign employers. Thus, a French employer of a United
States citizen in France would be subject to Title VII -- a result at which even petitioners
balk. The EEOC assures us that, in its view, the term "employer" means only "American
employer," but there is no such distinction in this statute, and no indication that EEOC,
in the normal course of its administration, had produced a reasoned basis for such a
distinction. Without clearer evidence of congressional intent to do so than is contained
in the alien exemption clause, we are unwilling to ascribe to that body a policy which
would raise difficult issues of international law by imposing this country's employment
discrimination regime upon foreign corporations operating in foreign commerce.
This conclusion is fortified by the other elements in the statute suggesting a purely
domestic focus. The statute as a whole indicates a concern that it not unduly interfere
with the sovereignty and laws of the States. See, e.g., 42 U.S.C. § 2000h-4 (stating that
Title VII should not be construed to exclude the operation of state law or invalidate any
state law unless inconsistent with the purposes of the act); § 2000e-5 (requiring the
EEOC to accord substantial weight to findings of state or local authorities in proceedings
under state or local law); § 2000e-7 (providing that nothing in Title VII shall affect the
application of state or local law unless such law requires or permits practices that would
be unlawful under Title VII); §§ 2000e-5(c), (d), and (e) (provisions addressing deferral to
state discrimination proceedings).
Page 499 U. S. 256
While Title VII consistently speaks in terms of "States" and state proceedings, it fails
even to mention foreign nations or foreign proceedings.
Similarly, Congress failed to provide any mechanisms for overseas enforcement of Title
VII. For instance, the statute's venue provisions, § 2000e-5(f)(3), are ill-suited for
extraterritorial application, as they provide for venue only in a judicial district in the
state where certain matters related to the employer occurred or were located. And the
limited investigative authority provided for the EEOC, permitting the Commission only
to issue subpoenas for witnesses and documents from "anyplace in the United States or
any Territory or possession thereof," § 2000e-9, suggests that Congress did not intend
for the statute to apply abroad.
It is also reasonable to conclude that, had Congress intended Title VII to apply overseas,
it would have addressed the subject of conflicts with foreign laws and procedures. In
amending the Age Discrimination in Employment Act of 1967, 81 Stat. 602, as amended,
29 U.S.C. § 621 et seq. (ADEA), to apply abroad, Congress specifically addressed
potential conflicts with foreign law by providing that it is not unlawful for an employer
to take any action prohibited by the ADEA
"where such practices involve an employee in a workplace in a foreign country, and
compliance with [the ADEA] would cause such employer . . . to violate the laws of the
country in which such workplace is located."
29 U.S.C. § 623(f)(1). Title VII, by contrast, fails to address conflicts with the laws of
other nations.
Finally, the EEOC, as one of the two federal agencies with primary responsibility for
enforcing Title VII, argues that we should defer to its "consistent" construction of Title
VII, first formally expressed in a statement issued after oral argument but before the
Fifth Circuit's initial decision in this case, Policy Statement No. N-915.033, EEOC
Compl.Man. (BNA) § 605:0055 (Apr.1989), "to apply to discrimination against
Page 499 U. S. 257
American citizens outside the United States." Brief for Petitioner in No. 891838, p. 22.
Citing a 1975 letter from the EEOC's General Counsel, 1983 testimony by its Chairman,
and a 1985 decision by the Commission, it argues that its consistent administrative
interpretations "reinforce" the conclusion that Congress intended Title VII to apply
abroad.
In General Electric Co. v. Gilbert, 429 U. S. 125, 429 U. S. 140-146 (1976), we addressed
the proper deference to be afforded the EEOC's guidelines. Recognizing that "Congress,
in enacting Title VII, did not confer upon the EEOC authority to promulgate rules or
regulations," we held that the level of deference afforded
"'will depend upon the thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later pronouncements, and all those factors
which give it power to persuade, if lacking power to control.'"
Id. at 429 U. S. 141, 429 U. S. 142 (quoting Skidmore v. Swift & Co., 323 U. S. 134, 323 U.
S. 140 (1944)).
The EEOC's interpretation does not fare well under these standards. As an initial matter,
the position taken by the Commission "contradicts the position which [it] had
enunciated at an earlier date, closer to the enactment of the governing
statute." General Electric Co., supra, 429 U.S. at 429 U. S. 142. The Commission's early
pronouncements on the issue supported the conclusion that the statute was limited to
domestic application. See 29 CFR § 1606.1(c) (1971) ("Title VII . . . protects all
individuals, both citizen and noncitizens, domiciled or residing in the United States,
against discrimination on the basis of race, color, religion, sex, or national origin.") While
the Commission later intimated that the statute applied abroad, this position was not
expressly reflected in its policy guidelines until some 24 years after the passage of the
statute.
Page 499 U. S. 258
The EEOC offers no basis in its experience for the change. The EEOC's interpretation of
the statute here thus has been neither contemporaneous with its enactment nor
consistent since the statute came into law. As discussed above, it also lacks support in
the plain language of the statute. While we do not wholly discount the weight to be
given to the 1988 guideline, its persuasive value is limited when judged by the standards
set forth in Skidmore. Accord: Southeastern Community College v. Davis, 442 U. S.
397, 442 U. S. 411-412 (1979); SEC v. Sloan, 436 U. S. 103, 436 U. S. 117-118
(1978); Espinoza v. Farah Mfg. Co., 414 U.S. at 414 U. S. 93-94. We are of the view that,
even when considered in combination with petitioners' other arguments, the EEOC's
interpretation is insufficiently weighty to overcome the presumption against
extraterritorial application.
Our conclusion today is buttressed by the fact that "[w]hen it desires to do so, Congress
knows how to place the high seas within the jurisdictional reach of a statute." Argentine
Republic v. Amerada Hess Shipping Corp.,488 U. S. 428, 488 U. S. 440 (1989). Congress's
awareness of the need to make a clear statement that a statute applies overseas is
amply demonstrated by the numerous occasions on which it has expressly legislated the
extraterritorial application of a statute. See, e.g., the Export Administration Act of 1979,
50 U.S.C.App. §§ 2401-2420 (1982, and Supp. III ed.) (defining "United States person" to
include "any domestic concern (including any permanent domestic establishment of any
foreign concern) and any foreign subsidiary or affiliate (including any permanent foreign
establishment) of any domestic concern which is controlled in fact by such domestic
concern") § 2415(2); Coast Guard Act, 14 U.S.C. § 89(a) (Coast Guard searches and
seizures upon the high seas); 18 U.S.C. § 7 (Criminal code extends to high seas); 19
U.S.C. § 1701 (Customs enforcement on the high seas); Comprehensive Anti-Apartheid
Act of 1986, 22 U.S.C. §§ 5001-5116 (1982 ed. Supp. V) (definition of "national of the
United States" as "a natural person who is a citizen of the United States . . .") §
5001(5)(A); the Logan Act, 18 U.S.C. § 953 (applying act to "[a]ny citizen . . . wherever he
may be . . ."). Indeed, after several courts had held that the ADEA did not apply
overseas, Congress amended § 11(f) to provide,
"[t]he term 'employee' includes any individual who is a citizen of the United States
employed by an employer in a workplace in a foreign country."
29 U.S.C. § 630(f). Congress also amended § 4(g)(1), which states,
"[i]f an employer controls a corporation whose place of incorporation is in a foreign
country, any practice by such corporation prohibited under this section shall be
presumed to be such practice by such employer."
29 U.S.C. § 623(h)(1). The expressed purpose of these changes was to
"mak[e] provisions of the Act apply to citizens of the United States employed in foreign
countries by United States corporations or their subsidiaries."
S.Rep. No. 98-467, p. 2 (1984), U.S. Code Cong. & Admin.News 1984, pp. 2974, 2975.
Congress, should it wish to do so, may similarly amend Title VII and in doing so will be
able to calibrate its provisions in a way that we cannot.
Petitioners have failed to present sufficient affirmative evidence that Congress intended
Title VII to apply abroad. Accordingly, the judgment of the Court of Appeals is
Affirmed. entitled to deference." Id. 486 U.S. at 486 U. S. 115. Commercial Office Products has not
been overruled (or even mentioned) in today's opinion, so that the state of the law
* Title VII defines "employee" as: regarding deference to the EEOC is left unsettled.

"an individual employed by an employer, except that the term 'employee' shall not
include any person elected to public office in any State or political subdivision of any
State by the qualified voters thereof, or any person chosen by such officer to be on such
officer's personal staff, or an appointee on the policy making level or an immediate
adviser with respect to the exercise of the constitutional or legal powers of the office.
The exemption set forth in the preceding sentence shall not include employees subject
to the civil service laws of a State government, government agency or political
subdivision."
42 U.S.C. § 2000e(f).
JUSTICE SCALIA, concurring in part and concurring in the judgment.
I would resolve these cases by assuming, without deciding, that the EEOC was entitled
to deference on the particular point in question. But deference is not abdication, and it
requires us to accept only those agency interpretations that are reasonable in light of
the principles of construction courts normally employ. Given the presumption against
extraterritoriality that the Court accurately describes, and the requirement that the
intent to overcome it be "clearly expressed," it is, in my view, not reasonable to give
effect to mere implications from the statutory language, as the EEOC has
done. Cf. Sunstein, Law and Administration after Chevron, 90 Colum.L.Rev. 2071, 2114
(1990).
On all other points, I join the opinion of the Court.

I join the judgment of the Court, and its opinion except that portion, ante at 499 U. S.
256-258, asserting that the views of the Equal Employment Opportunity Commission --
not only with respect to the particular point at issue here but apparently as a general
matter -- are not entitled to the deference normally accorded administrative agencies
under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S.
837(1984). The case relied upon for the proposition that the EEOC's interpretations have
only the force derived from their "power to persuade" was decided in an era when we
were disposed to give deference (as opposed to "persuasive force") only to so-called
"legislative regulations." The reasoning of General Electric Co. v. Gilbert, 429 U. S.
125 (1976) was not that the EEOC (singled out from other agencies) was not entitled to
deference, but that the EEOC's guidelines, like the guidelines of all agencies without
explicit rulemaking

Page 499 U. S. 260

power, could not be considered legislative rules, and therefore could not be accorded
deference. See id. at429 U. S. 141.

In an era when our treatment of agency positions is governed by Chevron, the

"legislative rules vs. other action" dichotomy of Gilbert is an anachronism; and it is not
even a correct description of that anachronism to say that Gilbert held that the EEOC (as
opposed to all agency action other than legislative rules) is not entitled to deference.
We recognized that only three years ago, in EEOC v. Commercial Office Products Co., 486
U. S. 107 (1988) -- which case, rather than Gilbert, was our last word on deference to
the EEOC. We said, in language quite familiar from our cases following Chevron, that
"the EEOC's interpretation of ambiguous language need only be reasonable to be
OPINION OF THE COURT not include foreign convictions); United States v. Concha, 233 F. 3d 1249, 1256 (CA10
SMALL V. UNITED STATES 2000) (same).
544 U. S. ____ (2005)
II
SUPREME COURT OF THE UNITED STATES
A
NO. 03-750
The question before us is whether the statutory reference “convicted in any court”
includes a conviction entered in a foreign court. The word “any” considered alone
cannot answer this question. In ordinary life, a speaker who says, “I’ll see any film,” may
GARY SHERWOOD SMALL, PETITIONER v. UNITED STATES
or may not mean to include films shown in another city. In law, a legislature that uses
on writ of certiorari to the united states court of appeals for the third circuit the statutory phrase “ ‘any person’ ” may or may not mean to include “ ‘persons’ ”
outside “the jurisdiction of the state.” See, e.g., United States v. Palmer, 3 Wheat. 610,
[April 26, 2005] 631 (1818) (Marshall, C. J.) (“[G]eneral words,” such as the word “ ‘any,’ ” must “be
limited” in their application “to those objects to which the legislature intended to apply
Justice Breyer delivered the opinion of the Court. them”); Nixon v. Missouri Municipal League, 541 U. S. 125, 132 (2004) (“ ‘any’ ” means
“different things depending upon the setting”); United States v. Alvarez-Sanchez, 511 U.
The United States Criminal Code makes it
S. 350, 357 (1994) (“[R]espondent errs in placing dispositive weight on the broad
“unlawful for any person … who has been convicted in any court, of a crime punishable statutory reference to ‘any’ law enforcement officer or agency without considering the
by imprisonment for a term exceeding one year … to … possess … any firearm.” 18 U. rest of the statute”); Middlesex County Sewerage Authority v. National Sea Clammers
S. C. §922(g)(1) (emphasis added). Assn., 453 U. S. 1, 15–16 (1981) (it is doubtful that the phrase “ ‘any statute’ ” includes
the very statute in which the words appear); Flora v. United States, 362 U. S. 145, 149
The question before us focuses upon the words “convicted in any court.” Does this (1960) (“[A]ny sum,” while a “catchall” phase, does not “define what it catches”). Thus,
phrase apply only to convictions entered in any domestic court or to foreign convictions even though the word “any” demands a broad interpretation, see, e.g., United
as well? We hold that the phrase encompasses only domestic, not foreign, convictions. States v. Gonzales, 520 U. S. 1, 5 (1997), we must look beyond that word itself.

I In determining the scope of the statutory phrase we find help in the “commonsense
notion that Congress generally legislates with domestic concerns in
In 1994 petitioner, Gary Small, was convicted in a Japanese court of having tried to
mind.” Smith v. United States, 507 U. S. 197, 204, n. 5 (1993). This notion has led the
smuggle several pistols, a rifle, and ammunition into Japan. Small was sentenced to five
Court to adopt the legal presumption that Congress ordinarily intends its statutes to
years’ imprisonment. 183 F. Supp. 2d 755, 757, n. 3 (WD Pa. 2002). After his release,
have domestic, not extraterritorial, application. See Foley Bros., Inc. v. Filardo, 336 U. S.
Small returned to the United States, where he bought a gun from a Pennsylvania gun
281, 285 (1949); see also Palmer, supra, at 631 (“The words ‘any person or persons,’ are
dealer. Federal authorities subsequently charged Small under the “unlawful gun
broad enough to comprehend every human being” but are “limited to cases within the
possession” statute here at issue. 333 F. 3d 425, 426 (CA3 2003). Small pleaded guilty
jurisdiction of the state”); EEOC v. Arabian American Oil Co.,499 U. S. 244, 249–251
while reserving the right to challenge his conviction on the ground that his earlier
(1991). That presumption would apply, for example, were we to consider whether this
conviction, being a foreign conviction, fell outside the scope of the illegal gun possession
statute prohibits unlawful gun possession abroad as well as domestically. And, although
statute. The Federal District Court rejected Small’s argument, as did the Court of
the presumption against extraterritorial application does not apply directly to this case,
Appeals for the Third Circuit. 183 F. Supp. 2d, at 759; 333 F. 3d, at 427, n. 2. Because the
we believe a similar assumption is appropriate when we consider the scope of the
Circuits disagree about the matter, we granted certiorari. Compare United
phrase “convicted in any court” here.
States v. Atkins, 872 F. 2d 94, 96 (CA4 1989) (“convicted in any court” includes foreign
convictions); United States v. Winson, 793 F. 2d 754, 757–759 (CA6 1986) (same), For one thing, the phrase describes one necessary portion of the “gun possession”
with United States v. Gayle, 342 F. 3d 89, 95 (CA2 2003) (“convicted in any court” does activity that is prohibited as a matter of domestic law. For another, considered as a
group, foreign convictions differ from domestic convictions in important ways. Past
foreign convictions for crimes punishable by more than one year’s imprisonment may
include a conviction for conduct that domestic laws would permit, for example, for
engaging in economic conduct that our society might encourage. See, e.g., Art. 153 of
the Criminal Code of the Russian Soviet Federated Socialist Republic, in Soviet Criminal
Law and Procedure 171 (H. Berman & J. Spindler transls. 2d ed. 1972) (criminalizing
“Private Entrepreneurial Activity”); Art. 153, id., at 172 (criminalizing “Speculation,”
which is defined as “the buying up and reselling of goods or any other articles for the
purpose of making a profit”); cf. e.g., Gaceta Oficial de la Republica de Cuba, ch. II, Art.
103, p. 68 (Dec. 30, 1987) (forbidding propaganda that incites against the social order,
international solidarity, or the Communist State). They would include a conviction from
a legal system that is inconsistent with an American understanding of fairness. See, e.g.,
U. S. Dept. of State, Country Reports on Human Rights Practices for 2003, Submitted to
the House Committee on International Relations and the Senate Committee on Foreign
Relations, 108th Cong., 2d Sess., 702–705, 1853, 2023 (Joint Comm. Print 2004)
(describing failures of “due process” and citing examples in which “the testimony of one
man equals that of two women”). And they would include a conviction for conduct that
domestic law punishes far less severely. See, e.g., Singapore Vandalism Act, ch. 108,
§§2, 3, III Statutes of Republic of Singapore p. 258 (imprisonment for up to three years
for an act of vandalism). Thus, the key statutory phrase “convicted in any court of, a
crime punishable by imprisonment for a term exceeding one year” somewhat less
reliably identifies dangerous individuals for the purposes of U. S. law where foreign
convictions, rather than domestic convictions, are at issue.
In addition, it is difficult to read the statute as asking judges or prosecutors to refine its
definitional distinctions where foreign convictions are at issue. To somehow weed out
inappropriate foreign convictions that meet the statutory definition is not consistent
with the statute’s language; it is not easy for those not versed in foreign laws to
accomplish; and it would leave those previously convicted in a foreign court (say of
economic crimes) uncertain about their legal obligations. Cf. 1 United States Sentencing
Commission, Guidelines Manual §4A1.2(h) (Nov. 2004) (“[S]entences resulting from
foreign convictions are not counted” as a “prior sentence” for criminal history
purposes).
These considerations, suggesting significant differences between foreign and domestic
convictions, do not dictate our ultimate conclusion. Nor do they create a “clear
statement” rule, imposing upon Congress a special burden of specificity. See post, at 5
(Thomas, J., dissenting). They simply convince us that we should apply an ordinary
assumption about the reach of domestically oriented statutes here—an assumption that
helps us determine Congress’ intent where Congress likely did not consider the matter
and where other indicia of intent are in approximate balance. Cf. ibid. We consequently
assume a congressional intent that the phrase “convicted in any court” applies
domestically, not extraterritorially. But, at the same time, we stand ready to revise this
assumption should statutory language, context, history, or purpose show the contrary.
B
We have found no convincing indication to the contrary here. The statute’s language
does not suggest any intent to reach beyond domestic convictions. Neither does it
mention foreign convictions nor is its subject matter special, say, immigration or
terrorism, where one could argue that foreign convictions would seem especially
relevant. To the contrary, if read to include foreign convictions, the statute’s language
creates anomalies.
For example, the statute creates an exception that allows gun possession despite a
prior conviction for an antitrust or business regulatory crime. 18 U. S. C. §921(a)(20)(A).
In doing so, the exception speaks of “Federal or State” antitrust or regulatory
offenses. Ibid. If the phrase “convicted in any court” generally refers only to domestic
convictions, this language causes no problem. But if “convicted in any court” includes
foreign convictions, the words “Federal or State” prevent the exception from applying
where a foreignantitrust or regulatory conviction is at issue. An individual convicted of,
say, a Canadian antitrust offense could not lawfully possess a gun, Combines
Investigation Act, 2 R. S. C. 1985, ch. C–34, §§61(6), (9) (1985), but a similar individual
convicted of, say, a New York antitrust offense, could lawfully possess a gun.
For example, the statute specifies that predicate crimes include “a misdemeanor crime
of domestic violence.” 18 U. S. C. §922(g)(9). Again, the language specifies that these
predicate crimes include only crimes that are “misdemeanor[s] under Federal or State
law.” §921(a)(33)(A). If “convicted in any court” refers only to domestic convictions, this
language creates no problem. If the phrase also refers to foreign convictions, the
language creates an apparently senseless distinction between (covered) domestic
relations misdemeanors committed within the United States and (uncovered) domestic
relations misdemeanors committed abroad.
For example, the statute provides an enhanced penalty where unlawful gun
possession rests upon three predicate convictions for a “serious drug offense.”
§924(e)(1) (2000 ed., Supp. II). Again the statute defines the relevant drug crimes
through reference to specific federal crimes and with the words “offense under State
law.” §§924(e)(2)(A)(i), (ii) (2000). If “convicted in any court” refers only to domestic
convictions, this language creates no problem. But if the phrase also refers to foreign
convictions, the language creates an apparently senseless distinction between drug
offenses committed within the United States (potentially producing enhanced
punishments) and similar offenses committed abroad (not producing enhanced
punishments).
For example, the statute provides that offenses that are punishable by a term of
imprisonment of up to two years, and characterized under state law as misdemeanors,
are not predicate crimes. §921(20). This exception is presumably based on the
determination that such state crimes are not sufficiently serious or dangerous so as to
preclude an individual from possessing a firearm. If “convicted in any court” refers only
to domestic convictions, this language creates no problem. But if the phrase also refers
to foreign convictions, the language creates another apparently senseless distinction
between less serious crimes (misdemeanors punishable by more than one year’s
imprisonment) committed within the United States (not predicate crimes) and similar
offenses committed abroad (predicate crimes). These illustrative examples taken
together suggest that Congress did not consider whether the generic phrase “convicted
in any court” applies to domestic as well as foreign convictions.
The statute’s lengthy legislative history confirms the fact that Congress did not
consider whether foreign convictions should or should not serve as a predicate to
liability under the provision here at issue. Congress did consider a Senate bill containing
language that would have restricted predicate offenses to domestic offenses. See
S. Rep. No. 1501, 90th Cong., 2d Sess., p. 31 (1968) (defining predicate crimes in terms
of “Federal” crimes “punishable by a term of imprisonment exceeding one year” and
crimes “determined by the laws of the State to be a felony”). And the Conference
Committee ultimately rejected this version in favor of language that speaks of those
“convicted in any court, of a crime punishable by a term of imprisonment exceeding one
year.” H. R. Conf. Rep. No. 1956, 90th Cong., 2d Sess., pp. 28–29 (1968). But the history
does not suggest that this language change reflected a congressional view on the matter
before us. Rather, the enacted version is simpler and it avoids potential difficulties
arising out of the fact that States may define the term “felony” differently. And as far as
the legislative history is concerned, these latter virtues of the new language fully explain
the change. Thus, those who use legislative history to help discern congressional intent
will see the history here as silent, hence a neutral factor, that simply confirms the
obvious, namely, that Congress did not consider the issue. Others will not be tempted to
use or to discuss the history at all. But cf. post, at 13 (Thomas, J., dissenting).
The statute’s purpose does offer some support for a reading of the phrase that
includes foreign convictions. As the Government points out, Congress sought to “ ‘keep
guns out of the hands of those who have demonstrated that they may not be trusted to
possess a firearm without becoming a threat to society.’ ” Brief for United States 16
(quoting Dickerson v. New Banner Institute, Inc., 460 U. S. 103, 112 (1983)); see
also Lewis v. United States, 445 U. S. 55, 60–62, 66 (1980); Huddleston v. United
States, 415 U. S. 814, 824 (1974). And, as the dissent properly notes, post, at 12, one
convicted of a serious crime abroad may well be as dangerous as one convicted of a
similar crime in the United States.
The force of this argument is weakened significantly, however, by the empirical fact
that, according to the Government, since 1968, there have probably been no more than
“10 to a dozen” instances in which such a foreign conviction has served as a predicate
for a felon-in-possession prosecution. Tr. of Oral Arg. 32. This empirical fact reinforces
the likelihood that Congress, at best, paid no attention to the matter.
C
In sum, we have no reason to believe that Congress considered the added
enforcement advantages flowing from inclusion of foreign crimes, weighing them
against, say, the potential unfairness of preventing those with inapt foreign convictions
from possessing guns. See supra, at 4. The statute itself and its history offer only
congressional silence. Given the reasons for disfavoring an inference of extraterritorial
coverage from a statute’s total silence and our initial assumption against such coverage,
see supra, at 5, we conclude that the phrase “convicted in any court” refers only to
domestic courts, not to foreign courts. Congress, of course, remains free to change this
conclusion through statutory amendment.
For these reasons, the judgment of the Third Circuit is reversed, and the case is
remanded for further proceedings consistent with this opinion.
It is so ordered.
The Chief Justice took no part in the decision of this case.
THOMAS, J., DISSENTING
SMALL V. UNITED STATES
544 U. S. ____ (2005)
SUPREME COURT OF THE UNITED STATES
NO. 03-750
GARY SHERWOOD SMALL, PETITIONER v. UNITED STATES
on writ of certiorari to the united states court of appeals for the third circuit
[April 26, 2005]
 Justice Thomas, with whom Justice Scalia and Justice Kennedy join, dissenting.
Gary Small, having recently emerged from three years in Japanese prison for illegally
importing weapons into that country, bought a gun in the United States. This violated 18
U. S. C. §922(g)(1), which makes it unlawful for any person “who has been convicted in
any court of, a crime punishable by imprisonment for a term exceeding one year” to
possess a firearm in or affecting commerce. Yet the majority decides that Small’s gun
possession did not violate the statute, because his prior convictions occurred in a
Japanese court rather than an American court. In concluding that “any” means not what
it says, but rather “a subset of any,” the Court distorts the plain meaning of the statute
and departs from established principles of statutory construction. I respectfully dissent.
I
In December 1992, Small shipped a 19-gallon electric water heater from the United
States to Okinawa, Japan, ostensibly as a present for someone in Okinawa. App. to Brief
for Appellant in No. 02–2785 (CA3), pp. 507a–510a, 530a–531a, 534a, 598a (hereinafter
Appellant’s App.). Small had sent two other water heaters to Japan that same
year. Id., at 523a–527a. Thinking it unusual for a person to ship a water tank from
overseas as a present, id., at 599a, Japanese customs officials searched the heater and
discovered 2 rifles, 8 semiautomatic pistols, and 410 rounds of ammunition. Id., at
603a–604a; id., at 262a, 267a, 277a.
The Japanese Government indicted Small on multiple counts of violating Japan’s
weapons-control and customs laws. Id., at 261a–262a. Each offense was punishable by
imprisonment for a term exceeding one year. 333 F. 3d 425, 426 (CA3 2003). Small was
tried before a three-judge court in Naha, Japan, Appellant’s App. 554a, convicted on all
counts on April 14, 1994, 333 F. 3d, at 426, and sentenced to 5 years’ imprisonment
with credit for 320 days served, id., at 426, n. 1; Government’s Brief in Support of
Detention in Crim. No. 00–160 (WD Pa.), pp. 3–4. He was paroled on November 22,
1996, and his parole terminated on May 26, 1998. 333 F. 3d, at 426, n. 1.
A week after completing parole for his Japanese convictions, on June 2, 1998, Small
purchased a 9-millimeter SWD Cobray pistol from a firearms dealer in Pennsylvania.
Appellant’s App. 48a, 98a. Some time later, a search of his residence, business premises,
and automobile revealed a .380 caliber Browning pistol and more than 300 rounds of
ammunition. Id., at 47a–51a, 98a–99a. This prosecution ensued.
II
The plain terms of §922(g)(1) prohibit Small—a person “convicted in any court of, a
crime punishable by imprisonment for a term exceeding one year”—from possessing a
firearm in the United States. “Read naturally, the word ‘any’ has an expansive meaning,
that is, ‘one or some indiscriminately of whatever kind.’ ”United States v. Gonzales, 520
U. S. 1, 5 (1997) (quoting Webster’s Third New International Dictionary 97 (1976)
(hereinafter Webster’s 3d)); see also Department of Housing and Urban
Development v. Rucker, 535 U. S. 125, 130–131 (2002) (statute making “any” drug-
related criminal activity cause for termination of public housing lease precludes
requirement that tenant know of the activity); Brogan v. United States, 522 U. S. 398,
400–401 (1998) (statute criminalizing “any” false statement within the jurisdiction of a
federal agency allows no exception for the mere denial of wrongdoing); United
States v. Alvarez-Sanchez, 511 U. S. 350, 356, 358 (1994) (statute referring to “any” law-
enforcement officer includes all law enforcement officers—federal, state, or local—
capable of arresting for a federal crime). No exceptions appear on the face of the
statute; “[n]o modifier is present, and nothing suggests any restriction,” Lewis v. United
States, 445 U. S. 55, 60 (1980), on the scope of the term “court.” See Gonzales, supra, at
5 (statute referring to “ ‘any other term of imprisonment’ ” includes no “language
limiting the breadth of that word, and so we must read [the statute] as referring to all
‘term[s] of imprisonment’ ”). The broad phrase “any court” unambiguously includes all
judicial bodies[Footnote 1] with jurisdiction to impose the requisite conviction—a
conviction for a crime punishable by imprisonment for a term of more than a year.
Indisputably, Small was convicted in a Japanese court of crimes punishable by a prison
term exceeding one year. The clear terms of the statute prohibit him from possessing a
gun in the United States.
Of course, the phrase “any court,” like all other statutory language, must be read in
context. E.g., Deal v. United States, 508 U. S. 129, 132 (1993). The context of §922(g)(1),
however, suggests that there is no geographic limit on the scope of “any
court.”[Footnote 2] By contrast to other parts of the firearms-control law that expressly
mention only state or federal law, “any court” is not qualified by jurisdiction. See 18 U.
S. C. §921(a)(20) (excluding certain “Federal or State offenses” from the definition of
“crime punishable by imprisonment for a term exceeding one year”); §921(a)(33)(A)(i)
(defining a “misdemeanor crime of domestic violence” by reference to “Federal or State
law”).[Footnote 3] Congress’ explicit use of “Federal” and “State” in other provisions
shows that it specifies such restrictions when it wants to do so.
Counting foreign convictions, moreover, implicates no special federalism concerns or
other clear statement rules that have justified construing “any” narrowly in the
past.[Footnote 4] And it is eminently practical to put foreign convictions to the same use
as domestic ones; foreign convictions indicate dangerousness just as reliably as
domestic convictions. See Part III–B, infra. The expansive phrase “convicted in any
court” straightforwardly encompasses Small’s Japanese convictions.
III
 Faced with the inescapably broad text, the Court narrows the statute by assuming that
the text applies only to domestic convictions, ante, at 5; criticizing the accuracy of
foreign convictions as a proxy for dangerousness, ante, at 3–5; finding that the broad,
natural reading of the statute “creates anomalies,” ante,at 5; and suggesting that
Congress did not consider whether foreign convictions counted, ante, at 7–8. None of
these arguments is persuasive.
A Congress generally legislates with domestic concerns in mind.” Smith, supra, at 204, n.
The Court first invents a canon of statutory interpretation—what it terms “an ordinary
assumption about the reach of domestically oriented statutes,” ante, at 5—to cabin the
statute’s reach. This new “assumption” imposes a clear statement rule on Congress:
Absent a clear statement, a statute refers to nothing outside the United States. The
Court’s denial that it has created a clear statement rule is implausible. Ibid. After today’s
ruling, the only way for Congress to ensure that courts will construe a law to refer to
foreign facts or entities is to describe those facts or entities specifically as foreign. If this
is not a “special burden of specificity,” ibid., I am not sure what is.
The Court’s innovation is baseless. The Court derives its assumption from the entirely
different, and well-recognized, canon against extraterritorial application of federal
statutes: “It is a longstanding principle of American law that legislation of Congress,
unless a contrary intent appears, is meant to apply only within the territorial jurisdiction
of the United States.” EEOC v. Arabian American Oil Co., 499 U. S. 244, 248 (1991)
(internal quotation marks omitted). But the majority rightly concedes that the canon
against extraterritoriality itself “does not apply directly to this case.” Ante, at 3. Though
foreign as well as domestic convictions trigger §922(g)(1)’s prohibition, the statute
criminalizes gun possession in this country, not abroad. In prosecuting Small, the
Government is enforcing a domestic criminal statute to punish domestic criminal
conduct. Pasquantino v. United States, ante, at 20–21 (federal wire fraud statute covers
a domestic scheme aimed at defrauding a foreign government of tax revenue).
The extraterritoriality cases cited by the Court, ante, at 3, do not support its new
assumption. They restrict federal statutes from applying outside the territorial
jurisdiction of the United States. See Smith v. United States, 507 U. S. 197, 203–204
(1993) (Federal Tort Claims Act does not apply to claims arising in Antarctica); Arabian
American Oil Co., supra, at 249–251 (Title VII of the Civil Rights Act of 1964 does not
regulate the employment practices of American firms employing American citizens
abroad); Foley Bros., Inc. v. Filardo, 336 U. S. 281, 285–286 (1949) (federal labor statute
does not apply to a contract between the United States and a private contractor for
construction work done in a foreign country); United States v. Palmer, 3 Wheat. 610,
630–634 (1818) (statute punishing piracy on the high seas does not apply to robbery
committed on the high seas by a noncitizen on board a ship belonging exclusively to
subjects of a foreign state). These straightforward applications of the extraterritoriality
canon, restricting federal statutes from reaching conduct beyond U. S. borders, lend no
support to the Court’s unprecedented rule restricting a federal statute from reaching
conduct within U. S. borders.
We have, it is true, recognized that the presumption against extraterritorial
application of federal statutes is rooted in part in the “commonsense notion that
5. But my reading of §922(g)(1) is entirely true to that notion: Gun possession in this
country is surely a “domestic concern.” We have also consistently grounded the canon
in the risk that extraterritorially applicable U. S. laws could conflict with foreign laws, for
example, by subjecting individuals to conflicting obligations. Arabian American Oil
Co., supra, at 248. That risk is completely absent in applying §922(g)(1) to Small’s
conduct. Quite the opposite, §922(g)(1) takes foreign law as it finds it. Aside from the
extraterritoriality canon, which the Court properly concedes does not apply, I know of
no principle of statutory construction justifying the result the Court reaches. Its
concession that the canon is inapposite should therefore end this case.
Rather than stopping there, the Court introduces its new “assumption about the reach
of domestically oriented statutes” sU. S.onte, without briefing or argument on the
point,[Footnote 5] and without providing guidance on what constitutes a “domestically
oriented statut[e].” Ante, at 5. The majority suggests that it means all statutes except
those dealing with subjects like “immigration or terrorism,” ibid., apparently reversing
our previous rule that the extraterritoriality canon “has special force” in statutes “that
may involve foreign and military affairs,” Sale v. Haitian Centers Council, Inc., 509 U. S.
155, 188 (1993) (provision of the Immigration and Nationality Act does not apply
extraterritorially); cf. Palmer, supra (statute criminalizing piracy on the high seas does
not apply to robbery by noncitizen on ship belonging to foreign subjects). The Court’s
creation threatens to wreak havoc with the established rules for applying the canon
against extraterritoriality.[Footnote 6]
B
In support of its narrow reading of the statute, the majority opines that the natural
reading has inappropriate results. It points to differences between foreign and domestic
convictions, primarily attacking the reliability of foreign convictions as a proxy for
identifying dangerous individuals. Ante, at 3–5. Citing various foreign laws, the Court
observes that, if interpreted to include foreign convictions, §922(g) would include
convictions for business and speech activities “that [United States] laws would
permit,” ante, at 3; convictions “from a legal system that is inconsistent with an
American understanding of fairness,” ante, at 4; and convictions “for conduct that
[United States] law punishes far less severely,” ibid. The Court therefore concludes that
foreign convictions cannot trigger §922(g)(1)’s prohibition on firearm possession.
The Court’s claim that foreign convictions punishable by imprisonment for more than a
year “somewhat less reliably identif[y] dangerous individuals” than domestic
convictions, ibid., is untenable. In compiling examples of foreign convictions that might
trigger §922(g)(1), ibid., the Court constructs a parade of horribles. Citing laws of the
Russian Soviet Federated Socialist Republic, Cuba, and Singapore, it cherry-picks a few
egregious examples of convictions unlikely to correlate with dangerousness,
inconsistent with American intuitions of fairness, or punishable more severely than in
this country. Ibid. This ignores countless other foreign convictions punishable by more
than a year that serve as excellent proxies for dangerousness and culpability.[Footnote
7] Surely a “reasonable human being” drafting this language would have considered
whether foreign convictions are, on average and as a whole, accurate at gauging
dangerousness and culpability, not whether the worst-of-the-worst are. Breyer, On the
Uses of Legislative History in Interpreting Statutes, 65 S. Cal. L. Rev. 845, 854 (1992). The
Court also ignores the facts of this very case: A week after completing his sentence for
shipping two rifles, eight semiautomatic pistols, and hundreds of rounds of ammunition
into Japan, Small bought a gun in this country. It was eminently reasonable for Congress
to use convictions punishable by imprisonment for more than a year—foreign no less
than domestic—as a proxy for dangerousness.
Contrary to the majority’s assertion, it makes sense to bar people convicted overseas
from possessing guns in the United States. The Court casually dismisses this point with
the observation that only “ ‘10 to a dozen’ ” prosecutions under the statute have
involved foreign convictions as predicate convictions. Ante, at 8 (quoting Tr. of Oral Arg.
32). The rarity of such prosecutions, however, only refutes the Court’s simultaneous
claim, ante, at 3–5, that a parade of horribles will result if foreign convictions count.
Moreover, the Court does not claim that any of these few prosecutions has been based
on a foreign conviction inconsistent with American law. As far as anyone is aware, the
handful of prosecutions thus far rested on foreign convictions perfectly consonant with
American law, like Small’s conviction for international gunrunning. The Court has no
answer for why including foreign convictions is unwise, let alone irrational.
C reading creates ones even more dangerous. As explained above, the majority’s
The majority worries that reading §922(g)(1) to include foreign convictions “creates
anomalies” under other firearms control provisions. Ante, at 5–7. It is true, as the
majority notes, that the natural reading of §922(g)(1) affords domestic offenders more
lenient treatment than foreign ones in some respects: A domestic antitrust or business
regulatory offender could possess a gun, while a similar foreign offender could not; the
perpetrator of a state misdemeanor punishable by two years or less in prison could
possess a gun, while an analogous foreign offender could not. Ibid. In other respects,
domestic offenders would receive harsher treatment than their foreign counterparts:
One who committed a misdemeanor crime of domestic violence in the United States
could not possess a gun, while a similar foreign offender could; and a domestic drug
offender could receive a 15-year mandatory minimum sentence for unlawful gun
possession, while a foreign drug offender could not. Ante, at 6–7.
These outcomes cause the Court undue concern. They certainly present no occasion to
employ, nor does the Court invoke, the canon against absurdities. We should employ
that canon only “where the result of applying the plain language would be, in a genuine
sense, absurd, i.e., where it is quite impossible that Congress could have intended the
result . . . and where the alleged absurdity is so clear as to be obvious to most
anyone.” Public Citizen v. Department of Justice, 491 U. S. 440, 470–471 (1989)
(Kennedy, J., concurring in judgment); Nixon v. Missouri Municipal League, 541 U. S.
125, 141 (2004) (Scalia, J., concurring in judgment) (“avoidance of unhappy
consequences” is inadequate basis for interpreting a text);
cf. Sturges v. Crowninshield, 4 Wheat. 122, 203 (1819) (before disregarding the plain
meaning of a constitutional provision, the case “must be one in which the absurdity and
injustice of applying the provision to the case, would be so monstrous, that all mankind
would, without hesitation, unite in rejecting the application”).
Here, the “anomalies” to which the Court points are not absurd. They are, at most,
odd; they may even be rational. For example, it is not senseless to bar a Canadian
antitrust offender from possessing a gun in this country, while exempting a domestic
antitrust offender from the ban. Congress might have decided to proceed incrementally
and exempt only antitrust offenses with which it was familiar, namely, domestic ones. In
any event, the majority abandons the statute’s plain meaning based on results that are
at most incongruous and certainly not absurd. As with the extraterritoriality canon, the
Court applies a mutant version of a recognized canon when the recognized canon is
itself inapposite. Whatever the utility of canons as guides to congressional intent, they
are useless when modified in ways that Congress could never have imagined in enacting
§922(g)(1).
Even assuming that my reading of the statute generates anomalies, the majority’s
interpretation permits those convicted overseas of murder, rape, assault, kidnaping,
terrorism, and other dangerous crimes to possess firearms freely in the United
States. Supra, at 9, and n. 7. Meanwhile, a person convicted domestically of tampering
with a vehicle identification number, 18 U. S. C. §511(a)(1), is barred from possessing
firearms. The majority’s concern with anomalies provides no principled basis for
choosing its interpretation of the statute over mine.
D punishable by a term of imprisonment exceeding one year.” Surely that would have
been the natural change if expansion beyond federal and state convictions were not
The Court hypothesizes “that Congress did not consider whether the generic phrase intended. The elimination of the limiting references suggests that not only federal and
‘convicted in any court’ applies to domestic as well as foreign convictions,” ante, at 7, state convictions were meant to be covered.
and takes that as license to restrict the clear breadth of the text. Whether the Court’s
empirical assumption is correct is anyone’s guess. Regardless, we have properly rejected Some, of course, do not believe that any statement or text that has not been approved
this method of guesswork-as-interpretation. In Beecham v. United States, 511 U. S. by both Houses of Congress and the President (if he signed the bill) is an appropriate
368 (1994), we interpreted other provisions of the federal firearms laws to mean that a source of statutory interpretation. But for those who do, this committee change ought
person convicted of a federal crime is not relieved of the firearms disability unless his to be strong confirmation of the fact that “any” means not “any Federal or State,” but
civil rights have been restored under federal (as opposed to state) law. We simply “any.”
acknowledged the possibility “that the phrases on which our reading of the statute
turns . . . were accidents of statutory drafting,” id., at 374; and we observed that some IV
legislators might have read the phrases differently from the Court’s reading, “or, more
The Court never convincingly explains its departure from the natural meaning of
likely, . . . never considered the matter at all,” ibid. We nonetheless adhered to the
§922(g)(1). Instead, it institutes the troubling rule that “any” does not really mean
unambiguous meaning of the statute. Ibid.; cf. National Organization for Women,
“any,” but may mean “some subset of ‘any,’ ” even if nothing in the context so indicates;
Inc. v. Scheidler, 510 U. S. 249, 262 (1994) (“The fact that [the Racketeer Influenced and
it distorts the established canons against extraterritoriality and absurdity; it faults
Corrupt Organizations Act] has been applied in situations not expressly anticipated by
without reason Congress’ use of foreign convictions to gauge dangerousness and
Congress does not demonstrate ambiguity. It demonstrates breadth” (internal quotation
culpability; and it employs discredited methods of determining congressional intent. I
marks and brackets omitted)). Here, as in Beecham, “our task is not the hopeless one of
respectfully dissent.
ascertaining what the legislators who passed the law would have decided had they
reconvened to consider [this] particular cas[e],” 511 U. S., at 374, but the eminently
more manageable one of following the ordinary meaning of the text they enacted. That
meaning includes foreign convictions.

The Court’s reliance on the absence of any discussion of foreign convictions in the
legislative history is equally unconvincing. Ante, at 7–8. Reliance on explicit statements
in the history, if they existed, would be problematic enough. Reliance on silence in the
history is a new and even more dangerous phenomenon.Koons Buick Pontiac GMC,
Inc. v. Nigh, 543 U. S. ___, ___ (2004) (slip op., at 5) (Scalia, J., dissenting) (criticizing the
Court’s novel “Canon of Canine Silence”).

I do not even agree, moreover, that the legislative history is silent. As the Court
describes, the Senate bill that formed the basis for this legislation was amended in
Conference, to change the predicate offenses from “ ‘Federal’ crimes” punishable by
more than one year’s imprisonment and “crimes ‘determined by the laws of a State to
be a felony’ ” to conviction “ ‘in any court, of a crime punishable by a term of
imprisonment exceeding one year.’ ” Ante, at 7. The Court seeks to explain this change
by saying that “the enacted version is simpler and . . . avoids potential difficulties arising
out of the fact that States may define the term ‘felony’ differently.” Ante, at 8. But that
does not explain why all limiting reference to “Federal” and “State” was eliminated. The
revised provision would have been just as simple, and would just as well have avoided
the potential difficulties, if it read “convicted in any Federal or State court of a crime
G.R. No. 157376 October 2, 2007
CORAZON C. SIM, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and EQUITABLE PCI-BANK, respondents*.
DECISION
AUSTRIA-MARTINEZ, J.:
Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging
that she was initially employed by Equitable PCI-Bank (respondent) in 1990 as Italian
Remittance Marketing Consultant to the Frankfurt Representative Office. Eventually,
she was promoted to Manager position, until September 1999, when she received a
letter from Remegio David -- the Senior Officer, European Head of PCIBank, and
Managing Director of PCIB- Europe -- informing her that she was being dismissed due to
loss of trust and confidence based on alleged mismanagement and misappropriation of
funds.
Respondent denied any employer-employee relationship between them, and sought the
dismissal of the complaint.
On September 3, 2001, the Labor Arbiter rendered its Decision dismissing the case for
want of jurisdiction and/or lack of merit. 1 According to the Labor Arbiter:
It should be stressed at this juncture that the labor relations system in the Philippines
has no extra-territorial jurisdiction. It is limited to the relationship between labor and
capital within the Philippines. Since complainant was hired and assigned in a foreign
land, although by a Philippine Corporation, it follows that the law that govern their
relationship is the law of the place where the employment was executed and her place
of work or assignment. On this premise, the Italian law allegedly provides severance pay
which was applied and extended to herein complainant (Annex "P", respondent's
position paper).
As can be gleaned from the foregoing, a further elucidation on the matter would be an
exercise in futility. Hence, this case should be dismissed for want of jurisdiction.
Assuming for the sake of argument that this Office has jurisdiction over this case, still,
this Office is inclined to rule in favor of the respondent.
Complainant, as General Manager is an employee whom the respondent company
reposed its trust and confidence. In other words, she held a position of trust. It is well-
settled doctrine that the basic premise for dismissal on the ground of loss of confidence
is that the employee concerned holds a position of trust and confidence. (National Sugar
Refineries Corporation vs. NLRC, 286 SCRA 478.)
xxx
In this case, the respondent company had strong reason to believe that the complainant
was guilty of the offense charged against her.2
On appeal, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's
Decision and dismissed petitioner's appeal for lack of merit.3
Without filing a motion for reconsideration with the NLRC, petitioner went to the Court
of Appeals (CA) via a petition for certiorari under Rule 65 of the Rules of Court.
In a Resolution dated October 29, 2002, the CA4 dismissed the petition due to
petitioner's non-filing of a motion for reconsideration with the NLRC.5
Petitioner filed a motion for reconsideration but it was nonetheless denied by the CA
per Resolution dated February 26, 2003.
Hence, the present recourse under Rule 45 of the Rules of Court.
Petitioner alleges that:
I. The Court of Appeals departed from the accepted and usual concepts of remedial law
when it ruled that the petitioner should have first filed a Motion for Reconsideration
with the National Labor Relations Commission.
II. The National Labor Relations Commission decided a question of jurisdiction
heretofore not yet determined by the Court and decided the same in a manner not in
accord with law when it ruled that it had no jurisdiction over a labor dispute between a
Philippine corporation and its employee which it assigned to work for a foreign land.6
The pivotal question that needs to be resolved is whether or not a prior motion for
reconsideration is indispensable for the filing of a petition for certiorari under Rule 65 of
the Rules of Court with the CA.
Under Rule 65, the remedy of filing a special civil action for certiorari is available only
when there is no appeal; or any plain, speedy, and adequate remedy in the ordinary
course of law.7 A "plain" and "adequate remedy" is a motion for reconsideration of the
assailed order or resolution, the filing of which is an indispensable condition to the filing
of a special civil action for certiorari.8 This is to give the lower court the opportunity to
correct itself.9
There are, of course, exceptions to the foregoing rule, to wit:
(a) where the order is a patent nullity, as where the court a quo has no jurisdiction;
(b) where the questions raised in the certiorari proceedings have been duly raised and
passed upon by the lower court, or are the same as those raised and passed upon in the
lower court;
(c) where there is an urgent necessity for the resolution of the question and any further
delay would prejudice the interests of the Government or of the petitioner or the
subject matter of the action is perishable;
(d) where, under the circumstances, a motion for reconsideration would be useless;
(e) where petitioner was deprived of due process and there is extreme urgency for
relief;
(f) where, in a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable;
(g) where the proceedings in the lower court are a nullity for lack of due process;
(h) where the proceeding was ex parte or in which the petitioner had no opportunity to
object; and
(i) where the issue raised is one purely of law or public interest is involved. 10
Petitioner, however, failed to qualify her case as among the few exceptions. In fact, the
Court notes that the petition filed before the CA failed to allege any reason why a
motion for reconsideration was dispensed with by petitioner. It was only in her motion
for reconsideration of the CA's resolution of dismissal and in the petition filed in this
case that petitioner justified her non-filing of a motion for reconsideration.
Petitioner argues that filing a motion for reconsideration with the NLRC would be
merely an exercise in futility and useless. But it is not for petitioner to determine
whether it is so. As stressed in Cervantes v. Court of Appeals:
It must be emphasized that a writ of certiorari is a prerogative writ, never demandable
as a matter of right, never issued except in the exercise of judicial discretion. Hence, he
who seeks a writ of certiorari must apply for it only in the manner and strictly in
accordance with the provisions of the law and the Rules. Petitioner may not arrogate to
himself the determination of whether a motion for reconsideration is necessary or
not. To dispense with the requirement of filing a motion for reconsideration,
petitioner must show a concrete, compelling, and valid reason for doing so, which
petitioner failed to do. Thus, the Court of Appeals correctly dismissed the
petition.11 (Emphasis supplied)
Petitioner also contends that the issue at bench is purely a question of law, hence, an
exception to the rule. A reading of the petition filed with the CA shows otherwise. The
issues raised in this case are mixed questions of fact and law. There is a question of fact
when doubt or difference arises as to the truth or falsehood of the alleged facts, and
there is a question of law where the doubt or difference arises as to what the law is on a
certain state of facts.12
Petitioner, aside from questioning the ruling of the NLRC sustaining the Labor Arbiter's
view that it does not have any jurisdiction over the case, also questions the NLRC's
ruling affirming the Labor Arbiter's conclusion that she was validly dismissed by
respondent. The legality of petitioner's dismissal hinges on the question of whether
there was an employer-employee relationship, which was denied by respondent; and, if
in the affirmative, whether petitioner, indeed, committed a breach of trust and
confidence justifying her dismissal. These are mixed questions of fact and law and, as
such, do not fall within the exception from the filing of a motion for reconsideration.
Consequently, the CA was not in error when it dismissed the petition. More so since
petitioner failed to show any error on the part of the Labor Arbiter and the NLRC in
ruling that she was dismissed for cause.
The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the
NLRC, unless it is shown that grave abuse of discretion or lack or excess of jurisdiction
has been committed by said quasi-judicial bodies.13 The Court will not deviate from said
doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by
the NLRC, are bereft of sufficient substantiation.
Petitioner does not deny having withdrawn the amount of P3,000,000.00 lire from the
bank's account. What petitioner submits is that she used said amount for the Radio
Pilipinas sa Roma radio program of the company. Respondent, however, countered that
at the time she withdrew said amount, the radio program was already off the air.
Respondent is a managerial employee. Thus, loss of trust and confidence is a valid
ground for her dismissal.14The mere existence of a basis for believing that a managerial
employee has breached the trust of the employer would suffice for his/her dismissal. 15
[w]hen an employee accepts a promotion to a managerial position or to an office
requiring full trust and confidence, she gives up some of the rigid guaranties available to
ordinary workers. Infractions which if committed by others would be overlooked or
condoned or penalties mitigated may be visited with more severe disciplinary action. A
company's resort to acts of self-defense would be more easily justified.16
The Court notes, however, a palpable error in the Labor Arbiter's disposition of the case,
which was affirmed by the NLRC, with regard to the issue on jurisdiction. It was wrong
for the Labor Arbiter to rule that "labor relations system in the Philippines has no extra-
territorial jurisdiction."17
Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the
National Labor Relations Commission, viz.:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise
provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide, within thirty (30) calendar days after the submission of the case by
the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wage, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount of exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.
Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and
Overseas Filipinos Act of 1995,18provides:
SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original
and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the
filing of the complaint, the claims arising out of an employer-employee relationship or
by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages.
Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No.
804219 provides that the Labor Arbiters of the NLRC shall have the original and exclusive
jurisdiction to hear and decide all claims arising out of employer-employee relationship
or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages, subject to the
rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have original and exclusive
jurisdiction over claims arising from employer-employee relations, including termination
disputes involving all workers, among whom are overseas Filipino
workers.20 In Philippine National Bank v. Cabansag, the Court pronounced:
x x x Whether employed locally or overseas, all Filipino workers enjoy the protective
mantle of Philippine labor and social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the basic public policy of the
State to afford protection to labor, promote full employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers. For the State assures the basic rights of all workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions
of work [Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and
Section 3, Article XIII, 1987 Constitution]. This ruling is likewise rendered imperative by
Article 17 of the Civil Code which states that laws "which have for their object public
order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determination or conventions agreed upon in a foreign
country."21 (Emphasis supplied)
In any event, since the CA did not commit any error in dismissing the petition before it
for failure to file a prior motion for reconsideration with the NLRC, and considering that
the Labor Arbiter and the NLRC's factual findings as regards the validity of petitioner's
dismissal are accorded great weight and respect and even finality when the same are
supported by substantial evidence, the Court finds no compelling reason to relax the
rule on the filing of a motion for reconsideration prior to the filing of a petition
for certiorari.
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
January 11, 2018
G.R. No. 212448
AAA, Petitioner
vs.
BBB, Respondent
DECISION
TIJAM, J.:
May Philippine courts exercise jurisdiction over an offense constituting psychological
violence under Republic Act (R.A.) No. 9262,1 otherwise known as the Anti-Violence
Against Women and their Children Act of 2004, committed through marital infidelity,
when the alleged illicit relationship occurred or is occurring outside the country?
The above question is addressed to this Court in the present Petition 2 for the issuance of
a writ of certiorari under Rule 45 of the Rules of Court, to nullify the Resolutions dated
February 24, 20143 and May 2, 20144 of the Regional Trial Court (RTC) of Pasig City,
Branch 158, in Criminal Case No. 146468. The assailed resolutions granted the motion to
quash the Information5 which charged respondent BBB under Section 5(i) of R.A. No.
9262, committed as follows:
On or about April 19, 2011, in Pasig City, and within the jurisdiction of this Honorable
Court, [BBB], being then legally married to [AAA], caused herein [AAA] mental and
emotional anguish by having an illicit relationship with a certain Lisel Mok as confirmed
by his photograph with his purported paramour Lisel Mok and her children and the e-
mailed letter by his mother mentioning about the said relationship, to the damage and
prejudice of [AAA], in violation of the aforecited law.
Contrary to law.
We briefly recount the antecedents.
Petitioner AAA and BBB were married on August 1, 2006 in Quezon City. Their union
produced two children: CCC was born on March 4, 2007 and DDD on October 1, 2009. 6
In May of 2007, BBB started working in Singapore as a chef, where he acquired
permanent resident status in September of 2008. This petition nonetheless indicates his
address to be in Quezon City where his parents reside and where AAA also resided from
the time they were married until March of 2010, when AAA and their children moved
back to her parents' house in Pasig City.7
AAA claimed, albeit not reflected in the Information, that BBB sent little to no financial
support, and only sporadically. This allegedly compelled her to fly extra hours and take
on additional jobs to augment her income as a flight attendant. There were also
allegations of virtual abandonment, mistreatment of her and their son CCC, and physical
and sexual violence. To make matters worse, BBB supposedly started having an affair
with a Singaporean woman named Lisel Mok with whom he allegedly has been living in
Singapore. Things came to a head on April 19, 2011 when AAA and BBB had a violent
altercation at a hotel room in Singapore during her visit with their kids. 8 As can be
gathered from the earlier cited Information, despite the claims of varied forms of
abuses, the investigating prosecutor found sufficient basis to charge BBB with causing
AAA mental and emotional anguish through his alleged marital infidelity.9
The Information having been filed, a warrant of arrest was issued against BBB. AAA was
also able to secure a Hold-Departure Order against BBB who continued to evade the
warrant of arrest. Consequently, the case was archived.10
On November 6, 2013, an Entry of Appearance as Counsel for the Accused With
Omnibus Motion to Revive Case, Quash Information, Lift Hold Departure Order and
Warrant of Arrest11 was filed on behalf of BBB. Granting the motion to quash on the
ground of lack of jurisdiction and thereby dismissing the case, the trial court reasoned:
Here, while the Court maintains its 28 October 2011 ruling that probable cause exists in
this case and that [BBB] is probably guilty of the crime charged, considering, however,
his subsequent clear showing that the acts complained of him had occurred in
Singapore, dismissal of this case is proper since the Court enjoys no jurisdiction over the
offense charged, it having transpired outside the territorial jurisdiction of this Court.
xxxx
The Court is not convinced by .the prosecution's argument that since [AAA] has been
suffering from mental and emotional anguish "wherever she goes'', jurisdiction over the
offense attaches to this Court notwithstanding that the acts resulting in said suffering
had happened outside of the Philippines. To the mind of the Court, with it noting that
there is still as yet no jurisprudence on this score considering that Republic Act 9262 is
relatively a new law, the act itself which had caused a woman to suffer mental or
emotional anguish must have occurred within the territorial limits of the Court for it to
enjoy jurisdiction over the offense. This amply explains the use of the emphatic word
"causing" in the provisions of Section 5(i), above, which denotes the bringing about or
into existence of something. Hence, the mental or emotional anguish suffered by a
woman must have been brought about or into existence by a criminal act which must
logically have occurred within the territorial limits of the Court for jurisdiction over the
offense to attach to it. To rule otherwise would violate or render nugatory one of the
basic characteristics of our criminal laws - territoriality.
In the listing provided in the law itself - "repeated verbal and emotional abuse, and
denial of financial support or custody of minor children of (sic) access to the woman's
child/children" - it becomes clear that there must be an act which causes the "mental or
emotional anguish, public ridicule or humiliation", and it is such act which partakes of a
criminal nature. Here, such act was the alleged maintenance of "an illicit relationship
with a certain Liesel Mok" - which has been conceded to have been committed in
Singapore.
Granting, without conceding, that the law presents ambiguities as written, quashal of
the Information must still be ordered following the underlying fundamental principle
that all doubts must be resolved in favor of [BBB]. At best, the Court draws the attention
of Congress to the arguments on jurisdiction spawned by the law. 12 (Emphasis in the
original)
Aggrieved by the denial of the prosecution's motion for reconsideration of the dismissal
of the case, AAA sought direct recourse to this Court via the instant petition on a pure
question of law. AAA posits that R.A. No. 9262 is in danger of becoming transmogrified
into a weak, wobbly, and worthless law because with the court a quo's ruling, it is as if
husbands of Filipino women have been given license to enter into extra-marital affairs
without fear of any consequence, as long as they are carried out abroad. In the main,
AAA argues that mental and emotional anguish is an essential element of the offense
charged against BBB, which is experienced by her wherever she goes, and not only in
Singapore where the extra-marital affair takes place; thus, the RTC of Pasig City where
she resides can take cognizance of the case.
In support of her theory, AAA draws attention to Section 7 of R.A. No. 9262, which
provides:
Sec. 7. Venue - The Regional Trial Court designated as a Family Court shall have original
and exclusive jurisdiction over cases of violence against women and their children under
this law. In the absence of such court in the place where the offense was committed,
the case shall be filed in the Regional Trial Court where the crime or any of its elements
was committed at the option of the complainant. (Emphasis ours)
As to the ambiguity in the law hypothetically referred to in the assailed order, AAA
directs us to:
Section 4. Construction.- This Act shall be liberally construed to promote the protection
and safety of victims of violence against women and their children.
In his Comment13 filed on January 20, 2015, BBB contends that the grant of the motion
to quash is in effect an acquittal; that only the civil aspect of a criminal case may be
appealed by the private offended party; and. that this petition should be dismissed
outright for having been brought before this Court by AAA instead of the Office of the
Solicitor General (OSG) as counsel for the People in appellate proceedings. BBB
furthermore avers that the petition was belatedly filed.
We tackle first the threshold issue of whether or not this Court should entertain the
petition.
It must be stated beforehand that BBB is plainly mistaken in asserting that the instant
petition was belatedly filed. The date erroneously perceived by BBB as the date of AAA's
Motion for Extension14 was filed - June 2, 2014 - refers to the date of receipt by the
Division Clerk of Court and not the date when the said motion was lodged before this
Comi. The motion was in fact filed on May 27, 2014, well within the period that AAA had
under the Rules of Court to file the intended petition. Thus, considering the timeliness
of the motion, this Comi in a Resolution15 dated June 9, 2014, granted AAA an additional
period of thirty (30) days or until June 26, 2014 to file a petition for review.
In AAA's motion for extension of time, it was mentioned that she was awaiting the
OSG's response to her Letter16dated May 26, 2014 requesting for representation. Since,
the OSG was unresponsive to her plea for assistance in filing the intended petition, AAA
filed the present petition in her own name before the lapse of the extension given her
by this Court or on June 25, 2014.
We find that under the circumstances, the ends of substantial justice will be better
served by entertaining the petition if only to resolve the question of law lodged before
this Court. In Morillo v. People of the Philippines, et al., 17 where the Court entertained a
Rule 45 petition which raised only a question of law filed by the private offended party
in the absence of the OSG's participation, we recalled the instances when the Court
permitted an offended party to file an appeal without the intervention of the OSG. One
such instance is when the interest of substantial justice so requires. 18
Morillo, 19 also differentiated between dismissal and acquittal, thus:
Acquittal is always based on the merits, that is, the defendant is acquitted because the
evidence does not show that defendant's guilt is beyond a reasonable doubt; but
dismissal does not decide the case on the merits or that the defendant is not guilty.
Dismissal terminates the proceeding, either because the court is not a court of
competent jurisdiction, or the evidence does not show that the offense was committed
within the territorial jurisdiction of the court, or the complaint or information is not
valid or sufficient in form and substance, etc. The only case in which the word dismissal
is commonly but not correctly used, instead of the proper term acquittal, is when, after
the prosecution has presented all its evidence, the defendant moves for the dismissal
and the court dismisses the case on the ground that the evidence fails to show beyond a
reasonable doubt that the defendant is guilty; for in such case the dismissal is in reality
an acquittal because the case is decided on the merits. If the prosecution fails to prove
that the offense was committed within the territorial jurisdiction of the court and the
case is dismissed, the dismissal is not an acquittal, inasmuch as if it were so the
defendant could not be again prosecuted before the court of competent jurisdiction;
and it is elemental that in such case, the defendant may again be prosecuted for the
same offense before a court of competent jurisdiction.20(Citation omitted and emphasis
in the original)
The grant of BBB's motion to quash may not therefore be viewed as an acquittal, which
in limited instances may only be repudiated by a petition for certiorari under Rule 65
upon showing grave abuse of discretion lest the accused would be twice placed in
jeopardy.21
Indubitably, "the Rules do not prohibit any of the parties from filing a Rule 45 Petition
with this Court, in case only questions of law are raised or involved."22 "There is a
question of law when the issue does not call for an examination of the probative value
of the evidence presented or of the truth or falsehood of the facts being admitted, and
the doubt concerns the c01Tect application of law and jurisprudence on the matter." 23
Further, the question of whether or not the RTC has jurisdiction in view of the peculiar
provisions of R.A. No. 9262 is a question of law. Thus, in Morillo,24 the Court reiterated
that:
[T]he jurisdiction of the court is determined by the averments of the complaint or
Information, in relation to the law prevailing at the time of the filing of the complaint or
Information, and the penalty provided by law for the crime charged at the time of its
commission. Thus, when a case involves a proper interpretation of the rules and
jurisprudence with respect to the jurisdiction of courts to entertain complaints filed
therewith, it deals with a question of law that can be properly brought to this Court
under Rule 45.25 (Citations omitted)
We are not called upon in this case to determine the truth or falsity of the charge
against BBB, much less weigh the evidence, especially as the case had not even
proceeded to a full-blown trial on the merits. The issue for resolution concerns the
correct application of law and jurisprudence on a given set of
circumstances, i.e., whether or not Philippine courts are deprived of territorial
jurisdiction over a criminal charge of psychological abuse under R.A. No. 9262 when
committed through marital infidelity and the alleged illicit relationship took place
outside the Philippines.
The novelty of the issue was even recognized by the RTC when it opined that there is
still as yet no jurisprudence on this score, prompting it to quash the Information even as
it maintained its earlier October 28, 2011 ruling that probable cause exists in the
case.26 Calling the attention of Congress to the arguments on jurisdiction spawned by
the law,27 the RTC furnished copies of the assailed order to the House of
Representatives and the Philippine Senate through the Committee on Youth, Women
and Public Relations, as well as the Committee on Justice and Human Rights.28
The issue acquires special significance when viewed against the present economic
reality that a great number of Filipino families have at least one parent working
overseas. In. April to September 2016, the number of overseas Filipino workers who
worked abroad was estimated at 2.2 million, 97.5 percent of which were comprised of
overseas contract workers or those with existing work contract while 2.5 percent
worked overseas without contract.29 It is thus necessary to clarify how R.A. No. 9262
should be applied in a question of territorial jurisdiction over a case of psychological
abuse brought against the husband when such is allegedly caused by marital infidelity
carried on abroad.
Ruling of the Court
There is merit in the petition.
"Physical violence is only the most visible form of abuse. Psychological abuse,
particularly forced social and economic isolation of women, is also common." 30 In this
regard, Section 3 of R.A. No. 9262 made it a point to encompass in a non-limiting
manner the various forms of violence that may be committed against women and their
children:
Sec. 3. Definition of Terms. - As used in this Act, (a) "Violence against women and their
children" refers to any act or a series of acts committed by any person against a woman
who is his wife, former wife, or against a woman with whom the person has or had a
sexual or dating relationship, or with whom he has a common child, or against her child
whether legitimate or illegitimate, within or without the family abode, which result in or
is likely to result in physical, sexual, psychological harm or suffering, or economic abuse
including threats of such acts, battery, assault, coercion, harassment or arbitrary
deprivation of liberty. It includes, but is not limited to, the following acts:
A. "Physical Violence" refers to acts that include bodily or physical harm;
B. "Sexual violence" refers to an act which is sexual in nature, committed against a
woman or her child. It includes, but is not limited to:
xxxx
C. "Psychological violence" refers to acts or omissions causing or likely to cause mental
or emotional suffering of the victim such as but not limited to intimidation, harassment,
stalking, damage to property, public ridicule or humiliation, repeated verbal abuse and
marital infidelity. It includes causing or allowing the victim to witness the physical,
sexual or psychological abuse of a member of the family to which the victim belongs, or
to witness pornography in any form or to witness abusive injury to pets or to unlawful
or .unwanted deprivation of the right to custody and/or visitation of common children.
D. "Economic abuse" refers to acts that make or attempt to make a woman financially
dependent which includes, but is not limited to the following:
xxxx
As jurisdiction of a court over the criminal case is determined by the allegations in the
complaint or information, threshing out the essential elements of psychological abuse
under R.A. No. 9262 is crucial. In Dinamling v. People,31 this Court already had occasion
to enumerate the elements of psychological violence under Section 5(i) of R.A. No.
9262, as follows:
Section 5. Acts of Violence Against Women and Their Children. - The crime of violence
against women and their children is committed through any of the following acts:
xxxx
(i) Causing mental or emotional anguish, public ridicule or humiliation to the woman or
her child, including, but not limited to, repeated verbal and emotional abuse, and denial
of financial support or custody of minor children or access to the woman's
child/children.
From the aforequoted Section 5(i), in relation to other sections of R[.]A[.] No. 9262, the
elements of the crime are derived as follows:
(1) The offended paiiy is a woma.J.1 and/or her child or children;
(2) The woman is either the wife or former wife of the offender, or is a woman with
whom the offender has or had a sexual or dating relationship, or is a woman with whom
such offender has a common child. As for the woman's child or children, they may be
legitimate or illegitimate, or living within or without the family abode;
(3) The offender causes on the woman and/or child mental or emotional anguish; and
(4) The anguish is caused through acts of public ridicule or humiliation, repeated verbal
and emotional abuse, denial of financial support or custody of minor children or access
to the children or similar· such acts or omissions.
xxxx
It bears emphasis that Section 5(i) penalizes some forms of psychological violence that
are inflicted on victims who are women and children. Other forms of psychological
violence, as well as physical, sexual and economic violence, are addressed and penalized
in other subparts of Section 5.
xxxx
Psychological violence is an. element of violation of Section 5(i) just like the mental or
emotional anguish caused on the victim. Psychological violence is the means employed
by the perpetrator, while mental or emotional anguish is the effect caused to or the
damage sustained by the offended party. To establish psychological violence as an
element of the crime, it is necessary to show proof of commission of any of the acts
enumerated in Section 5(i) or similar such acts. And to establish mental or emotional
anguish, it is necessary to present the testimony of the victim as such experiences are
personal to this party. x x x.32 (Citations omitted and emphasis ours)
Contrary to the interpretation of the RTC, what R.A. No. 9262 criminalizes is not the
marital infidelity per se but the psychological violence causing mental or emotional
suffering on the wife. Otherwise stated, it is the violence inflicted under the said
circumstances that the law seeks to outlaw. Marital infidelity as cited in the law is only
one of the various acts by which psychological violence may be committed. Moreover,
depending on the circumstances of the spouses and for a myriad of reasons, the illicit
relationship may or may not even be causing mental or emotional anguish on the wife.
Thus, the mental or emotional suffering of the victim is an essential and distinct element
in the commission of the offense.
In criminal cases, venue is jurisdictional. Thus, in Trenas v. People,33 the Court explained
that:
The place where the crime was committed determines not only the venue of the action
but is an essential element of jurisdiction.1âwphi1 It is a fundamental rule that for
jurisdiction to be acquired by courts in criminal cases, the offense should have been
committed or any one of its essential ingredients should have taken place within the
territorial jurisdiction of the court. Territorial jurisdiction in criminal cases is the territory
where the court has jurisdiction to take cognizance or to try the offense allegedly
committed therein by the accused. Thus, it cannot take jurisdiction over a person
charged with an offense allegedly committed outside of that limited territory.
Furthermore, the jurisdiction of a court over the criminal case is determined by the
allegations in the complaint or information. And once it is so shown, the court may
validly take cognizance of the case. However, if the evidence adduced during the trial
shows that the offense was committed somewhere else, the court should dismiss the
action for want of jurisdiction.34 (Emphasis in the original)
In Section 7 of R.A. No. 9262, venue undoubtedly pertains to jurisdiction. As correctly
pointed out by AAA, Section 7 provides that the case may be filed where the crime or
any of its elements was committed at the option of the complainant. Which the
psychological violence as the means employed by the perpetrator is certainly an
indispensable element of the offense, equally essential also is the element of mental or
emotional anguish which is personal to the complainant. The resulting mental or
emotional anguish is analogous to the indispensable element of damage in a
prosecution for estafa, viz:
The circumstance that the deceitful manipulations or false pretenses employed by the
accused, as shown in the vouchers, might have been perpetrated in Quezon City does
not preclude the institution of the criminal action in Mandaluyong where the damage
was consummated. Deceit and damage are the basic elements of estafa. The estafa
involved in this case appears to be a transitory or continuing offense. It could be filed
either in Quezon City or in Rizal. The theory is that a person charged with a transitory
offense may be tried in any jurisdiction where the offense is in part committed. In
transitory or continuing offenses in which some acts material and essential to the crime
and requisite to its consummation occur in one province and some in another, the court
of either province has jurisdiction to try the case, it being understood that the first court
taking cognizance of the case will exclude the others x x x[.] 35
where the complaint is filed in view of the anguish suffered being a material element of
the offense. In the present scenario, the offended wife and children of respondent
husband are residents of Pasig City since March of 2010. Hence, the RTC of Pasig City
may exercise jurisdiction over the case.
Certainly, the act causing psychological violence which under the information relates to
BBB's marital infidelity must be proven by probable cause for the purpose of formally
charging the husband, and to establish the same beyond reasonable doubt for purposes
of conviction. It likewise remains imperative to acquire jurisdiction over the husband.
What this case concerns itself is simply whether or not a complaint for psychological
abuse under R.A. No. 9262 may even be filed within the Philippines if the illicit
relationship is conducted abroad. We say that even if the alleged extra-marital affair
causing the offended wife mental and emotional anguish is committed abroad, the
same does not place a prosecution under R.A. No. 9262 absolutely beyond the reach of
Philippine courts.
IN VIEW OF THE FOREGOING, the petition is GRANTED. The Resolutions dated February
24, 2014 and May 2, 2014 of the Regional Trial Court of Pasig City, Branch 158, in
Criminal Case No. 146468 are SET ASIDE.Accordingly, the Information filed in Criminal
Case No. 146468 is ordered REINSTATED.
SO ORDERED.

What may be gleaned from Section 7 of R.A. No. 9262 is that the law contemplates that
acts of violence against women and their children may manifest as transitory or
continuing crimes; meaning that some acts material and essential thereto and requisite
in their consummation occur in one municipality or territory, while some occur in
another. In such cases, the court wherein any of the crime's essential and material acts
have been committed maintains jurisdiction to try the case; it being understood that the
first court taking cognizance of the same excludes the other. Thus, a person charged
with a continuing or transitory crime may be validly tried in any municipality or territory
where the offense was in part committed.36

It is necessary, for Philippine courts to have jurisdiction when the abusive conduct or act
of violence under Section 5(i) of R.A. No. 9262 in relation to Section 3(a), Paragraph (C)
was committed outside Philippine territory, that the victim be a resident of the place
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–697
_________________
SUPAP KIRTSAENG, dba BLUECHRISTINE99, PETITIONER v. JOHN WILEY & SONS, INC.
on writ of certiorari to the united states court of appeals for the second circuit
[March 19, 2013]
Justice Breyer delivered the opinion of the Court.
Section 106 of the Copyright Act grants “the owner of copyright under this title”
certain “exclusive rights,” including the right “to distribute copies . . . of the copyrighted
work to the public by sale or other transfer of ownership.” 17 U. S. C. §106(3). These
rights are qualified, however, by the application of various limitations set forth in the
next several sections of the Act, §§107 through 122. Those sections, typically entitled
“Limitations on exclusive rights,” include, for example, the principle of “fair use” (§107),
permission for limited library archival reproduction, (§108), and the doctrine at issue
here, the “first sale” doctrine (§109).
Section 109(a) sets forth the “first sale” doctrine as follows:
“Notwithstanding the provisions of section 106(3) [the section that grants the owner
exclusive distribution rights], the owner of a particular copy or phonorecord lawfully
made under this title . . . is entitled, without the authority of the copyright owner, to sell
or otherwise dispose of the possession of that copy or phonorecord.” (Emphasis added.)
Thus, even though §106(3) forbids distribution of a copy of, say, the copyrighted novel
Herzog without the copyright owner’s permission, §109(a) adds that, once a copy of
Her- zog has been lawfully sold (or its ownership otherwise lawfully transferred), the
buyer of that copy and subsequent owners are free to dispose of it as they wish. In
copyright jargon, the “first sale” has “exhausted” the copyright owner’s §106(3)
exclusive distribution right.
What, however, if the copy of Herzog was printed abroad and then initially sold with
the copyright owner’s permission? Does the “first sale” doctrine still apply? Is the buyer,
like the buyer of a domestically manufactured copy, free to bring the copy into the
United States and dispose of it as he or she wishes?
To put the matter technically, an “importation” provision, §602(a)(1), says that
“[i]mportation into the United States, without the authority of the owner of copyright
under this title, of copies . . . of a work that have been acquired outside the United
States is an infringement of the exclusive right to distribute copies . . . under section 106
. . . .” 17 U. S. C. §602(a)(1) (2006 ed., Supp. V) (emphasis added).
Thus §602(a)(1) makes clear that importing a copy without permission violates the
owner’s exclusive distri- bution right. But in doing so, §602(a)(1) refers explicitly to the
§106(3) exclusive distribution right. As we have just said, §106 is by its terms “[s]ubject
to” the various doctrines and principles contained in §§107 through 122, in- cluding
§109(a)’s “first sale” limitation. Do those same modifications apply—in particular, does
the “first sale” modification apply—when considering whether §602(a)(1) prohibits
importing a copy?
In Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135, 145
(1998) , we held that §602(a)(1)’s reference to §106(3)’s exclusive distribution right
incorporates the later subsections’ limitations, including, in particular, the “first sale”
doctrine of §109. Thus, it might seem that, §602(a)(1) notwithstanding, one who buys a
copy abroad can freely import that copy into the United States and dispose of it, just as
he could had he bought the copy in the United States.
But Quality King considered an instance in which the copy, though purchased abroad,
was initially manufactured in the United States (and then sent abroad and sold). This
case is like Quality King but for one important fact. The copies at issue here were
manufactured abroad. That fact is important because §109(a) says that the “first sale”
doctrine applies to “a particular copy or phonorecord lawfully made under this title.”
And we must decide here whether the five words, “lawfully made under this title,” make
a critical legal difference.
Putting section numbers to the side, we ask whether the “first sale” doctrine applies
to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully
manufactured abroad. Can that buyer bring that copy into the United States (and sell it
or give it away) without obtaining permission to do so from the copyright owner? Can,
for example, someone who purchases, say at a used bookstore, a book printed abroad
subsequently resell it without the copyright owner’s permission?
In our view, the answers to these questions are, yes. We hold that the “first sale”
doctrine applies to copies of a copyrighted work lawfully made abroad.
I
A
 Respondent, John Wiley & Sons, Inc., publishes aca- demic textbooks. Wiley obtains
from its authors various foreign and domestic copyright assignments, licenses and
permissions—to the point that we can, for present pur- poses, refer to Wiley as the
relevant American copyright owner. See 654 F. 3d 210, 213, n. 6 (CA2 2011). Wiley often
assigns to its wholly owned foreign subsidiary, John Wiley & Sons (Asia) Pte Ltd., rights
to publish, print, and sell Wiley’s English language textbooks abroad. App. to Pet. for
Cert. 47a–48a. Each copy of a Wiley Asia foreign edition will likely contain language
making clear that the copy is to be sold only in a particular country or geographical
region outside the United States. 654 F. 3d, at 213.
For example, a copy of Wiley’s American edition says, “Copyright © 2008 John Wiley
& Sons, Inc. All rights reserved. . . . Printed in the United States of America.” J. Walker,
Fundamentals of Physics, p. vi (8th ed. 2008). A copy of Wiley Asia’s Asian edition of that
book says:
“Copyright © 2008 John Wiley & Sons (Asia) Pte Ltd[.] All rights reserved. This book is
authorized for sale in Europe, Asia, Africa, and the Middle East only and may be not
exported out of these territories. Exportation from or importation of this book to
another region without the Publisher’s authorization is illegal and is a violation of the
Publisher’s rights. The Publisher may take legal action to enforce its rights. . . . Printed in
Asia.” J. Walker, Fundamentals of Physics, p. vi (8th ed. 2008 Wiley Int’l Student ed.).
Both the foreign and the American copies say:
“No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means . . . except as permitted under Sections 107 or
108 of the 1976 United States Copyright Act.” Compare, e.g., ibid. (Int’l ed.), with
Walker, supra, at vi (American ed.).
The upshot is that there are two essentially equivalent versions of a Wiley textbook,
654 F. 3d, at 213, each version manufactured and sold with Wiley’s permission: (1) an
American version printed and sold in the United States, and (2) a foreign version
manufactured and sold abroad. And Wiley makes certain that copies of the second
version state that they are not to be taken (without permission) into the United States.
Ibid.
Petitioner, Supap Kirtsaeng, a citizen of Thailand, moved to the United States in 1997
to study mathemat- ics at Cornell University. Ibid. He paid for his educa- tion with the
help of a Thai Government scholarship which required him to teach in Thailand for 10
years on his return. Brief for Petitioner 7. Kirtsaeng successfully completed his
undergraduate courses at Cornell, successfully completed a Ph. D. program in
mathematics at the University of Southern California, and then, as promised, returned
to Thailand to teach. Ibid. While he was studying in the United States, Kirtsaeng asked
his friends and family in Thailand to buy copies of foreign edition English-language
textbooks at Thai book shops, where they sold at low prices, and mail them to him in
the United States. Id., at 7–8. Kirtsaeng would then sell them, reimburse his family and
friends, and keep the profit. App. to Pet. for Cert. 48a–49a.
B
In 2008 Wiley brought this federal lawsuit against Kirtsaeng for copyright
infringement. 654 F. 3d, at 213. Wiley claimed that Kirtsaeng’s unauthorized
importation of its books and his later resale of those books amounted to an
infringement of Wiley’s §106(3) exclusive right to dis- tribute as well as §602’s related
import prohibition. 17 U. S. C. §§106(3) (2006 ed.), 602(a) (2006 ed., Supp. V). See also
§501 (2006 ed.) (authorizing infringement action). App. 204–211. Kirtsaeng replied that
the books he had acquired were “ ‘lawfully made’ ” and that he had acquired them
legitimately. Record in No. 1:08–CV–7834–DCP (SDNY), Doc. 14, p. 3. Thus, in his view,
§109(a)’s “first sale” doctrine permitted him to resell or otherwise dispose of the books
without the copyright owner’s further permission. Id., at 2–3.
The District Court held that Kirtsaeng could not assert the “first sale” defense
because, in its view, that doctrine does not apply to “foreign-manufactured goods”
(even if made abroad with the copyright owner’s permission). App. to Pet. for Cert. 72a.
The jury then found that Kirtsaeng had willfully infringed Wiley’s American copyrights by
selling and importing without authorization copies of eight of Wiley’s copyrighted titles.
And it assessed statutory damages of $600,000 ($75,000 per work). 654 F. 3d, at 215.
On appeal, a split panel of the Second Circuit agreed with the District Court. Id., at
222. It pointed out that §109(a)’s “first sale” doctrine applies only to “the owner of a
particular copy . . . lawfully made under this title.” Id., at 218–219 (emphasis added).
And, in the majority’s view, this language means that the “first sale” doctrine does not
apply to copies of American copyrighted works manufactured abroad. Id., at 221. A
dissenting judge thought that the words “lawfully made under this title” do not refer “to
a place of manufacture” but rather “focu[s] on whether a particular copy was
manufactured lawfully under” Amer- ica’s copyright statute, and that “the lawfulness of
the manufacture of a particular copy should be judged by U. S. copyright law.” Id., at
226 (opinion of Murtha, J.).
We granted Kirtsaeng’s petition for certiorari to con- sider this question in light of
different views among the Circuits. Compare id., at 221 (case below) (“first sale”
doctrine does not apply to copies manufactured outside the United States), with Omega
S. A. v. Costco Wholesale Corp., 541 F. 3d 982, 986 (CA9 2008) (“first sale” doctrine
applies to copies manufactured outside the United States only if an authorized first sale
occurs within the United States), aff’d by an equally divided court, 562 U. S. ___ (2010),
and Sebastian Int’l, Inc. v. Consumer Contacts (PTY) Ltd., 847 F. 2d 1093, 1098, n. 1 (CA3
1988) (limitation of the first sale doctrine to copies made within the United States “does
not fit comfortably within the scheme of the Copyright Act”).
II
We must decide whether the words “lawfully made under this title” restrict the scope
of §109(a)’s “first sale” doctrine geographically. The Second Circuit, the Ninth Circuit,
Wiley, and the Solicitor General (as amicus) all read those words as imposing a form of
geographical limitation. The Second Circuit held that they limit the “first sale” doctrine
to particular copies “made in territories in which the Copyright Act is law,” which (the
Circuit says) are copies “manufactured domestically,” not “outside of the United States.”
654 F. 3d, at 221–222 (emphasis added). Wiley agrees that those five words limit the
“first sale” doctrine “to copies made in conformance with the [United States] Copyright
Act where the Copyright Act is appli- cable,” which (Wiley says) means it does not apply
to copies made “outside the United States” and at least not to “foreign production of a
copy for distribution exclusively abroad.” Brief for Respondent 15–16. Similarly, the
Solicitor General says that those five words limit the “first sale” doctrine’s applicability
to copies “ ‘made subject to and in compliance with [the Copyright Act],’ ” which (the
Solicitor General says) are copies “made in the United States.” Brief for United States as
Amicus Curiae 5 (hereinafter Brief for United States) (emphasis added). And the Ninth
Circuit has held that those words limit the “first sale” doctrine’s applicability (1) to
copies lawfully made in the United States, and (2) to copies lawfully made outside the
United States but initially sold in the United States with the copyright owner’s
permission. Denbicare U. S. A. Inc. v. Toys “R” Us, Inc., 84 F. 3d 1143, 1149–1150 (1996).
Under any of these geographical interpretations, §109(a)’s “first sale” doctrine would
not apply to the Wiley Asia books at issue here. And, despite an American copyright
owner’s permission to make copies abroad, one who buys a copy of any such book or
other copyrighted work—whether at a retail store, over the Internet, or at a library
sale—could not resell (or otherwise dispose of) that particular copy without further
permission.
Kirtsaeng, however, reads the words “lawfully made under this title” as imposing a
non-geographical limitation. He says that they mean made “in accordance with” or “in
compliance with” the Copyright Act. Brief for Petitioner 26. In that case, §109(a)’s “first
sale” doctrine would apply to copyrighted works as long as their manufacture met the
requirements of American copyright law. In particular, the doctrine would apply where,
as here, copies are manufactured abroad with the permission of the copyright owner.
See §106 (referring to the owner’s right to authorize).
In our view, §109(a)’s language, its context, and the common-law history of the “first
sale” doctrine, taken together, favor a non-geographical interpretation. We also doubt
that Congress would have intended to create the practical copyright-related harms with
which a geographical interpretation would threaten ordinary scholarly, artistic,
commercial, and consumer activities. See Part II–D, infra. We consequently conclude
that Kirtsaeng’s nongeographical reading is the better reading of the Act.
A
The language of §109(a) read literally favors Kirtsaeng’s nongeographical
interpretation, namely, that “lawfully made under this title” means made “in
accordance with” or “in compliance with” the Copyright Act. The language of §109(a)
says nothing about geography. The word “under” can mean “[i]n accordance with.” 18
Oxford English Dictionary 950 (2d ed. 1989). See also Black’s Law Dictionary 1525 (6th
ed. 1990) (“according to”). And a nongeographical interpretation provides each word of
the five-word phrase with a distinct purpose. The first two words of the phrase,
“lawfully made,” suggest an effort to distinguish those copies that were made lawfully
from those that were not, and the last three words, “under this title,” set forth the
standard of “lawful[ness].” Thus, the nongeograph- ical reading is simple, it promotes a
traditional copyright objective (combatting piracy), and it makes word-by-word linguistic
sense.
The geographical interpretation, however, bristles with linguistic difficulties. It gives
the word “lawfully” little, if any, linguistic work to do. (How could a book be unlawfully
“made under this title”?) It imports geography into a statutory provision that says
nothing explicitly about it. And it is far more complex than may at first appear.
To read the clause geographically, Wiley, like the Sec- ond Circuit and the Solicitor
General, must first emphasize the word “under.” Indeed, Wiley reads “under this title”
to mean “in conformance with the Copyright Act where the Copyright Act is applicable.”
Brief for Respondent 15. Wiley must then take a second step, arguing that the Act “is
applicable” only in the United States. Ibid. And the Solicitor General must do the same.
See Brief for United States 6 (“A copy is ‘lawfully made under this title’ if Title 17
governs the copy’s creation and the copy is made in compliance with Title 17’s
requirements”). See also post, at 7 (Ginsburg, J., dissenting) (“under” describes
something “governed or regulated by another”).
One difficulty is that neither “under” nor any other word in the phrase means
“where.” See, e.g., 18 Oxford English Dictionary, supra, at 947–952 (definition of
“under”). It might mean “subject to,” see post, at 6, but as this Court has repeatedly
acknowledged, the word evades a uniform, consistent meaning. See Kucana v. Holder,
558 U. S. 233, 245 (2010) (“ ‘under’ is chameleon”); Ardestani v. INS, 502 U. S. 129, 135
(1991) (“under” has “many dictionary definitions” and “must draw its meaning from its
context”).
A far more serious difficulty arises out of the uncer- tainty and complexity
surrounding the second step’s effort to read the necessary geographical limitation into
the word “applicable” (or the equivalent). Where, precisely, is the Copyright Act
“applicable”? The Act does not instantly protect an American copyright holder from
unauthorized piracy taking place abroad. But that fact does not mean the Act is
inapplicable to copies made abroad. As a matter of ordinary English, one can say that a
statute imposing, say, a tariff upon “any rhododendron grown in Nepal” applies to all
Nepalese rhododendrons. And, similarly, one can say that the American Copyright Act is
applicable to all pirated copies, including those printed overseas. Indeed, the Act itself
makes clear that (in the Solicitor General’s language) foreign-printed pirated copies are
“sub- ject to” the Act. §602(a)(2) (2006 ed., Supp. V) (refer- ring to importation of copies
“the making of which either constituted an infringement of copyright, or which would
have constituted an infringement of copyright if this title had been applicable”); Brief for
United States 5. See also post, at 6 (suggesting that “made under” may be read as
“subject to”).
The appropriateness of this linguistic usage is underscored by the fact that §104 of
the Act itself says that works “subject to protection under this title” include unpublished
works “without regard to the nationality or domicile of the author,” and works “first
published” in any one of the nearly 180 nations that have signed a copyright treaty with
the United States. §§104(a), (b) (2006 ed.) (emphasis added); §101 (2006 ed., Supp. V)
(defining “treaty party”); U. S. Copyright Office, Circular No. 38A, International Copyright
Relations of the United States (2010). Thus, ordinary English permits us to say that the
Act “applies” to an Irish manuscript lying in its author’s Dublin desk drawer as well as to
an original recording of a ballet performance first made in Japan and now on display in a
Kyoto art gallery. Cf. 4 M. Nimmer & D. Nimmer, Copyright §17.02, pp. 17–18, 17–19
(2012) (herein- after Nimmer on Copyright) (noting that the principle that “copyright
laws do not have any extraterritorial operation” “requires some qualification”).
The Ninth Circuit’s geographical interpretation pro- duces still greater linguistic
difficulty. As we said, that Cir- cuit interprets the “first sale” doctrine to cover both (1)
copies manufactured in the United States and (2) copies manufactured abroad but first
sold in the United States with the American copyright owner’s permission. Den- bicare
U. S. A., 84 F. 3d, at 1149–1150. See also Brief for Respondent 16 (suggesting that the
clause at least excludes “the foreign production of a copy for distribution exclusively
abroad”); id., at 51 (the Court need “not de- cide whether the copyright owner would be
able to restrict further distribution” in the case of “a downstream domestic purchaser of
authorized imports”); Brief for Petitioner in Costco Wholesale Corp. v. Omega, S. A.,
O. T. 2010, No. 08–1423, p. 12 (excepting imported copies “made by unrelated foreign
copyright holders” (emphasis deleted)).
We can understand why the Ninth Circuit may have thought it necessary to add the
second part of its definition. As we shall later describe, see Part II–D, infra, without
some such qualification a copyright holder could prevent a buyer from domestically
reselling or even giving away copies of a video game made in Japan, a film made in
Germany, or a dress (with a design copyright) made in China, even if the copyright
holder has granted permission for the foreign manufacture, importation, and an initial
domestic sale of the copy. A publisher such as Wiley would be free to print its books
abroad, allow their im- portation and sale within the United States, but prohibit
students from later selling their used texts at a campus bookstore. We see no way,
however, to reconcile this half-geographical/half-nongeographical interpretation with
the language of the phrase, “lawfully made under this title.” As a matter of English, it
would seem that those five words either do cover copies lawfully made abroad or they
do not.
In sum, we believe that geographical interpretations create more linguistic problems
than they resolve. And considerations of simplicity and coherence tip the purely
linguistic balance in Kirtsaeng’s, nongeographical, favor.
B
Both historical and contemporary statutory context in- dicate that Congress, when
writing the present version of §109(a), did not have geography in mind. In respect to
history, we compare §109(a)’s present language with the language of its immediate
predecessor. That predecessor said:
“[N]othing in this Act shall be deemed to forbid, prevent, or restrict the transfer of any
copy of a copyrighted work the possession of which has been lawfully obtained.”
Copyright Act of 1909, §41, 35Stat. 1084 (emphasis added).
See also Copyright Act of 1947, §27, 61Stat. 660. The predecessor says nothing about
geography (and Wiley does not argue that it does). So we ask whether Congress, in
changing its language implicitly introduced a geograph- ical limitation that previously
was lacking. See also Part II–C, infra (discussing 1909 codification of common-law
principle).
A comparison of language indicates that it did not. The predecessor says that the
“first sale” doctrine protects “the transfer of any copy the possession of which has been
lawfully obtained.” The present version says that “the owner of a particular copy or
phonorecord lawfully made under this title is entitled to sell or otherwise dispose of the
possession of that copy or phonorecord.” What does this change in language
accomplish?
The language of the former version referred to those who are not owners of a copy,
but mere possessors who “lawfully obtained” a copy. The present version covers only
those who are owners of a “lawfully made” copy. Whom does the change leave out?
Who might have law- fully obtained a copy of a copyrighted work but not owned that
copy? One answer is owners of movie theaters, who during the 1970’s (and before)
often leased films from movie distributors or filmmakers. See S. Donahue, American
Film Distribution 134, 177 (1987) (describing producer-distributer and distributer-
exhibitor agreements); Note, The Relationship Between Motion Picture Distribution and
Exhibition: An Analysis of the Effects of Anti-Blind Bidding Legislation, 9 Comm/Ent. L. J.
131, 135 (1986). Because the theater owners had “lawfully obtained” their copies, the
earlier version could be read as allowing them to sell that copy, i.e., it might have given
them “first sale” protection. Because the theater owners were lessees, not owners, of
their copies, the change in language makes clear that they (like bailees and other
lessees) cannot take advantage of the “first sale” doctrine. (Those who find legislative
history useful will find confirmation in, e.g., House Committee on the Judiciary,
Copyright Law Revision, Supplementary Report of the Register of Copyrights on the
General Revision of the U. S. Copyright Law: 1965 Revision Bill, 89th Cong., 1st Sess., pt.
6, p. 30 (Comm. Print 1965) (hereinafter Copyright Law Revision) (“[W]here a person has
rented a print of a motion picture from the copyright owner, he would have no right to
lend, rent, sell, or otherwise dispose of the print without first obtaining the copyright
owner’s permission”). See also Platt & Munk Co. v. Republic Graphics, Inc., 315 F. 2d
847, 851 (CA2 1963) (Friendly, J.) (pointing out predecessor statute’s leasing problem)).
This objective perfectly well explains the new language of the present version,
including the five words here at issue. Section 109(a) now makes clear that a lessee of a
copy will not receive “first sale” protection but one who owns a copy will receive “first
sale” protection, provided, of course, that the copy was “lawfully made” and not pi-
rated. The new language also takes into account that a copy may be “lawfully made
under this title” when the copy, say of a phonorecord, comes into its owner’s possession
through use of a compulsory license, which “this title” provides for elsewhere, namely,
in §115. Again, for those who find legislative history useful, the relevant legislative
report makes this clear. H. R. Rep. No. 94–1476, p. 79 (1976) (“For example, any resale
of an illegally ‘pirated’ phonorecord would be an infringement, but the disposition of a
phonorecord legally made under the compulsory licensing provisions of section 115
would not”).
Other provisions of the present statute also support a nongeographical
interpretation. For one thing, the stat- ute phases out the “manufacturing clause,” a
clause that appeared in earlier statutes and had limited importation of many copies (of
copyrighted works) printed outside the United States. §601, 90Stat. 2588 (“Prior to July
1, 1982 . . . the importation into or public distribution in the United States of copies of a
work consisting preponderantly of nondramatic literary material . . . is prohibited unless
the portions consisting of such material have been manufac- tured in the United States
or Canada”). The phasing out of this clause sought to equalize treatment of copies
manufactured in America and copies manufactured abroad. See H. R. Rep. No. 94–1476,
at 165–166.
The “equal treatment” principle, however, is difficult to square with a geographical
interpretation of the “first sale” clause that would grant the holder of an American
copyright (perhaps a foreign national, see supra, at 10) permanent control over the
American distribution chain (sales, resales, gifts, and other distribution) in respect to
copies printed abroad but not in respect to copies printed in America. And it is
particularly difficult to believe that Congress would have sought this unequal treatment
while saying nothing about it and while, in a related clause (the manufacturing phase-
out), seeking the opposite kind of policy goal. Cf. Golan v. Holder, 565 U. S. ___, ___
(2012) (slip op., at 30) (Congress has moved from a copyright regime that, prior to 1891,
entirely excluded foreign works from U. S. copyright protection to a regime that now
“ensure[s] that most works, whether foreign or domestic, would be governed by the
same legal regime” (emphasis added)).
Finally, we normally presume that the words “lawfully made under this title” carry
the same meaning when they appear in different but related sections. Department of
Revenue of Ore. v. ACF Industries, Inc., 510 U. S. 332, 342 (1994) . But doing so here
produces surprising consequences. Consider:
(1) Section 109(c) says that, despite the copyright owner’s exclusive right “to display” a
copyrighted work (provided in §106(5)), the owner of a particular copy “law- fully made
under this title” may publicly display it without further authorization. To interpret these
words geographically would mean that one who buys a copyrighted work of art, a
poster, or even a bumper sticker, in Canada, in Europe, in Asia, could not display it in
America without the copyright owner’s further authorization.
(2) Section 109(e) specifically provides that the owner of a particular copy of a
copyrighted video arcade game “lawfully made under this title” may “publicly perform
or display that game in coin-operated equipment” without the authorization of the
copyright owner. To interpret these words geographically means that an arcade owner
could not (“without the authority of the copyright owner”) perform or display arcade
games (whether new or used) originally made in Japan. Cf. Red Baron-Franklin Park, Inc.
v. Taito Corp., 883 F. 2d 275 (CA4 1989).
(3) Section 110(1) says that a teacher, without the copyright owner’s authorization, is
allowed to perform or display a copyrighted work (say, an audiovisual work) “in the
course of face-to-face teaching activities”—unless the teacher knowingly used “a copy
that was not law- fully made under this title.” To interpret these words geographically
would mean that the teacher could not (without further authorization) use a copy of a
film during class if the copy was lawfully made in Canada, Mexico, Europe, Africa, or
Asia.
(4) In its introductory sentence, §106 provides the Act’s basic exclusive rights to an
“owner of a copyright under this title.” The last three words cannot support a
geographic interpretation.
Wiley basically accepts the first three readings, but ar- gues that Congress intended the
restrictive consequences. And it argues that context simply requires that the words of
the fourth example receive a different interpretation. Leaving the fourth example to the
side, we shall explain in Part II–D, infra, why we find it unlikely that Congress would have
intended these, and other related consequences.
C copyright law. See Bobbs-Merrill Co. v. Straus, 210 U. S. 339 (1908) ; Copyright Act of
A relevant canon of statutory interpretation favors a nongeographical reading.
“[W]hen a statute covers an is- sue previously governed by the common law,” we must
pre- sume that “Congress intended to retain the substance of the common law.”
Samantar v. Yousuf, 560 U. S. ___, ___, n. 13 (2010) (slip op., at 14, n. 13). See also
Isbrandtsen Co. v. Johnson, 343 U. S. 779, 783 (1952) (“Statutes which invade the
common law . . . are to be read with a presumption favoring the retention of long-
established and familiar principles, except when a statu- tory purpose to the contrary is
evident”).
The “first sale” doctrine is a common-law doctrine with an impeccable historic
pedigree. In the early 17th century Lord Coke explained the common law’s refusal to
permit restraints on the alienation of chattels. Referring to Littleton, who wrote in the
15th century, Gray, Two Contributions to Coke Studies, 72 U. Chi. L. Rev. 1127, 1135
(2005), Lord Coke wrote:
“[If] a man be possessed of . . . a horse, or of any other chattell . . . and give or sell his
whole interest . . . therein upon condition that the Donee or Vendee shall not alien[ate]
the same, the [condition] is voi[d], because his whole interest . . . is out of him, so as he
hath no possibilit[y] of a Reverter, and it is against Trade and Traffi[c], and bargaining
and contracting betwee[n] man and man: and it is within the reason of our Author that
it should ouster him of all power given to him.” 1 E. Coke, Institutes of the Laws of
England §360, p. 223 (1628).
A law that permits a copyright holder to control the resale or other disposition of a
chattel once sold is simi- larly “against Trade and Traffi[c], and bargaining and con-
tracting.” Ibid.
With these last few words, Coke emphasizes the importance of leaving buyers of
goods free to compete with each other when reselling or otherwise disposing of those
goods. American law too has generally thought that competition, including freedom to
resell, can work to the advantage of the consumer. See, e.g., Leegin Creative Leather
Products, Inc. v. PSKS, Inc., 551 U. S. 877, 886 (2007) (restraints with “manifestly
anticompetitive effects” are per se illegal; others are subject to the rule of reason
(internal quotation marks omitted)); 1 P. Areeda & H. Hovenkamp, Antitrust Law ¶100,
p. 4 (3d ed. 2006) (“[T]he principal objective of antitrust policy is to maximize consumer
welfare by encouraging firms to behave competitively”).
The “first sale” doctrine also frees courts from the administrative burden of trying to
enforce restrictions upon difficult-to-trace, readily movable goods. And it avoids the
selective enforcement inherent in any such effort. Thus, it is not surprising that for at
least a century the “first sale” doctrine has played an important role in American
1909, §41, 35Stat. 1084. See also Copyright Law Revision, Further Discussions and
Comments on Preliminary Draft for Revised U. S. Copyright Law, 88th Cong., 2d Sess., pt.
4, p. 212 (Comm. Print 1964) (Irwin Karp of Authors’ League of America expressing
concern for “the very basic concept of copyright law that, once you’ve sold a copy
legally, you can’t restrict its resale”).
The common-law doctrine makes no geographical distinctions; nor can we find any in
Bobbs-Merrill (where this Court first applied the “first sale” doctrine) or in §109(a)’s
predecessor provision, which Congress enacted a year later. See supra, at 12. Rather, as
the Solicitor General acknowledges, “a straightforward application of Bobbs-Merrill”
would not preclude the “first sale” defense from applying to authorized copies made
overseas. Brief for United States 27. And we can find no language, context, purpose, or
history that would rebut a “straightforward application” of that doctrine here.
The dissent argues that another principle of statutory interpretation works against
our reading, and points out that elsewhere in the statute Congress used different words
to express something like the non-geographical reading we adopt. Post, at 8–9 (quoting
§602(a)(2) (prohibiting the importation of copies “the making of which either
constituted an infringement of copyright, or which would have constituted an
infringement of copyright if this title had been applicable” (emphasis deleted))). Hence,
Congress, the dissent believes, must have meant §109(a)’s different language to mean
something different (such as the dissent’s own geographical interpretation of §109(a)).
We are not aware, however, of any canon of interpretation that forbids interpreting
different words used in different parts of the same statute to mean roughly the same
thing. Regardless, were there such a canon, the dissent’s interpretation of §109(a)
would also violate it. That is because Congress elsewhere in the 1976 Act included the
words “manufactured in the United States or Canada,” 90Stat. 2588, which express just
about the same geographical thought that the dissent reads into §109(a)’s very different
language.
D phones, tablets, and personal computers” contain copyrightable software programs or
Associations of libraries, used-book dealers, technology companies, consumer-goods
retailers, and museums point to various ways in which a geographical interpretation
would fail to further basic constitutional copyright objectives, in particular “promot[ing]
the Progress of Science and useful Arts.” U. S. Const., Art. I, §8, cl. 8.
The American Library Association tells us that library collections contain at least 200
million books published abroad (presumably, many were first published in one of the
nearly 180 copyright-treaty nations and enjoy American copyright protection under 17
U. S. C. §104, see supra, at 10); that many others were first published in the United
States but printed abroad because of lower costs; and that a geographical interpretation
will likely require the li- braries to obtain permission (or at least create significant
uncertainty) before circulating or otherwise distributing these books. Brief for American
Library Association et al. as Amici Curiae 4, 15–20. Cf. id., at 16–20, 28 (discussing
limitations of potential defenses, including the fair use and archival exceptions, §§107–
108). See also Library and Book Trade Almanac 511 (D. Bogart ed., 55th ed. 2010)
(during 2000–2009 “a significant amount of book printing moved to foreign nations”).
How, the American Library Association asks, are the libraries to obtain permission to
distribute these millions of books? How can they find, say, the copyright owner of a
foreign book, perhaps written decades ago? They may not know the copyright holder’s
present address. Brief for American Library Association 15 (many books lack indication
of place of manufacture; “no practical way to learn where [a] book was printed”). And,
even where addresses can be found, the costs of finding them, contacting owners, and
negotiating may be high indeed. Are the libraries to stop circulating or distributing or
displaying the millions of books in their collections that were printed abroad?
Used-book dealers tell us that, from the time when Benjamin Franklin and Thomas
Jefferson built commercial and personal libraries of foreign books, American readers
have bought used books published and printed abroad. Brief for Powell’s Books Inc. et
al. as Amici Curiae 7 (citing M. Stern, Antiquarian Bookselling in the United States
(1985)). The dealers say that they have “operat[ed] . . . for centuries” under the
assumption that the “first sale” doctrine applies. Brief for Powell’s Books 7. But under a
geographical interpretation a contemporary tourist who buys, say, at Shakespeare and
Co. (in Paris), a dozen copies of a foreign book for American friends might find that she
had violated the copyright law. The used-book dealers cannot easily predict what the
foreign copyright holder may think about a reader’s effort to sell a used copy of a novel.
And they believe that a geographical interpretation will injure a large portion of the
used-book business.
Technology companies tell us that “automobiles, microwaves, calculators, mobile
packaging. Brief for Public Knowledge et al. as Amici Curiae 10. See also Brief for
Association of Service and Computer Dealers International, Inc., et al. as Amici Curiae 2.
Many of these items are made abroad with the American copyright holder’s permission
and then sold and imported (with that permission) to the United States. Brief for Retail
Litigation Center, Inc., et al. as Amici Curiae 4. A geographical interpretation would
prevent the resale of, say, a car, without the permission of the holder of each copyright
on each piece of copyrighted automobile software. Yet there is no reason to believe that
foreign auto manufacturers regularly obtain this kind of permission from their software
component suppliers, and Wiley did not indicate to the contrary when asked. See Tr. of
Oral Arg. 29–30. Without that permission a foreign car owner could not sell his or her
used car.
Retailers tell us that over $2.3 trillion worth of for- eign goods were imported in
2011. Brief for Retail Litigation Center 8. American retailers buy many of these goods
after a first sale abroad. Id., at 12. And, many of these items bear, carry, or contain
copyrighted “packaging, logos, labels, and product inserts and instructions for [the use
of] everyday packaged goods from floor cleaners and health and beauty products to
breakfast cereals.” Id., at 10–11. The retailers add that American sales of more
traditional copyrighted works, “such as books, recorded music, motion pictures, and
magazines” likely amount to over $220 billion. Id., at 9. See also id., at 10 (electronic
game industry is $16 billion). A geographical interpretation would subject many, if not
all, of them to the disruptive impact of the threat of infringement suits. Id., at 12.
Art museum directors ask us to consider their efforts to display foreign-produced
works by, say, Cy Twombly, René Magritte, Henri Matisse, Pablo Picasso, and others.
See supra, at 10 (describing how §104 often makes such works “subject to” American
copyright protection). A geographical interpretation, they say, would require the
museums to obtain permission from the copyright owners before they could display the
work, see supra, at 15—even if the copyright owner has already sold or donated the
work to a foreign museum. Brief for Association of Art Museum Directors et al. as Amici
Curiae 10–11. What are the museums to do, they ask, if the artist retained the
copyright, if the artist cannot be found, or if a group of heirs is arguing about who owns
which copyright? Id., at 14.
 These examples, and others previously mentioned, help explain why Lord Coke
considered the “first sale” doctrine necessary to protect “Trade and Traffi[c], and
bargaining and contracting,” and they help explain why American copyright law has long
applied that doctrine. Cf. supra, at 17–18.
Neither Wiley nor any of its many amici deny that a geographical interpretation could
bring about these “horribles”—at least in principle. Rather, Wiley essentially says that
the list is artificially invented. Brief for Respondent 51–52. It points out that a federal
court first adopted a geographical interpretation more than 30 years ago. CBS, Inc. v.
Scorpio Music Distributors, Inc., 569 F. Supp. 47, 49 (ED Pa. 1983), summarily aff’d, 738
F. 2d 424 (CA3 1984) (table). Yet, it adds, these problems have not occurred. Why not?
Because, says Wiley, the problems and threats are purely theoretical; they are unlikely
to reflect reality. See also post, at 30–31.
We are less sanguine. For one thing, the law has not been settled for long in Wiley’s
favor. The Second Circuit, in its decision below, is the first Court of Appeals to adopt a
purely geographical interpretation. The Third Circuit has favored a nongeographical
interpretation. Sebastian Int’l, 847 F. 2d 1093. The Ninth Circuit has favored a modified
geographical interpretation with a nongeographical (but textually unsustainable)
corollary designed to diminish the problem. Denbicare U. S. A., 84 F. 3d 1143. See supra,
at 11–12. And other courts have hesitated to adopt, and have cast doubt upon, the
validity of the geographical interpretation. Pearson Educ., Inc. v. Liu, 656 F. Supp. 2d 407
(SDNY 2009); Red-Baron Franklin Park, Inc. v. Taito Corp., No. 88–0156–A, 1988 WL
167344, *3 (ED Va. 1988), rev’d on other grounds, 883 F. 2d 275 (CA4 1989).
For another thing, reliance upon the “first sale” doctrine is deeply embedded in the
practices of those, such as book- sellers, libraries, museums, and retailers, who have
long relied upon its protection. Museums, for example, are not in the habit of asking
their foreign counterparts to check with the heirs of copyright owners before sending,
e.g., a Picasso on tour. Brief for Association of Art Mu- seum Directors 11–12. That
inertia means a dramatic change is likely necessary before these institutions, instructed
by their counsel, would begin to engage in the complex permission-verifying process
that a geographical interpretation would demand. And this Court’s adoption of the
geographical interpretation could provide that dramatic change. These intolerable
consequences (along with the absurd result that the copyright owner can ex- ercise
downstream control even when it authorized the import or first sale) have
understandably led the Ninth Circuit, the Solicitor General as amicus, and the dissent to
adopt textual readings of the statute that attempt to mitigate these harms. Brief for
United States 27–28; post, at 24–28. But those readings are not defensible, for they
require too many unprecedented jumps over linguistic and other hurdles that in our
view are insurmountable. See, e.g., post, at 26 (acknowledging that its reading of
§106(3) “significantly curtails the independent effect of §109(a)”).
Finally, the fact that harm has proved limited so far may simply reflect the reluctance
of copyright holders so far to assert geographically based resale rights. They may decide
differently if the law is clarified in their favor. Regardless, a copyright law that can work
in practice only if unenforced is not a sound copyright law. It is a law that would create
uncertainty, would bring about selective enforcement, and, if widely unenforced, would
breed disrespect for copyright law itself.
Thus, we believe that the practical problems that petitioner and his amici have
described are too serious, too extensive, and too likely to come about for us to dismiss
them as insignificant—particularly in light of the ever-growing importance of foreign
trade to America. See The World Bank, Imports of goods and services (% of GDP)
(imports in 2011 18% of U. S. gross domestic product compared to 11% in 1980), online
at http:// data.worldbank.org/indicator/NE.IMP.GNFS.ZS? (as visited Mar. 15, 2013, and
available in Clerk of Court’s case file). The upshot is that copyright-related consequences
along with language, context, and interpretive canons argue strongly against a
geographical interpretation of §109(a).
III
Wiley and the dissent make several additional impor- tant arguments in favor of the
geographical interpretation. First, they say that our Quality King decision strongly
supports its geographical interpretation. In that case we asked whether the Act’s
“importation provision,” now §602(a)(1) (then §602(a)), barred importation (without
permission) of a copyrighted item (labels affixed to hair care products) where an
American copyright owner authorized the first sale and export of hair care products with
copyrighted labels made in the United States, and where a buyer sought to import them
back into the United States without the copyright owner’s permission. 523 U. S., at 138–
139.
We held that the importation provision did not prohibit sending the products back
into the United States (without the copyright owner’s permission). That section says:
“Importation into the United States, without the authority of the owner of copyright
under this title, of copies or phonorecords of a work that have been acquired outside
the United States is an infringement of the exclusive right to distribute copies or phono-
records under section 106.” 17 U. S. C. §602(a)(1) (2006 ed., Supp. V) (emphasis added).
See also §602(a) (1994 ed.).
We pointed out that this section makes importation an infringement of the “exclusive
right to distribute . . . under 106.” We noted that §109(a)’s “first sale” doctrine limits the
scope of the §106 exclusive distribution right. We took as given the fact that the
products at issue had at least once been sold. And we held that consequently,
importation of the copyrighted labels does not violate §602(a)(1). 523 U. S., at 145.
In reaching this conclusion we endorsed Bobbs-Merrill and its statement that the
copyright laws were not “intended to create a right which would permit the holder of
the copyright to fasten, by notice in a book . . . a restriction upon the subsequent
alienation of the subject-matter of copyright after the owner had parted with the title to
one who had acquired full dominion over it.” 210 U. S., at 349–350.
We also explained why we rejected the claim that our interpretation would make
§602(a)(1) pointless. Those advancing that claim had pointed out that the 1976
Copyright Act amendments retained a prior anti-piracy provision, prohibiting the
importation of pirated copies. Qual- ity King, supra, at 146. Thus, they said, §602(a)(1)
must prohibit the importation of lawfully made copies, for to allow the importation of
those lawfully made copies after a first sale, as Quality King’s holding would do, would
leave §602(a)(1) without much to prohibit. It would become superfluous, without any
real work to do.
We do not believe that this argument is a strong one. Under Quality King’s
interpretation, §602(a)(1) would still forbid importing (without permission, and subject
to the exceptions in §602(a)(3)) copies lawfully made abroad, for example, where (1) a
foreign publisher operating as the licensee of an American publisher prints copies of a
book overseas but, prior to any authorized sale, seeks to send them to the United
States; (2) a foreign printer or other manufacturer (if not the “owner” for purposes of
§109(a), e.g., before an authorized sale) sought to send copyrighted goods to the United
States; (3) “a book publisher transports copies to a wholesaler” and the wholesaler (not
yet the owner) sends them to the United States, see Copyright Law Revision, pt. 4, at
211 (giving this example); or (4) a foreign film distributor, having leased films for distri-
bution, or any other licensee, consignee, or bailee sought to send them to the United
States. See, e.g., 2 Nimmer on Copyright §8.12[B][1][a], at 8–159 (“Section 109(a)
provides that the distribution right may be exercised solely with respect to the initial
disposition of copies of a work, not to prevent or restrict the resale or other further
transfer of possession of such copies”). These examples show that §602(a)(1) retains
significance. We concede it has less significance than the dissent believes appropriate,
but the dissent also adopts a construction of §106(3) that “significantly curtails”
§109(a)’s effect, post, at 26, and so limits the scope of that provision to a similar, or
even greater, degree.
In Quality King we rejected the “superfluous” argument for similar reasons. But,
when rejecting it, we said that, where an author gives exclusive American distribution
rights to an American publisher and exclusive British distribution rights to a British
publisher, “presumably only those [copies] made by the publisher of the United States
edition would be ‘lawfully made under this title’ within the meaning of §109(a).” 523
U. S., at 148 (emphasis added). Wiley now argues that this phrase in the Quality King
opinion means that books published abroad (under license) must fall outside the words
“lawfully made under this title” and that we have consequently already given those
words the geographical interpretation that it favors.
We cannot, however, give the Quality King statement the legal weight for which
Wiley argues. The language “lawfully made under this title” was not at issue in Qual- ity
King; the point before us now was not then fully argued; we did not canvas the
considerations we have here set forth; we there said nothing to suggest that the
example assumes a “first sale”; and we there hedged our state- ment with the word
“presumably.” Most importantly, the statement is pure dictum. It is dictum contained in
a rebuttal to a counterargument. And it is unnecessary dictum even in that respect. Is
the Court having once written dicta calling a tomato a vegetable bound to deny that it is
a fruit forever after?
To the contrary, we have written that we are not necessarily bound by dicta should
more complete argument demonstrate that the dicta is not correct. Central Va.
Community College v. Katz, 546 U. S. 356, 363 (2006) (“[W]e are not bound to follow our
dicta in a prior case in which the point now at issue was not fully debated”); Humphrey’s
Executor v. United States, 295 U. S. 602 –628 (1935) (rejecting, under stare decisis,
dicta, “which may be followed if sufficiently persuasive but which are not controlling”).
And, given the bit part that our Quality King statement played in our Quality King
decision, we believe the view of stare decisis set forth in these opinions applies to the
matter now before us.
Second, Wiley and the dissent argue (to those who consider legislative history) that
the Act’s legislative history supports their interpretation. But the historical events to
which it points took place more than a decade before the enactment of the Act and, at
best, are inconclusive.
During the 1960’s, representatives of book, record, and film industries, meeting with
the Register of Copyrights to discuss copyright revision, complained about the difficulty
of dividing international markets. Copyright Law Revision Discussion and Comments on
Report of the Register of Copyrights on the General Revision of the U. S. Copyright Law,
88th Cong., 1st Sess., pt. 2, p. 212 (Comm. Print 1963) (English editions of “particular”
books “fin[d]” their “way into this country”); id., at 213 (works “publi[shed] in a country
where there is no copyright protection of any sort” are put into “the free stream of
commerce” and “shipped to the United States”); ibid. (similar concern in respect to
films).
 The then-Register of Copyrights, Abraham Kaminstein, found these examples “very
troubl[ing].” Ibid. And the Copyright Office released a draft provision that it said “deals
with the matter of the importation for distribution in the United States of foreign copies
that were made under proper authority but that, if sold in the United States, would be
sold in contravention of the rights of the copyright owner who holds the exclusive right
to sell copies in the United States.” Id., pt. 4, at 203. That draft version, without
reference to §106, simply forbids unauthorized imports. It said:
“Importation into the United States of copies or records of a work for the purpose of
distribution to the public shall, if such articles are imported without the authority of the
owner of the exclusive right to distrib- ute copies or records under this title, constitute
an infringement of copyright actionable under section 35 [ 17 U. S. C. §501].” Id.,
Preliminary Draft for Revised U. S. Copyright Law and Discussions and Comments, 88th
Cong., 2d Sess., pt. 3, pp. 32–33 (Comm. Print 1964).
In discussing the draft, some of those present expressed concern about its effect on
the “first sale” doctrine. For example, Irwin Karp, representing the Authors League of
America asked, “If a German jobber lawfully buys cop- ies from a German publisher, are
we not running into the problem of restricting his transfer of his lawfully obtained
copies?” Id., pt. 4, at 211. The Copyright Office representative replied, “This could vary
from one situation to another, I guess. I should guess, for example, that if a book
publisher transports [i.e., does not sell] copies to a wholesaler [i.e., a nonowner], this is
not yet the kind of transaction that exhausts the right to control disposition.” Ibid.
(emphasis added).
The Office later withdrew the draft, replacing it with a draft, which, by explicitly
referring to §106, was similar to the provision that became law, now §602(a)(1). The
Office noted in a report that, under the new draft, importation of a copy (without
permission) “would violate the exclusive rights of the U. S. copyright owner . . . where
the copyright owner had authorized the making of copies in a foreign country for
distribution only in that country.” Id., pt. 6, at 150.
Still, that part of the report says nothing about the “first sale” doctrine, about
§109(a), or about the five words, “lawfully made under this title.” And neither the report
nor its accompanying 1960’s draft answers the question before us here. Cf. Quality King,
523 U. S., at 145 (without those five words, the import clause, via its reference to §106,
imports the “first sale” doctrine).
But to ascertain the best reading of §109(a), rather than dissecting the remarks of
industry representatives concerning §602 at congressional meetings held 10 years
before the statute was enacted, see post, at 13–16, we would give greater weight to the
congressional report accompanying §109(a), written a decade later when Congress
passed the new law. That report says:
“Section 109(a) restates and confirms the principle that, where the copyright owner
has transferred ownership of a particular copy or phonorecord of a work, the person to
whom the copy or phonorecord is transferred is entitled to dispose of it by sale, rental,
or any other means. Under this principle, which has been established by the court
decisions and . . . the present law, the copyright owner’s exclusive right of public
distribution would have no effect upon anyone who owns ‘a particular copy or
phonorecord lawfully made under this title’ and who wishes to transfer it to someone
else or to destroy it.
. . . . .
“To come within the scope of section 109(a), a copy or phonorecord must have been
‘lawfully made under this title,’ though not necessarily with the copyright owner’s
authorization. For example, any resale of an illegally ‘pirated’ phonorecord would be an
infringement but the disposition of a phonorecord legally made under the compulsory
licensing provisions of section 115 would not.” H. R. Rep. No. 94–1476, at 79 (emphasis
added).
Accord, S. Rep. No. 94–473, pp. 71–72 (1975).
This history reiterates the importance of the “first sale” doctrine. See, e.g., Copyright
Law Revision, 1964 Revision Bill with Discussions and Comments, 89th Cong., 1st Sess.,
pt. 5, p. 66 (Comm. Print 1965) (“[F]ull ownership of a lawfully-made copy authorizes its
owner to dispose of it freely”). It explains, as we have explained, the nongeographical
purposes of the words “lawfully made under this title.” Part II–B, supra. And it says
nothing about geography. Nor, importantly, did §109(a)’s predecessor provision. See
supra, at 12. This means that, contrary to the dissent’s suggestion, any lack of legislative
history pertaining to the “first sale” doctrine only tends to bolster our position that
Congress’ 1976 revision did not intend to create a drastic geographical change in its
revision to that provision. See post, at 18, n. 13. We consequently believe that the
legislative history, on balance, supports the non- geographical interpretation.
Third, Wiley and the dissent claim that a nongeographical interpretation will make it
difficult, perhaps impos- sible, for publishers (and other copyright holders) to divide
foreign and domestic markets. We concede that is so. A publisher may find it more
difficult to charge different prices for the same book in different geographic markets.
But we do not see how these facts help Wiley, for we can find no basic principle of
copyright law that suggests that publishers are especially entitled to such rights.
 The Constitution describes the nature of American copyright law by providing
Congress with the power to “secur[e]” to “[a]uthors” “for limited [t]imes” the “exclusive
[r]ight to their . . . [w]ritings.” Art. I, §8, cl. 8. The Founders, too, discussed the need to
grant an author a limited right to exclude competition. Compare Letter from Thomas
Jefferson to James Madison (July 31, 1788), in 13 Papers of Thomas Jefferson 440, 442–
443 (J. Boyd ed. 1956) (arguing against any monopoly) with Letter from James Madison
to Thomas Jefferson (Oct. 17, 1788), in 14 id., at 16, 21 (J. Boyd ed. 1958) (arguing for a
limited monopoly to secure production). But the Constitution’s language nowhere
suggests that its limited exclusive right should include a right to divide markets or a
concomitant right to charge different purchasers different prices for the same book, say
to increase or to maximize gain. Neither, to our knowledge, did any Founder make any
such suggestion. We have found no precedent suggesting a legal preference for
interpretations of copyright statutes that would provide for market divisions. Cf.
Copyright Law Revision, pt. 2, at 194 (statement of Barbara Ringer, Copyright Office)
(division of territorial markets was “primarily a matter of private contract”).
To the contrary, Congress enacted a copyright law that (through the “first sale”
doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation
is consistent with antitrust laws that ordinarily forbid market divisions. Cf. Palmer v. BRG
of Ga., Inc., 498 U. S. 46 –50 (1990) (per curiam) (“[A]greements between competitors
to allocate territories to minimize competition are illegal”). Whether copyright owners
should, or should not, have more than ordinary commercial power to divide
international markets is a matter for Congress to decide. We do no more here than try
to determine what decision Congress has taken.
Fourth, the dissent and Wiley contend that our decision launches United States
copyright law into an unprecedented regime of “international exhaustion.” Post, at 18–
23; Brief for Respondent 45–46. But they point to nothing indicative of congressional
intent in 1976. The dissent also claims that it is clear that the United States now opposes
adopting such a regime, but the Solicitor General as amicus has taken no such position
in this case. In fact, when pressed at oral argument, the Solicitor General stated that the
consequences of Wiley’s reading of the statute (perpetual downstream control) were
“worse” than those of Kirtsaeng’s reading (restriction of market segmentation). Tr. of
Oral Arg. 51. And the dissent’s reliance on the Solicitor General’s position in Quality King
is under- mined by his agreement in that case with our reading of §109(a). Brief for
United States as Amicus Curiae in Quality King, O. T. 1996, No. 1470, p. 30 (“When . . .
Congress wishes to make the location of manufacture relevant to Copyright Act
protection, it does so expressly”); ibid. (calling it “distinctly unlikely” that Congress
would have provided an incentive for overseas manufacturing).
Moreover, the exhaustion regime the dissent apparently favors would provide that
“the sale in one country of a good” does not “exhaus[t] the intellectual-property
owner’s right to control the distribution of that good elsewhere.” Post, at 18–19. But
our holding in Quality King that §109(a) is a defense in U. S. courts even when “the first
sale occurred abroad,” 523 U. S., at 145, n. 14, has already significantly eroded such a
principle.
IV
For these reasons we conclude that the considerations supporting Kirtsaeng’s
nongeographical interpretation of the words “lawfully made under this title” are the
more persuasive. The judgment of the Court of Appeals is reversed, and the case is
remanded for further proceedings consistent with this opinion.
It is so ordered.
SUPAP KIRTSAENG, dba BLUECHRISTINE99, PETITIONER v. JOHN WILEY & SONS, INC.
on writ of certiorari to the united states court of appeals for the second circuit
[March 19, 2013]
Justice Kagan, with whom Justice Alito joins, concurring.
I concur fully in the Court’s opinion. Neither the text nor the history of 17 U. S. C.
§109(a) supports removing first-sale protection from every copy of a protected work
manufactured abroad. See ante, at 8–16, 28–31. I recognize, however, that the
combination of today’s decision and Quality King Distributors, Inc. v. L’anza Research
Int’l, Inc., 523 U. S. 135 (1998) , constricts the scope of §602(a)(1)’s ban on unauthorized
importation. I write to suggest that any problems associated with that limitation come
not from our reading of §109(a) here, but from Qual- ity King’s holding that §109(a)
limits §602(a)(1).
As the Court explains, the first-sale doctrine has played an integral part in American
copyright law for over a century. See ante, at 17–19; Bobbs-Merrill Co. v. Straus, 210
U. S. 339 (1908) . No codification of the doctrine prior to 1976 even arguably limited its
application to copies made in the United States. See ante, at 12. And nothing in the text
or history of §109(a)—the Copyright Act of 1976’s first-sale provision—suggests that
Congress meant to enact the new, geographical restriction John Wiley proposes, which
at once would deprive American consumers of important rights and encourage
copyright holders to manufacture abroad. See ante, at 8–16, 28–31.
That said, John Wiley is right that the Court’s decision, when combined with Quality
King, substantially narrows §602(a)(1)’s ban on unauthorized importation. Quality King
held that the importation ban does not reach any copies receiving first-sale protection
under §109(a). See 523 U. S., at 151–152. So notwithstanding §602(a)(1), an “owner of a
particular copy . . . lawfully made under this title” can import that copy without the
copyright owner’s permission. §109(a). In now holding that copies “lawfully made under
this title” include copies manufactured abroad, we unavoidably diminish §602(a)(1)’s
scope—indeed, limit it to a fairly esoteric set of applications. See ante, at 26–27.
But if Congress views the shrinking of §602(a)(1) as a problem, it should recognize
Quality King—not our decision today—as the culprit. Here, after all, we merely construe
§109(a); Quality King is the decision holding that §109(a) limits §602(a)(1). Had we come
out the opposite way in that case, §602(a)(1) would allow a copyright owner to restrict
the importation of copies irrespective of the first-sale doctrine. [ 1 ] That result would
enable the copyright owner to divide international markets in the way John Wiley claims
Congress intended when enacting §602(a)(1). But it would do so without imposing
downstream liability on those who purchase and resell in the United States copies that
happen to have been manu- factured abroad. In other words, that outcome would tar-
get unauthorized importers alone, and not the “libraries, used-book dealers, technology
companies, consumer-goods retailers, and museums” with whom the Court today is
rightly concerned. Ante, at 19. Assuming Congress adopted §602(a)(1) to permit market
segmentation, I sus- pect that is how Congress thought the provision would work—not
by removing first-sale protection from every copy manufactured abroad (as John Wiley
urges us to do here), but by enabling the copyright holder to control imports even when
the first-sale doctrine applies (as Quality King now prevents). [ 2 ]
At bottom, John Wiley (together with the dissent) asks us to misconstrue §109(a) in
order to restore §602(a)(1) to its purportedly rightful function of enabling copyright
holders to segment international markets. I think John Wiley may have a point about
what §602(a)(1) was designed to do; that gives me pause about Quality King’s holding
that the first-sale doctrine limits the importation ban’s scope. But the Court today
correctly declines the invitation to save §602(a)(1) from Quality King by destroying the
first-sale protection that §109(a) gives to every owner of a copy manufactured abroad.
That would swap one (possible) mistake for a much worse one, and make our reading of
the statute only less reflective of Congressional intent. If Congress thinks copyright
owners need greater power to restrict importation and thus divide markets, a ready
solution is at hand—not the one John Wiley offers in this case, but the one the Court
rejected in Quality King.
SUPAP KIRTSAENG, dba BLUECHRISTINE99, PETITIONER v. JOHN WILEY & SONS, INC.
on writ of certiorari to the united states court of appeals for the second circuit
[March 19, 2013]
Justice Ginsburg, with whom Justice Kennedy joins, and with whom Justice Scalia
joins except as to Parts III and V–B–1, dissenting.
“In the interpretation of statutes, the function of the courts is easily stated. It is to
construe the language so as to give effect to the intent of Congress.” United States v.
American Trucking Assns., Inc., 310 U. S. 534, 542 (1940) . Instead of adhering to the
Legislature’s design, the Court today adopts an interpretation of the Copyright Act at
odds with Congress’ aim to protect copyright owners against the unauthorized
importation of low-priced, foreign-made copies of their copyrighted works. The Court’s
bold departure from Congress’ design is all the more stunning, for it places the United
States at the vanguard of the movement for “international exhaustion” of copyrights—a
movement the United States has steadfastly resisted on the world stage.
To justify a holding that shrinks to insignificance copyright protection against the
unauthorized importation of foreign-made copies, the Court identifies several “practical
problems.” Ante, at 24. The Court’s parade of horribles, however, is largely imaginary.
Congress’ objective in enacting 17 U. S. C. §602(a)(1)’s importation prohibition can be
honored without generating the absurd consequences hypothesized in the Court’s
opinion. I dissent from the Court’s embrace of “international exhaustion,” and would
affirm the sound judgment of the Court of Appeals.
I
Because economic conditions and demand for particular goods vary across the globe,
copyright owners have a financial incentive to charge different prices for copies of their
works in different geographic regions. Their ability to engage in such price
discrimination, however, is under- mined if arbitrageurs are permitted to import copies
from low-price regions and sell them in high-price regions. The question in this case is
whether the unauthorized importation of foreign-made copies constitutes copyright
infringement under U. S. law.
To answer this question, one must examine three provisions of Title 17 of the U. S.
Code: §§106(3), 109(a), and 602(a)(1). Section 106 sets forth the “exclusive rights” of a
copyright owner, including the right “to distribute copies or phonorecords of the
copyrighted work to the public by sale or other transfer of ownership, or by rental,
lease, or lending.” §106(3). This distribution right is limited by §109(a), which provides:
“Notwithstanding the provisions of section 106(3), the owner of a particular copy or
phono- record lawfully made under this title . . . is entitled, without the authority of the
copyright owner, to sell or otherwise dispose of the possession of that copy or
phonorecord.” Section 109(a) codifies the “first sale doctrine,” a doctrine articulated in
Bobbs-Merrill Co. v. Straus, 210 U. S. 339 –351 (1908), which held that a copyright
owner could not control the price at which retailers sold lawfully purchased copies of its
work. The first sale doctrine recognizes that a copyright owner should not be permitted
to exercise perpetual control over the distribution of copies of a copyrighted work. At
some point—ordinarily the time of the first commercial sale—the copyright owner’s
exclusive right under §106(3) to control the distribution of a particular copy is
exhausted, and from that point forward, the copy can be resold or otherwise
redistributed without the copyright owner’s authorization.
Section 602(a)(1) (2006 ed., Supp. V) [ 1 ] —last, but most critical, of the three
copyright provisions bearing on this case—is an importation ban. It reads:
“Importation into the United States, without the authority of the owner of copyright
under this title, of copies or phonorecords of a work that have been acquired outside
the United States is an infringe- ment of the exclusive right to distribute copies or
phonorecords under section 106, actionable under section 501.”
In Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135 –154
(1998), the Court held that a copyright owner’s right to control importation under
§602(a)(1) is a component of the distribution right set forth in §106(3) and is therefore
subject to §109(a)’s codification of the first sale doctrine. Quality King thus held that the
importation of copies made in the United States but sold abroad did not rank as
copyright infringement under §602(a)(1). Id., at 143–154. See also id., at 154 (Ginsburg,
J., concurring) (Quality King “involve[d] a ‘round trip’ journey, travel of the copies in
question from the United States to places abroad, then back again”). [ 2 ] Important to
the Court’s holding, the copies at issue in Quality King had been “ ‘lawfully made under
[Title 17]’ ”—a prerequisite for application of §109(a). Id., at 143, n. 9 (quoting §109(a)).
Section 602(a)(1), the Court noted, would apply to “copies that were ‘lawfully made’ not
under the United States Copyright Act, but instead, under the law of some other
country.” Id., at 147. Drawing on an example discussed during a 1964 public meeting on
proposed revisions to the U. S. copyright laws, [ 3 ] the Court stated:
“If the author of [a] work gave the exclusive United States distribution rights—
enforceable under the Act—to the publisher of the United States edition and the
exclusive British distribution rights to the publisher of the British edition, . . . presumably
only those [copies] made by the publisher of the United States edition would be
‘lawfully made under this title’ within the meaning of §109(a). The first sale doctrine
would not provide the publisher of the British edition who decided to sell in the
American market with a defense to an action under §602(a) (or, for that matter, to an
action under §106(3), if there was a distribution of the copies).” Id., at 148.
As the District Court and the Court of Appeals concluded, see 654 F. 3d 210, 221–222
(CA2 2011); App. to Pet. for Cert. 70a–73a, application of the Quality King analysis to the
facts of this case would preclude any invocation of §109(a). Petitioner Supap Kirtsaeng
imported and then sold at a profit over 600 copies of copyrighted textbooks printed
outside the United States by the Asian subsidiary of respondent John Wiley & Sons, Inc.
(Wiley). App. 29–34. See also ante, at 3–5 (opinion of the Court). In the words the Court
used in Quality King, these copies “were ‘lawfully made’ not under the United States
Copyright Act, but instead, under the law of some other country.” 523 U. S., at 147.
Section 109(a) therefore does not ap- ply, and Kirtsaeng’s unauthorized importation
constitutes copyright infringement under §602(a)(1).
The Court does not deny that under the language I have quoted from Quality King,
Wiley would prevail. Ante, at 27. Nevertheless, the Court dismisses this language, to
which all Members of the Quality King Court subscribed, as ill-considered dictum. Ante,
at 27–28. I agree that the discussion was dictum in the sense that it was not essential to
the Court’s judgment. See Quality King, 523 U. S., at 154 (Ginsburg, J., concurring)
(“[W]e do not today resolve cases in which the allegedly infringing imports were
manufactured abroad.”). But I disagree with the Court’s conclusion that this dictum was
ill considered. Instead, for the reasons explained below, I would hold, consistently with
Quality King’s dictum, that §602(a)(1) authorizes a copyright owner to bar the
importation of a copy manufactured abroad for sale abroad.
II
The text of the Copyright Act demonstrates that Congress intended to provide
copyright owners with a potent remedy against the importation of foreign-made copies
of their copyrighted works. As the Court recognizes, ante, at 3, this case turns on the
meaning of the phrase “lawfully made under this title” in §109(a). In my view, that
phrase is most sensibly read as referring to instances in which a copy’s creation is
governed by, and conducted in compliance with, Title 17 of the U. S. Code. This reading
is consistent with the Court’s interpretation of similar language in other statutes. See
Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc., 554 U. S. 33 –53 (2008) (“under” in
11 U. S. C. §1146(a), a Bankruptcy Code provision exempting certain asset transfers from
stamp taxes, means “pursuant to”); Ardestani v. INS, 502 U. S. 129, 135 (1991) (the
phrase “under section 554” in the Equal Access to Justice Act means “subject to” or
“governed by” 5 U. S. C. §554 (internal quotation marks omitted)). It also accords with
dictionary definitions of the word “under.” See, e.g., American Heritage Dictionary 1887
(5th ed. 2011) (“under” means, among other things, “[s]ubject to the authority, rule, or
control of”).
 Section 109(a), properly read, affords Kirtsaeng no defense against Wiley’s claim of
copyright infringement. The Copyright Act, it has been observed time and again, does
not apply extraterritorially. See United Dictionary Co. v. G. & C. Merriam Co., 208 U. S.
260, 264 (1908) (copyright statute requiring that U. S. copyright notices be placed in all
copies of a work did not apply to copies published abroad because U. S. copyright laws
have no “force” beyond the United States’ borders); 4 M. Nimmer & D. Nimmer,
Copyright §17.02, p. 17–18 (2012) (hereinafter Nimmer) (“[C]opyright laws do not have
any extraterritorial operation.”); 4 W. Patry, Copyright §13:22, p. 13–66 (2012)
(hereinafter Patry) (“Copyright laws are rigor- ously territorial.”). The printing of Wiley’s
foreign-manufactured textbooks therefore was not governed by Title 17. The textbooks
thus were not “lawfully made under [Title 17],” the crucial precondition for application
of §109(a). And if §109(a) does not apply, there is no dispute that Kirtsaeng’s conduct
constituted copyright infringement under §602(a)(1).
The Court’s point of departure is similar to mine. According to the Court, the phrase
“ ‘lawfully made under this title’ means made ‘in accordance with’ or ‘in compliance
with’ the Copyright Act.” Ante, at 8. But the Court overlooks that, according to the very
dictionaries it cites, ante, at 9, the word “under” commonly signals a relationship of
subjection, where one thing is governed or regu- lated by another. See Black’s Law
Dictionary 1525 (6th ed. 1990) (“under” “frequently” means “inferior” or “subordinate”
(internal quotation marks omitted)); 18 Oxford English Dictionary 950 (2d ed. 1989)
(“under” means, among other things, “[i]n accordance with (some regulative power or
principle)” (emphasis added)). See also Webster’s Third New International Dictionary
2487 (1961) (“under” means, among other things, “in . . . a condition of sub- jection,
regulation, or subordination” and “suffering restriction, restraint, or control by”). Only
by disregarding this established meaning of “under” can the Court arrive at the
conclusion that Wiley’s foreign-manufactured textbooks were “lawfully made under”
U. S. copyright law, even though that law did not govern their creation. It is anomalous,
however, to speak of particular conduct as “lawful” under an inapplicable law. For
example, one might say that driving on the right side of the road in England is “lawful”
under U. S. law, but that would be so only because U. S. law has nothing to say about
the subject. The governing law is English law, and English law demands that driving be
done on the left side of the road. [ 4 ]
The logical implication of the Court’s definition of the word “under” is that any copy
manufactured abroad—even a piratical one made without the copyright owner’s
authorization and in violation of the law of the country where it was created—would fall
within the scope of §109(a). Any such copy would have been made “in accordance with”
or “in compliance with” the U. S. Copyright Act, in the sense that manufacturing the
copy did not violate the Act (because the Act does not apply extraterritorially).
The Court rightly refuses to accept such an absurd conclusion. Instead, it interprets
§109(a) as applying only to copies whose making actually complied with Title 17, or
would have complied with Title 17 had Title 17 been applicable (i.e., had the copies
been made in the United States). See ante, at 8 (“§109(a)’s ‘first sale’ doctrine would
apply to copyrighted works as long as their manufacture met the requirements of
American copyright law.”). Congress, however, used express language when it called for
such a counterfactual inquiry in 17 U. S. C. §§602(a)(2) and (b). See §602(a)(2)
(“Importation into the United States or exportation from the United States, without the
authority of the owner of copyright under this title, of copies or phonorecords, the
making of which either constituted an infringement of copyright, or which would have
constituted an infringement of copyright if this title had been applicable, is an
infringement of the exclusive right to distribute copies or phonorecords under section
106.” (emphasis added)); §602(b) (“In a case where the making of the copies or
phonorecords would have constituted an infringement of copyright if this title had been
applicable, their importation is prohibited.” (emphasis added)). Had Congress intended
courts to engage in a similarly hypothetical inquiry under §109(a), Congress would pre-
sumably have included similar language in that section. See Russello v. United States,
464 U. S. 16, 23 (1983) (“ ‘[W]here Congress includes particular language in one section
of a statute but omits it in another section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate inclusion or exclusion.’ ”
(quoting United States v. Wong Kim Bo, 472 F. 2d 720, 722 (CA5 1972) (per curiam);
brackets in original)). [ 5 ]
Not only does the Court adopt an unnatural construction of the §109(a) phrase
“lawfully made under this title.” Concomitantly, the Court reduces §602(a)(1) to
insignificance. As the Court appears to acknowledge, see ante, at 26, the only
independent effect §602(a)(1) has under today’s decision is to prohibit unauthorized
importations carried out by persons who merely have possession of, but do not own,
the imported copies. See 17 U. S. C. §109(a) (§109(a) applies to any “owner of a
particular copy or phonorecord lawfully made under this title” (emphasis added)). [ 6 ] If
this is enough to avoid rendering §602(a)(1) entirely “superfluous,” ante, at 26, it hardly
suffices to give the owner’s importation right the scope Congress intended it to have.
Congress used broad language in §602(a)(1); it did so to achieve a broad objective. Had
Congress intended simply to provide a copyright remedy against larcenous lessees,
licensees, consignees, and bailees of films and other copyright-protected goods, see
ante, at 13–14, 26, it likely would have used language tailored to that narrow purpose.
See 2 Nimmer §8.12[B][6][c], at 8–184.31, n. 432 (“It may be wondered whether . . .
potential causes of action [against licensees and the like] are more than theoretical.”).
See also ante, at 2 (Kagan, J., concurring) (the Court’s decision limits §602(a)(1) “to a
fairly esoteric set of applications”). [ 7 ]
 The Court’s decision also overwhelms 17 U. S. C. §602(a)(3)’s exceptions to ban, reasoning that enforcement of territorial restrictions was best left to contract law.
§602(a)(1)’s importation prohibition. 2 P. Goldstein, Copyright §7.6.1.2(a), p. 7:141 (3d Copyright Law Revision 126.
ed. 2012) (hereinafter Goldstein). [ 8 ] Those exceptions permit the importation of
copies without the copyright owner’s authorization for certain governmental, personal, Publishing-industry representatives argued strenuously against the position initially
schol- arly, educational, and religious purposes. 17 U. S. C. §602(a)(3). Copies imported taken by the Copyright Office. At a 1962 panel discussion on the Copyright Office’s
under these exceptions “will often be lawfully made gray market goods purchased report, for example, Horace Manges of the American Book Publishers Council stated:
through normal market channels abroad.” 2 Goldstein §7.6.1.2(a), at 7:141. [ 9 ] But if,
“When a U. S. book publisher enters into a contract with a British publisher to acquire
as the Court holds, such copies can in any event be imported by virtue of §109(a),
exclusive U. S. rights for a particular book, he often finds that the English edition . . . of
§602(a)(3)’s work has already been done. For example, had Congress conceived of
that particular book finds its way into this country. Now it’s all right to say, ‘Commence
§109(a)’s sweep as the Court does, what earthly reason would there be to provide, as
a lawsuit for breach of contract.’ But this is expensive, burdensome, and, for the most
Congress did in §602(a)(3)(C), that a library may import “no more than five copies” of a
part, ineffective.” Copyright Law Revision Part 2: Discussion and Comments on Report of
non-audiovisual work for its “lending or archival purposes”?
the Register of Copyrights on the General Revision of the U. S. Copyright Law, 88th
The far more plausible reading of §§109(a) and 602(a), then, is that Congress Cong., 1st Sess., 212 (H. R. Judiciary Comm. Print 1963).
intended §109(a) to apply to copies made in the United States, not to copies
Sidney Diamond, representing London Records, elaborated on Manges’ statement.
manufactured and sold abroad. That reading of the first sale and importation provisions
“There are many situations,” he explained, “in which it is not necessarily a question of
leaves §602(a)(3)’s exceptions with real, meaningful work to do. See TRW Inc. v.
the inadequacy of a contract remedy—in the sense that it may be difficult or not quick
Andrews, 534 U. S. 19, 31 (2001) (“It is a cardinal principle of statutory construction that
enough to solve the particular problem.” Id., at 213. “Very frequently,” Diamond stated,
a statute ought, upon the whole, to be so construed that, if it can be prevented, no
publishers “run into a situation where . . . copies of [a] work . . . produced in a foreign
clause, sen- tence, or word shall be superfluous, void, or insignificant.” (internal
country . . . may be shipped [to the United States] without violating any contract of the
quotation marks omitted)). In the range of circum- stances covered by the exceptions,
U. S. copyright proprietor.” Ibid. To illustrate, Diamond noted, if a “British publisher
§602(a)(3) frees individuals and entities who purchase foreign-made copies abroad from
[sells a copy] to an individual who in turn ship[s] it over” to the United States, the
the requirement they would otherwise face under §602(a)(1) of obtaining the copyright
individual’s conduct would not “violate [any] contract between the British and the
owner’s permission to import the copies into the United States. [ 10 ]
American publisher.” Ibid. In such a case, “no possibility of any contract remedy” would
III exist. Ibid. The facts of Kirtsaeng’s case fit Diamond’s example, save that the copies at
issue here were printed and ini- tially sold in Asia rather than Great Britain.
The history of §602(a)(1) reinforces the conclusion I draw from the text of the
relevant provisions: §109(a) does not apply to copies manufactured abroad. Section After considering comments on its 1961 report, the Copyright Office “prepared a
602(a)(1) was enacted as part of the Copyright Act of 1976, 90Stat. 2589–2590. That Act preliminary draft of provisions for a new copyright statute.” Copyright Law Revision Part
was the product of a lengthy revision effort overseen by the U. S. Copyright Office. See 3: Preliminary Draft for Revised U. S. Copyright Law and Discussions and Comments on
Mills Music, Inc. v. Snyder, 469 U. S. 153 –160 (1985). In its initial 1961 report on the Draft, 88th Cong., 2d Sess., v (H. R. Judiciary Comm. Print 1964). Section 44 of the
recommended revisions, the Copyright Office noted that publishers had “suggested that draft statute addressed the concerns raised by publishing-industry representatives. In
the [then-existing] import ban on piratical copies should be extended to bar the particular, §44(a) provided:
importation of . . . foreign edition[s]” in violation of “agreements to divide international
“Importation into the United States of copies or records of a work for the purpose of
markets for copyrighted works.” Copyright Law Revision: Report of the Register of
distribution to the public shall, if such articles are imported without the authority of the
Copyrights on the General Revision of the U. S. Copyright Law, 87th Cong., 1st Sess., 126
owner of the exclusive right to distribute copies or records under this title, constitute an
(H. R. Judiciary Comm. Print 1961) (hereinafter Copyright Law Revision). See Copyright
infringement of copyright actionable under section 35 [i.e., the section providing for a
Act of 1947, §106, 61Stat. 663 (“The importation into the United States . . . of any
private cause of action for copyright infringement].” Id., at 32–33.
piratical copies of any work copyrighted in the United States . . . is prohibited.”). The
Copyright Office originally recommended against such an extension of the importation
 In a 1964 panel discussion regarding the draft statute, Abe Goldman, the Copyright
Office’s General Counsel, left no doubt about the meaning of §44(a). It represented, he
explained, a “shif[t]” from the Copyright Office’s 1961 report, which had recommended
against using copyright law to facilitate publishers’ efforts to segment interna- tional
markets. Copyright Law Revision Part 4: Further Discussions and Comments on
Preliminary Draft for Revised U. S. Copyright Law, 88th Cong., 2d Sess., 203 (H. R.
Judiciary Comm. Print 1964). Section 44(a), Goldman stated, would allow copyright
owners to bring infringement actions against importers of “foreign copies that were
made under proper authority.” Ibid. See also id., at 205–206 (Goldman agreed with a
speaker’s comment that §44(a) “enlarge[d]” U. S. copyright law by extending import
prohibitions “to works legally produced in Europe” and other foreign countries). [ 11 ]
The next step in the copyright revision process was the introduction in Congress of a
draft bill on July 20, 1964. See Copyright Law Revision Part 5: 1964 Revision Bill with
Discussions and Comments, 89th Cong., 1st Sess., iii (H. R. Judiciary Comm. Print 1965).
After another round of public comments, a revised bill was introduced on February 4,
1965. See Copyright Law Revision Part 6: Supplementary Report of the Register of
Copyrights on the General Revision of the U. S. Copyright Law: 1965 Revision Bill, 89th
Cong., 1st Sess., v (H. R. Judiciary Comm. Print 1965) (hereinafter Copyright Law Revision
Part 6). In language closely resembling the statutory text later enacted by Congress,
§602(a) of the 1965 bill provided:
“Importation into the United States, without the authority of the owner of copyright
under this title, of copies or phonorecords of a work for the purpose of distribution to
the public is an infringement of the exclusive right to distribute copies or phonorecords
under section 106, actionable under section 501.” Id., at 292. [ 12 ]
The Court implies that the 1965 bill’s “explici[t] refer[ence] to §106” showed a
marked departure from §44(a) of the Copyright Office’s prior draft. Ante, at 29. The
Copyright Office, however, did not see it that way. In its summary of the 1965 bill’s
provisions, the Copyright Office observed that §602(a) of the 1965 bill, like §44(a) of the
Copyright Office’s prior draft, see supra, at 15–16, permitted copyright owners to bring
infringement actions against unauthorized importers in cases “where the copyright
owner had authorized the making of [the imported] copies in a foreign country for
distribution only in that country.” Copyright Law Revision Part 6, at 149–150. See also
id., at xxvi (Under §602(a) of the 1965 bill, “[a]n unauthorized importer could be
enjoined and sued for damages both where the copies or phonorecords he was
importing were ‘piratical’ (that is, where their making would have constituted an
infringement if the U. S. copyright law could have been applied), and where their
making was ‘lawful.’ ”).
The current text of §602(a)(1) was finally enacted into law in 1976. See Copyright Act
of 1976, §602(a), 90Stat. 2589–2590. The House and Senate Committee Reports on the
1976 Act demonstrate that Congress understood, as did the Copyright Office, just what
that text meant. Both Reports state:
“Section 602 [deals] with two separate situations: importation of ‘piratical’ articles (that
is, copies or phonorecords made without any authorization of the copyright owner), and
unauthorized importation of copies or phonorecords that were lawfully made. The
general approach of section 602 is to make unauthorized importation an act of
infringement in both cases, but to permit the Bureau of Customs to prohibit importation
only of ‘piratical’ articles.” S. Rep. No. 94–473, p. 151 (1975) (emphasis added). See also
H. R. Rep. No. 94–1476, p. 169 (1976) (same).
In sum, the legislative history of the Copyright Act of 1976 is hardly “inconclusive.”
Ante, at 28. To the con- trary, it confirms what the plain text of the Act conveys:
Congress intended §602(a)(1) to provide copyright owners with a remedy against the
unauthorized importation of foreign-made copies of their works, even if those copies
were made and sold abroad with the copyright owner’s authorization. [ 13 ]
IV
Unlike the Court’s holding, my position is consistent with the stance the United States
has taken in international-trade negotiations. This case bears on the highly con- tentious
trade issue of interterritorial exhaustion. The issue arises because intellectual property
law is territorial in nature, see supra, at 6, which means that creators of intellectual
property “may hold a set of parallel” intellectual property rights under the laws of
different nations. Chiappetta, The Desirability of Agreeing to Disagree: The WTO, TRIPS,
International IPR Exhaustion and a Few Other Things, 21 Mich. J. Int’l L. 333, 340–341
(2000) (hereinafter Chiappetta). There is no international consensus on whether the sale
in one country of a good in- corporating protected intellectual property exhausts the
intellectual property owner’s right to control the distribution of that good elsewhere.
Indeed, the members of the World Trade Organization, “agreeing to disagree,” [ 14 ]
provided in Article 6 of the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS), Apr. 15, 1994, 33 I. L. M. 1197, 1200, that “nothing in this Agreement
shall be used to address the issue of . . . exhaustion.” See Chiappetta 346 (observing that
exhaustion of intellectual property rights was “hotly debated” during the TRIPS
negotiations and that Article 6 “reflects [the negotiators’] ultimate inability to agree” on
a single international standard). Similar language appears in other treaties to which the
United States is a party. See World Intellectual Property Organization (WIPO) Copyright
Treaty, Art. 6(2), Dec. 20, 1996, S. Treaty Doc. No. 105–17, p. 7 (“Nothing in this Treaty
shall affect the freedom of Contracting Parties to determine the conditions, if any, under
which the exhaustion of the right [to control distribution of copies of a copyrighted
work] applies after the first sale or other transfer of ownership of the original or a copy
of the work with the authorization of the author.”); WIPO Performances and
Phonograms Treaty, Art. 8(2), Dec. 20, 1996, S. Treaty Doc. No. 105–17, p. 28
(containing language nearly identical to Article 6(2) of the WIPO Copyright Treaty).
In the absence of agreement at the international level, each country has been left to
choose for itself the exhaustion framework it will follow. One option is a national-
exhaustion regime, under which a copyright owner’s right to control distribution of a
particular copy is exhausted only within the country in which the copy is sold. See
Forsyth & Rothnie, Parallel Imports, in The Interface Between Intellectual Property
Rights and Competition Policy 429, 430 (S. Anderman ed. 2007) (hereinafter Forsyth &
Rothnie). Another option is a rule of international exhaustion, under which the
authorized distribution of a particular copy anywhere in the world exhausts the
copyright owner’s distribution right everywhere with respect to that copy. See ibid. The
European Union has adopted the intermediate approach of regional exhaustion, under
which the sale of a copy anywhere within the European Economic Area exhausts the
copyright owner’s distribution right throughout that region. See id., at 430, 445. Section
602(a)(1), in my view, ties the United States to a national-exhaustion framework. The
Court’s decision, in con- trast, places the United States solidly in the international-
exhaustion camp.
Strong arguments have been made both in favor of, and in opposition to,
international exhaustion. See Chiappetta 360 (“[r]easonable people making valid points
can, and do, reach conflicting conclusions” regarding the desirability of international
exhaustion). International exhaustion subjects copyright-protected goods to
competition from lower priced imports and, to that extent, benefits con- sumers.
Correspondingly, copyright owners profit from a national-exhaustion regime, which also
enlarges the monetary incentive to create new copyrightable works. See Forsyth &
Rothnie 432–437 (surveying arguments for and against international exhaustion).
Weighing the competing policy concerns, our Government reached the conclusion
that widespread adoption of the international-exhaustion framework would be
inconsistent with the long-term economic interests of the United States. See Brief for
United States as Amicus Curiae in Quality King, O. T. 1997, No. 96–1470, pp. 22–26
(hereinafter Quality King Brief). [ 15 ] Accordingly, the United States has steadfastly
“taken the position in international trade negotiations that domestic copyright owners
should . . . have the right to prevent the unauthorized importation of copies of their
work sold abroad.” Id., at 22. The United States has “advanced this position in
multilateral trade negotiations,” including the negotiations on the TRIPS Agreement. Id.,
at 24. See also D. Gervais, The TRIPS Agreement: Drafting History and Analysis §2.63, p.
199 (3d ed. 2008). It has also taken a dim view of our trading partners’ adoption of
legislation incorporating elements of international exhaustion. See Clapperton &
Corones, Locking in Customers, Locking Out Competitors: Anti-Circumvention Laws in
Australia and Their Potential Effect on Competition in High Technology Markets, 30
Melbourne U. L. Rev. 657, 664 (2006) (United States expressed concern regarding
international-exhaustion leg- islation in Australia); Montén, Comment, The
Inconsistency Between Section 301 and TRIPS: Counterproductive With Respect to the
Future of International Protection of Intellectual Property Rights? 9 Marq. Intellectual
Property L. Rev. 387, 417–418 (2005) (same with respect to New Zealand and Taiwan).
Even if the text and history of the Copyright Act were am- biguous on the answer to
the question this case presents—which they are not, see Parts II–III, supra [ 16 ] —I
would resist a holding out of accord with the firm position the United States has taken
on exhaustion in international negotiations. Quality King, I acknowledge, discounted the
Government’s concerns about potential inconsistency with United States obligations
under certain bilateral trade agreements. See 523 U. S., at 153–154. See also Quality
King Brief 22–24 (listing the agreements). That decision, however, dealt only with
copyright-protected products made in the United States. See 523 U. S., at 154 (Ginsburg,
J., concurring). Quality King left open the question whether owners of U. S. copyrights
could retain control over the importation of copies manufactured and sold abroad—a
point the Court obscures, see ante, at 33 (arguing that Quality King “significantly
eroded” the national-exhaustion principle that, in my view, §602(a)(1) embraces). The
Court today answers that question with a resounding “no,” and in doing so, it risks
undermining the United States’ credibility on the world stage. While the Government
has urged our trading partners to refrain from adopting international-exhaustion
regimes that could benefit consumers within their borders but would impact adversely
on intellectual-property producers in the United States, the Court embraces an
international-exhaustion rule that could benefit U. S. consumers but would likely
disadvantage foreign holders of U. S. copyrights. This dissonance scarcely enhances the
United States’ “role as a trusted partner in multilateral endeavors.” Vimar Seguros y
Reaseguros, S. A. v. M/V Sky Reefer, 515 U. S. 528, 539 (1995) .
V
I turn now to the Court’s justifications for a decision difficult to reconcile with the
Copyright Act’s text and history.
A
The Court asserts that its holding “is consistent with antitrust laws that ordinarily
forbid market divisions.” Ante, at 32. See also ante, at 18 (again referring to antitrust
principles). Section 602(a)(1), however, read as I do and as the Government does, simply
facilitates copyright owners’ efforts to impose “vertical restraints” on distributors of
copies of their works. See Forsyth & Rothnie 435 (“Parallel importation restrictions
enable manufacturers and distributors to erect ‘vertical restraints’ in the market
through exclusive distribution agreements.”). See gener- ally Leegin Creative Leather
Products, Inc. v. PSKS, Inc., 551 U. S. 877 (2007) (discussing vertical restraints). We have
held that vertical restraints are not per se illegal under §1 of the Sherman Act, 15 U. S. C.
§1, because such “restraints can have procompetitive effects.” 551 U. S., at 881–882.
[ 17 ]
B that the question before the Court was “purely [one] of statutory construction”). [ 19 ]
The Court sees many “horribles” following from a holding that the §109(a) phrase
“lawfully made under this title” does not encompass foreign-made copies. Ante, at 22
(internal quotation marks omitted). If §109(a) excluded foreign-made copies, the Court
fears, then copyright owners could exercise perpetual control over the downstream
distribution or public display of such copies. A ruling in Wiley’s favor, the Court asserts,
would shutter libraries, put used-book dealers out of business, cripple art museums, and
prevent the resale of a wide range of consumer goods, from cars to calculators. Ante, at
19–22. See also ante, at 2–3 (Kagan, J., concurring) (expressing concern about “imposing
downstream liability on those who purchase and resell in the United States copies that
happen to have been manufactured abroad”). Copyright law and precedent, however,
erect barriers to the anticipated horribles. [ 18 ]
1 effect of §109(a). If, as I maintain, the term “distribute” in §106(3) incorporates the first
Recognizing that foreign-made copies fall outside the ambit of §109(a) would not
mean they are forever free of the first sale doctrine. As earlier observed, see supra, at 2,
the Court stated that doctrine initially in its 1908 Bobbs-Merrill decision. At that time,
no statutory provision expressly codified the first sale doctrine. Instead, copyright law
merely provided that copyright owners had “the sole liberty of printing, reprinting,
publishing, completing, copying, executing, finishing, and vending” their works.
Copyright Act of 1891, §1, 26Stat. 1107.
In Bobbs-Merrill, the Court addressed the scope of the statutory right to “ven[d].” In
granting that right, the Court held, Congress did not intend to permit copyright owners
“to fasten . . . a restriction upon the subsequent alienation of the subject-matter of
copyright after the owner had parted with the title to one who had acquired full
dominion over it and had given a satisfactory price for it.” 210 U. S., at 349–350. “[O]ne
who has sold a copyrighted article . . . without restriction,” the Court explained, “has
parted with all right to control the sale of it.” Id., at 350. Thus, “[t]he purchaser of a
book, once sold by authority of the owner of the copyright, may sell it again, although
he could not publish a new edition of it.” Ibid.
Under the logic of Bobbs-Merrill, the sale of a foreign-manufactured copy in the
United States carried out with the copyright owner’s authorization would exhaust the
copyright owner’s right to “vend” that copy. The copy could thenceforth be resold, lent
out, or otherwise redistributed without further authorization from the copyright owner.
Although §106(3) uses the word “distribute” rather than “vend,” there is no reason to
think Congress intended the word “distribute” to bear a meaning different from the
construction the Court gave to the word “vend” in Bobbs-Merrill. See ibid. (emphasizing
Thus, in accord with Bobbs-Merrill, the first authorized distribution of a foreign-made
copy in the United States exhausts the copyright owner’s distribution right under
§106(3). After such an authorized distribution, a library may lend, or a used-book dealer
may resell, the foreign-made copy without seeking the copyright owner’s permission. Cf.
ante, at 19–21.
For example, if Wiley, rather than Kirtsaeng, had imported into the United States and
then sold the foreign-made textbooks at issue in this case, Wiley’s §106(3) distribution
right would have been exhausted under the rationale of Bobbs-Merrill. Purchasers of
the textbooks would thus be free to dispose of the books as they wished without first
gaining a license from Wiley.
This line of reasoning, it must be acknowledged, significantly curtails the independent
sale doctrine by virtue of Bobbs-Merrill, then §109(a)’s codification of that doctrine adds
little to the regulatory regime. [ 20 ] Section 109(a), however, does serve as a statutory
bulwark against courts deviating from Bobbs-Merrill in a way that increases copyright
owners’ control over downstream distribution, and legislative history indicates that is
precisely the role Congress intended §109(a) to play. Congress first codified the first sale
doctrine in §41 of the Copyright Act of 1909, 35Stat. 1084. [ 21 ] It did so, the House
Committee Report on the 1909 Act explains, “in order to make . . . clear that [Congress
had] no intention [of] enlarg[ing] in any way the construction to be given to the word
‘vend.’ ” H. R. Rep. No. 2222, 60th Cong., 2d Sess., 19 (1909). According to the
Committee Report, §41 was “not intended to change [existing law] in any way.” Ibid.
The position I have stated and explained accords with this expression of congressional
intent. In enacting §41 and its successors, I would hold, Congress did not “change . . .
existing law,” ibid., by stripping the word “vend” (and thus its substitute “distribute”) of
the limiting construction imposed in Bobbs-Merrill.
In any event, the reading of the Copyright Act to which I subscribe honors Congress’
aim in enacting §109(a) while the Court’s reading of the Act severely diminishes
§602(a)(1)’s role. See supra, at 10–12. My position in no way tugs against the principle
underlying §109(a)—i.e., that certain conduct by the copyright owner exhausts the
owner’s §106(3) distribution right. The Court, in contrast, fails to give meaningful effect
to Congress’ manifest intent in §602(a)(1) to grant copyright owners the right to control
the importation of foreign-made copies of their works.
2 Most telling in this regard, no court, it appears, has been called upon to answer any
Other statutory prescriptions provide further protection against the absurd
consequences imagined by the Court. For example, §602(a)(3)(C) permits “an
organization operated for scholarly, educational, or religious purposes” to import,
without the copyright owner’s authorization, up to five foreign-made copies of a non-
audiovisual work—notably, a book—for “library lending or archival purposes.” But cf.
ante, at 19–20 (suggesting that affirming the Second Circuit’s decision might prevent
libraries from lending foreign-made books). [ 22 ]
The Court also notes that amici representing art museums fear that a ruling in Wiley’s
favor would prevent museums from displaying works of art created abroad. Ante, at 22
(citing Brief for Association of Art Museum Directors et al.). These amici observe that a
museum’s right to display works of art often depends on 17 U. S. C. §109(c). See Brief
for Association of Art Museum Directors et al. 11–13. [ 23 ] That provision addresses
exhaustion of a copyright owner’s exclusive right under §106(5) to publicly display the
owner’s work. Because §109(c), like §109(a), applies only to copies “lawfully made
under this title,” amici contend that a ruling in Wiley’s favor would prevent museums
from invoking §109(c) with respect to foreign-made works of art. Id., at 11–13. [ 24 ]
Limiting §109(c) to U. S.-made works, however, does not bar art museums from
lawfully displaying works made in other countries. Museums can, of course, seek the
copyright owner’s permission to display a work. Furthermore, the sale of a work of art
to a U. S. museum may carry with it an implied license to publicly display the work. See 2
Patry §5:131, at 5–280 (“[C]ourts have noted the potential availability of an implied
nonexclusive licens[e] when the circumstances . . . demonstrate that the parties
intended that the work would be used for a specific purpose.”). Displaying a work of art
as part of a museum exhibition might also qualify as a “fair use” under 17 U. S. C. §107.
Cf. Bouchat v. Baltimore Ravens Ltd. Partnership, 619 F. 3d 301, 313–316 (CA4 2010)
(display of copyrighted logo in museum-like exhibition constituted “fair use”).
The Court worries about the resale of foreign-made consumer goods “contain[ing]
copyrightable software pro- grams or packaging.” Ante, at 21. For example, the Court
observes that a car might be programmed with diverse forms of software, the
copyrights to which might be owned by individuals or entities other than the manu-
facturer of the car. Ibid. Must a car owner, the Court asks, obtain permission from all of
these various copyright owners before reselling her car? Ibid. Although this question
strays far from the one presented in this case and briefed by the parties, principles of
fair use and implied license (to the extent that express licenses do not exist) would likely
permit the car to be resold without the copyright owners’ authorization. [ 25 ]
of the Court’s “horribles” in an actual case. Three decades have passed since a federal
court first published an opinion reading §109(a) as applicable exclusively to copies made
in the United States. See Columbia Broadcasting System, Inc. v. Scorpio Music
Distributors, Inc., 569 F. Supp. 47, 49 (ED Pa. 1983), summarily aff’d, 738 F. 2d 424 (CA3
1984) (table). Yet Kirtsaeng and his supporting amici cite not a single case in which the
owner of a consumer good authorized for sale in the United States has been sued for
copyright infringement after reselling the item or giving it away as a gift or to charity.
The absence of such lawsuits is unsurprising. Routinely suing one’s customers is hardly a
best business practice. [ 26 ] Manufacturers, moreover, may be hesitant to do business
with software programmers taken to suing consumers. Manufacturers may also insist
that soft- ware programmers agree to contract terms barring such lawsuits.
The Court provides a different explanation for the absence of the untoward
consequences predicted in its opinion—namely, that lower court decisions regarding the
scope of §109(a)’s first sale prescription have not been uniform. Ante, at 23. Uncertainty
generated by these conflicting decisions, the Court notes, may have deterred some
copyright owners from pressing infringement claims. Ante, at 23–24. But if, as the Court
suggests, there are a multitude of copyright owners champing at the bit to bring
lawsuits against libraries, art museums, and consumers in an effort to exercise perpetual
control over the downstream distribution and public display of foreign-made copies,
might one not expect that at least a handful of such lawsuits would have been filed over
the past 30 years? The absence of such suits indicates that the “practical problems”
hypothesized by the Court are greatly exaggerated. Ante, at 24. [ 27 ] They surely do not
warrant disregarding Congress’ intent, expressed in §602(a)(1), to grant copyright
owners the authority to bar the importation of foreign-made copies of their works. Cf.
Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U. S. 1, 6 (2000)
(“[W]hen the statute’s language is plain, the sole function of the courts—at least where
the disposition required by the text is not absurd—is to enforce it according to its
terms.” (internal quotation marks omitted)).
VI
To recapitulate, the objective of statutory interpretation is “to give effect to the
intent of Congress.” American Trucking Assns., 310 U. S., at 542. Here, two congres-
sional aims are evident. First, in enacting §602(a)(1), Con- gress intended to grant
copyright owners permission to segment international markets by barring the
importation of foreign-made copies into the United States. Second, as codification of
the first sale doctrine underscores, Congress did not want the exclusive distribution
right conferred in §106(3) to be boundless. Instead of harmonizing these objectives, the
Court subordinates the first entirely to the second. It is unsurprising that none of the
three major treatises on U. S. copyright law embrace the Court’s construction of
§109(a). See 2 Nimmer §8.12[B][6][c], at 8–184.34 to 8–184.35; 2 Goldstein §7.6.1.2(a),
at 7:141; 4 Patry §§13:22, 13:44, 13:44.10.

Rather than adopting the very international-exhaustion rule the United States has
consistently resisted in international-trade negotiations, I would adhere to the national-
exhaustion framework set by the Copyright Act’s text and history. Under that regime,
codified in §602(a)(1), Kirtsaeng’s unauthorized importation of the foreign-made
textbooks involved in this case infringed Wiley’s copyrights. I would therefore affirm the
Second Circuit’s judgment.
SUPREME COURT OF THE UNITED STATES
_________________
No. 15–375
_________________
SUPAP KIRTSAENG, DBA BLUECHRISTINE99, PETITIONER v. JOHN WILEY & SONS, INC.
on writ of certiorari to the united states court of appeals for the second circuit
[June 16, 2016]
Justice Kagan delivered the opinion of the Court.
Section 505 of the Copyright Act provides that a district court “may . . . award a
reasonable attorney’s fee to the prevailing party.” 17 U. S. C. §505. The question pre-
sented here is whether a court, in exercising that author-ity, should give substantial
weight to the objective reasonableness of the losing party’s position. The answer, as
both decisions below held, is yes—the court should. But the court must also give due
consideration to all other circumstances relevant to granting fees; and it retains
discretion, in light of those factors, to make an award even when the losing party
advanced a reasonable claim or defense. Because we are not certain that the lower
courts here understood the full scope of that discretion, we return the case for further
consideration of the prevailing party’s fee application.
I reasonableness of [Wiley’s] position” and committed no abuse of discretion in deciding
Petitioner Supap Kirtsaeng, a citizen of Thailand, came to the United States 20 years ago
to study math at Cornell University. He quickly figured out that respondent John Wiley &
Sons, an academic publishing company, sold virtually identical English-language
textbooks in the two countries—but for far less in Thailand than in the United States.
Seeing a ripe opportunity for arbitrage, Kirtsaeng asked family and friends to buy the
foreign editions in Thai bookstores and ship them to him in New York. He then resold
the textbooks to American students, reimbursed his Thai suppliers, and pocketed a tidy
profit.
Wiley sued Kirtsaeng for copyright infringement, claiming that his activities violated its
exclusive right to distribute the textbooks. See 17 U. S. C. §§106(3), 602(a)(1). Kirtsaeng
invoked the “first-sale doctrine” as a defense. That doctrine typically enables the lawful
owner of a book (or other work) to resell or otherwise dispose of it as he wishes. See
§109(a). But Wiley contended that the first-sale doctrine did not apply when a book (like
those Kirtsaeng sold) was manufactured abroad.
At the time, courts were in conflict on that issue. Some thought, as Kirtsaeng did, that
the first-sale doctrine permitted the resale of foreign-made books; others maintained,
along with Wiley, that it did not. And this Court, in its first pass at the issue, divided 4 to
4. See Costco Wholesale Corp. v. Omega, S. A., 562 U. S. 40 (2010) ( per curiam). In this
case, the District Court sided with Wiley; so too did a divided panel of the Court of
Appeals for the Second Circuit. See 654 F. 3d 210, 214, 222 (2011). To settle the
continuing conflict, this Court granted Kirtsaeng’s petition for certiorari and reversed
the Second Circuit in a 6-to-3 decision, thus establishing that the first-sale doctrine
allows the resale of foreign-made books, just as it does domestic ones.
See Kirtsaeng v. John Wiley & Sons, Inc., 568 U. S. ___, ___ (2013) (slip op., at 3).
Returning victorious to the District Court, Kirtsaeng invoked §505 to seek more than $2
million in attorney’s fees from Wiley. The court denied his motion. Relying on Second
Circuit precedent, the court gave “substantial weight” to the “objective reasonableness”
of Wiley’s infringement claim. See No. 08–cv–07834 (SDNY, Dec. 20, 2013), App. to Pet.
for Cert. 18a, 2013 WL 6722887, *4. In explanation of that approach, the court stated
that “the imposition of a fee award against a copyright holder with an objectively
reasonable”—although unsuccessful—“lit-igation position will generally not promote
the purposes of the Copyright Act.”Id., at 11a (quoting Matthew Bender & Co. v. West
Publishing Co., 240 F. 3d 116, 122 (CA2 2001) (emphasis deleted)). Here, Wiley’s
position was reasonable: After all, several Courts of Appeals and three Justices of the
Supreme Court had agreed with it. See App. to Pet. for Cert. 12a. And according to the
District Court, no other circumstance “overr[o]de” that objective reasonableness, so as
to warrant fee-shifting. Id., at 22a. The Court of Appeals affirmed, concluding in a brief
summary order that “the district court properly placed ‘substantial weight’ on the
that other “factors did not outweigh” the reasonableness finding. 605 Fed. Appx. 48, 49,
50 (CA2 2015).
We granted certiorari, 577 U. S. ___ (2016), to resolve disagreement in the lower courts
about how to address an application for attorney’s fees in a copyright case.[1]
II
Section 505 states that a district court “may . . . award a reasonable attorney’s fee to
the prevailing party.” It thus authorizes fee-shifting, but without specifying standards
that courts should adopt, or guideposts they should use, in determining when such
awards are appropriate.
In Fogerty v. Fantasy, Inc., 510 U. S. 517 (1994) , this Court recognized the broad leeway
§505 gives to district courts—but also established several principles and criteria to guide
their decisions. See id., at 519 (asking “what standards should inform” the exercise of
the trial court’s authority). The statutory language, we stated, “clearly connotes
discretion,” and eschews any “precise rule or formula” for awarding fees. Id., at 533,
534. Still, we established a pair of restrictions. First, a district court may not “award[ ]
attorney’s fees as a matter of course”; rather, a court must make a more particularized,
case-by-case assessment. Id., at 533. Second, a court may not treat prevailing plaintiffs
and prevailing defendants any differently; defendants should be “encouraged to litigate
[meritorious copyright defenses] to the same extent that plaintiffs are encouraged to
litigate meritorious claims of infringement.” Id., at 527. In addition, we noted with
approval “several nonexclusive factors” to inform a court’s fee-shifting decisions:
“frivolousness, motivation, objective unreasonableness[,] and the need in particular
circumstances to advance considerations of compensation and deterrence.” Id., at 534,
n. 19. And we left open the possibility of providing further guidance in the future, in
response to (and grounded on) lower courts’ evolving experience. See id., at 534–
535; Martin v. Franklin Capital Corp., 546 U. S. 132 , n. (2005) (noting that Fogerty was
not intended to be the end of the matter).
The parties here, though sharing some common ground, now dispute what else we
should say to district courts. Both Kirtsaeng and Wiley agree—as they must—that §505
grants courts wide latitude to award attorney’s fees based on the totality of
circumstances in a case. See Brief for Petitioner 17; Brief for Respondent 35. Yet both
reject the position, taken by some Courts of Appeals, see supra, at 3, n. 1,
that Fogerty spelled out the only appropriate limits on judicial discretion—in other
words, that each district court should otherwise proceed as it sees fit, assigning
whatever weight to whatever factors it chooses. Rather, Kirtsaeng and Wiley both call,
in almost identical language, for “[c]hanneling district court discretion towards the
purposes of the Copyright Act.” Brief for Petitioner 16; see Brief for Respondent 21
(“[A]n appellate court [should] channel a district court’s discretion so that it . . .
further[s] the goals of the Copyright Act”). (And indeed, as discussed later, both describe
those purposes identically. See infra, at 6.) But at that point, the two part ways. Wiley
argues that giving substantial weight to the reasonableness of a losing party’s position
will best serve the Act’s objectives. See Brief for Respondent 24–35. By contrast,
Kirtsaeng favors giving special consideration to whether a lawsuit resolved an important
and close legal issue and thus “meaningfully clarifie[d]” copyright law. Brief for
Petitioner 36; see id., at 41–44.
We join both parties in seeing a need for some additional guidance respecting the
application of §505. In addressing other open-ended fee-shifting statutes, this Court has
emphasized that “in a system of laws discretion is rarely without limits.” Flight
Attendants v. Zipes, 491 U. S. 754, 758 (1989) ; see Halo Electronics, Inc. v. Pulse
Electronics, Inc., ante, at 8. Without governing standards or principles, such provisions
threaten to condone judicial “whim” or predilection. Martin, 546 U. S., at 139; see
also ibid. (“[A] motion to [a court’s] discretion is a motion, not to its inclination, but to
its judgment; and its judgment is to be guided by sound legal principles” (quoting United
States v. Burr, 25 F. Cas. 30, 35 (No. 14,692d) (CC Va. 1807) (Marshall, C. J.))). At the
least, utterly freewheeling inquiries often deprive litigants of “the basic principle of
justice that like cases should be decided alike,” Martin, 546 U. S., at 139—as when, for
example, one judge thinks the parties’ “motivation[s]” determinative and another
believes the need for “compensation” trumps all else, Fogerty, 510 U. S., at 534, n. 19.
And so too, such unconstrained discretion prevents individuals from predicting how fee
decisions will turn out, and thus from making properly informed judgments about
whether to litigate. For those reasons, when applying fee-shifting laws with “no explicit
limit or condition,” Halo, ante, at 8, we have nonetheless “found limits” in them—and
we have done so, just as both parties urge, by looking to “the large objectives of the
relevant Act,” Zipes, 491 U. S., at 759 (internal quotation marks omitted); see supra, at
5.
In accord with such precedents, we must consider if either Wiley’s or Kirtsaeng’s
proposal well advances the Copyright Act’s goals. Those objectives are well settled.
As Fogerty explained, “copyright law ultimately serves the purpose of enriching the
general public through access to creative works.” 510 U. S., at 527; see U. S. Const.,
Art. I, §8, cl. 8 (“To promote the Progress of Science and useful Arts”). The statute
achieves that end by striking a balance between two subsidiary aims: encouraging and
rewarding authors’ creations while also enabling others to build on that work.
See Fogerty, 510 U. S., at 526. Accordingly, fee awards under §505 should encourage the
types of lawsuits that promote those purposes. (That is why, for
example, Fogertyinsisted on treating prevailing plaintiffs and prevailing defendants
alike—because the one could “further the policies of the Copyright Act every bit as
much as” the other. 510 U. S., at 527.) On that much, both parties agree. Brief for
Petitioner 37; Brief for Respondent 29–30. The contested issue is whether giving
substantial weight to the objective (un)reasonableness of a losing party’s litigating
position—or, alternatively, to a lawsuit’s role in settling significant and uncertain legal
issues—will predictably encourage such useful copyright litigation.
The objective-reasonableness approach that Wiley favors passes that test because it
both encourages parties with strong legal positions to stand on their rights and deters
those with weak ones from proceeding with litigation. When a litigant—whether
plaintiff or defendant—is clearly correct, the likelihood that he will recover fees from
the opposing (i.e., unreasonable) party gives him an incentive to litigate the case all the
way to the end. The holder of a copyright that has obviously been infringed has good
reason to bring and maintain a suit even if the damages at stake are small; and likewise,
a person defending against a patently meritless copyright claim has every incentive to
keep fighting, no matter that attorney’s fees in a pro-tracted suit might be as or more
costly than a settlement. Conversely, when a person (again, whether plaintiff or
defendant) has an unreasonable litigating position, the likelihood that he will have to
pay two sets of fees discourages legal action. The copyright holder with no reasonable
infringement claim has good reason not to bring suit in the first instance (knowing he
cannot force a settlement and will have to proceed to judgment); and the infringer with
no reasonable defense has every reason to give in quickly, before each side’s litigation
costs mount. All of those results promote the Copyright Act’s purposes, by enhancing
the probability that both creators and users (i.e., potential plaintiffs and defendants) will
enjoy the substantive rights the statute provides.
By contrast, Kirtsaeng’s proposal would not produce any sure benefits. We accept his
premise that litigation of close cases can help ensure that “the boundaries of copyright
law [are] demarcated as clearly as possible,” thus advancing the public interest in
creative work. Brief for Petitioner 19 (quoting Fogerty, 510 U. S., at 527). But we cannot
agree that fee-shifting will necessarily, or even usually, encourage parties to litigate
those cases to judgment. Fee awards are a double-edged sword: They increase the
reward for a victory—but also enhance the penalty for a defeat. And the hallmark of
hard cases is that no party can be confident if he will win or lose. That means Kirtsaeng’s
approach could just as easily discourage as encourage parties to pursue the kinds of
suits that “meaningfully clarif[y]” copyright law. Brief for Petitioner 36. It would (by
definition) raise the stakes of such suits; but whether those higher stakes would provide
an incentive—or instead a disincentive—to litigate hinges on a party’s attitude toward
risk. Is the person risk-preferring or risk-averse—a high-roller or a penny-ante type?
Only the former would litigate more in Kirtsaeng’s world. See Posner, An Economic
Approach to Legal Procedure and Judicial Administration, 2 J. Legal Studies 399, 428
(1973) (fees “make[ ] the expected value of litigation less for risk-averse litigants, which
will encourage [them to] settle[ ]”). And Kirtsaeng offers no reason to think that serious
gamblers predominate. See, e.g., Texas Industries, Inc. v. Radcliff Materials, Inc., 451
U. S. 630 , n. 8 (1981) (“Economists disagree over whether business decisionmakers[ ]
are ‘risk averse’ ”); CIGNA Corp. v. Amara, 563 U. S. 421, 430 (2011) (“[M]ost individuals
are risk averse”). So the value of his standard, unlike Wiley’s, is entirely speculative.[2]
What is more, Wiley’s approach is more administrable than Kirtsaeng’s. A district court
that has ruled on the merits of a copyright case can easily assess whether the losing
party advanced an unreasonable claim or defense. That is closely related to what the
court has already done: In deciding any case, a judge cannot help but consider the
strength and weakness of each side’s arguments. By contrast, a judge may not know at
the conclusion of a suit whether a newly decided issue will have, as Kirtsaeng thinks
critical, broad legal significance. The precedent-setting, law-clarifying value of a decision
may become apparent only in retrospect—sometimes, not until many years later. And
so too a decision’s practical impact (to the extent Kirtsaeng would have courts
separately consider that factor). District courts are not accustomed to evaluating in real
time either the jurisprudential or the on-the-ground import of their rulings. Exactly how
they would do so is uncertain (Kirtsaeng points to no other context in which courts
undertake such an analysis), but we fear that the inquiry would implicate our oft-stated
concern that an application for attorney’s fees “should not result in a second major
litigation.” Zipes, 491 U. S., at 766 (quoting Hensley v. Eckerhart, 461 U. S. 424, 437
(1983) ). And we suspect that even at the end of that post-lawsuit lawsuit, the results
would typically reflect little more than edu-cated guesses.
Contrary to Kirtsaeng’s view, placing substantial weight on objective reasonableness
also treats plaintiffs and defendants even-handedly, as Fogerty commands. No matter
which side wins a case, the court must assess whether the other side’s position was
(un)reasonable. And of course, both plaintiffs and defendants can (and sometimes do)
make unreasonable arguments. Kirtsaeng claims that the reasonableness inquiry
systematically favors plaintiffs because a losing defendant “will virtually always be
found to have done something culpable.” Brief for Petitioner 29 (emphasis in original).
But that conflates two different questions: whether a defendant in fact infringed a
copyright and whether he made serious arguments in defense of his conduct. Courts
every day see reasonable defenses that ultimately fail (just as they see reasonable
claims that come to nothing); in this context, as in any other, they are capable of
distinguishing between those defenses (or claims) and the objectively unreason-able
variety. And if some court confuses the issue of liability with that of reasonableness, its
fee award should be reversed for abuse of discretion.[3]
All of that said, objective reasonableness can be only an important factor in assessing
fee applications—not the controlling one. As we recognized in Fogerty, §505 con-fers
broad discretion on district courts and, in deciding whether to fee-shift, they must take
into account a range of considerations beyond the reasonableness of litigating positions.
See supra, at 4. That means in any given case a court may award fees even though the
losing party offered reasonable arguments (or, conversely, deny fees even though the
losing party made unreasonable ones). For example, a court may order fee-shifting
because of a party’s litigation misconduct, whatever the reasonableness of his claims or
defenses. See, e.g., Viva Video, Inc. v. Cabrera, 9 Fed. Appx. 77, 80 (CA2 2001). Or a
court may do so to deter repeated instances of copyright infringement or
overaggressive assertions of copyright claims, again even if the losing position was
reasonable in a particular case. See, e.g., Bridgeport Music, Inc. v. WB Music Corp., 520
F. 3d 588, 593–595 (CA6 2008) (awarding fees against a copyright holder who filed
hundreds of suits on an overbroad legal theory, including in a subset of cases in which it
was objectively reasonable). Although objective reasonableness carries significant
weight, courts must view all the circumstances of a case on their own terms, in light of
the Copyright Act’s essential goals.
And on that score, Kirtsaeng has raised serious questions about how fee-shifting actually
operates in the Second Circuit. To be sure, the Court of Appeals’ framing of the inquiry
resembles our own: It calls for a district court to give “substantial weight” to the
reasonableness of a losing party’s litigating positions while also considering other
relevant circumstances. See 605 Fed. Appx., at 49–50; Matthew Bender, 240 F. 3d, at
122. But the Court of Appeals’ language at times suggests that a finding of
reasonableness raises a presumption against granting fees, see ibid.; supra, at 2–3—and
that goes too far in cabining how a district court must structure its analysis and what it
may conclude from its review of relevant factors. Still more, district courts in the Second
Circuit appear to have overly learned the Court of Appeals’ lesson, turning “substantial”
into more nearly “dispositive” weight. As Kirtsaeng notes, hardly any decisions in that
Circuit have granted fees when the losing party raised a reasonable argument (and none
have denied fees when the losing party failed to do so). See Reply Brief 15. For these
reasons, we vacate the decision below so that the District Court can take another look at
Kirtsaeng’s fee application. In sending back the case for this purpose, we do not at all
intimate that the District Court should reach a different conclusion. Rather, we merely
ensure that the court will evaluate the motion consistent with the analysis we have set
out—giving substantial weight to the reasonableness of Wiley’s litigating position, but
also taking into account all other relevant factors.

* * *

The judgment of the Court of Appeals is vacated, and the case is remanded for further
proceedings consistent with this opinion.

It is so ordered.
BMW OF NORTH AMERICA, INC. v. GORE
CERTIORARI TO THE SUPREME COURT OF ALABAMA No. 94-896. Argued October 11,
1995-Decided May 20,1996
JUSTICE STEVENS delivered the opinion of the Court.
The Due Process Clause of the Fourteenth Amendment prohibits a State from imposing
a " 'grossly excessive'" punishment on a tortfeasor. TXO Production Corp. v. Alliance
Resources Corp., 509 U. S. 443, 454 (1993) (and cases cited). The wrongdoing involved in
this case was the decision by a national distributor of automobiles not to advise its
dealers, and hence their customers, of predelivery damage to new cars when the cost of
repair amounted to less than 3 percent of the car's suggested retail price. The question
presented
et al. by Irving H. Greines, Robin Meadow, Barbara W Ravitz, and Robert A. Olson; for
the Life Insurance Company of Georgia et al. by Theodore B. Olson, Larry L. Simms,
Theodore J. Boutrous, Jr., John K. Bush, Theodore J. Fischkin, and Marcus Bergh; for the
National Association of Manufacturers by Carter G. Phillips and Jan Amundson; for the
New England Council et al. by Stephen S. Ostrach; for Owens-Corning Fiberglas
Corporation by Charles Fried, Michael W Schwartz, and Karen I. Ward; for Owens-
Illinois, Inc., by Griffin B. Bell and David L. Gray; for Pharmaceutical Research and
Manufacturers of America by Andrew T. Berry; for the Product Liability Advisory Council,
Inc., et al. by Malcolm E. Wheeler; for the TIG Insurance Company by Ellis J. Horvitz,
Barry R. Levy, Frederic D. Cohen, and Mitchell C. Tilner; and for the Washington Legal
Foundation et al. by Arvin Maskin, Steven Alan Reiss, Katherine Oberlies,
Daniel J. Popeo, and Paul D. Kamenar.
Briefs of amici curiae urging affirmance were filed for the Alabama Trial Lawyers
Association by Russell J.Drake; for the Association of Trial Lawyers of America by Jeffrey
Robert White, Cheryl Flax-Davidson, and LarryS. Stewart; and for the National
Association of Securities and Commercial Law Attorneys by Kevin P. Roddy, James P.
Solimano, Steve W Berman, and Jonathan W Cuneo.
Briefs of amici curiae were filed for CBS, Inc., et al. by P. Cameron De Yore,
Marshall J. Nelson, Douglas P. Jacobs, Jonathan E. Thackeray, John C. Fontaine, Cristina
L. Mendoza, William A. Niese, Karlene Goller, Susan Weiner, Richard M. Schmidt, Jr., R.
Bruce Rich, Slade R. Metcalf, Jane E. Kirtley, Bruce W Sanford, and Henry S. Hoberman;
for Trial Lawyers for Public Justice, P. C., by Leslie A. Brueckner and Arthur H. Bryant; for
Richard L. Blatt et al. by Mr. Blatt, pro se, and Robert W Hammesfahr, pro se; for James
D. A. Boyle et al. by Arthur F. McEvoy III, pro se; and for Law and Economics Scholars et
al. by Mark M. Hager, pro se.
563
is whether a $2 million punitive damages award to the purchaser of one of these cars
exceeds the constitutional limit.
I
In January 1990, Dr. Ira Gore, Jr. (respondent), purchased a black BMW sports sedan for
$40,750.88 from an authorized BMW dealer in Birmingham, Alabama. After driving the
car for approximately nine months, and without noticing any flaws in its appearance, Dr.
Gore took the car to "Slick Finish," an independent detailer, to make it look" 'snazzier
than it normally would appear.'" 646 So. 2d 619, 621 (Ala. 1994). Mr. Slick, the
proprietor, detected evidence that the car had been repainted.1 Convinced that he had
been cheated, Dr. Gore brought suit against petitioner BMW of North America (BMW),
the American distributor of BMW automobiles.2 Dr. Gore alleged, inter alia, that the
failure to disclose that the car had been repainted constituted suppression of a material
fact.3 The complaint prayed for $500,000 in compensatory and punitive damages, and
costs.
At trial, BMW acknowledged that it had adopted a nationwide policy in 1983 concerning
cars that were damaged in the course of manufacture or transportation. If the cost of
repairing the damage exceeded 3 percent of the car's sug-
1 The top, hood, trunk, and quarter panels of Dr. Gore's car were repainted at BMW's
vehicle preparation center in Brunswick, Georgia. The parties presumed that the
damage was caused by exposure to acid rain during transit between the manufacturing
plant in Germany and the preparation center.
2 Dr. Gore also named the German manufacturer and the Birmingham dealership as
defendants.
3 Alabama codified its common-law cause of action for fraud in a 1907 statute that is
still in effect. Hackmeyer v. Hackmeyer, 268 Ala. 329, 333, 106 So. 2d 245, 249 (1958).
The statute provides: "Suppression of a material fact which the party is under an
obligation to communicate constitutes fraud. The obligation to communicate may arise
from the confidential relations of the parties or from the particular circumstances of the
case." Ala. Code § 6-5-102 (1993); see Ala. Code § 4299 (1907).
564
gested retail price, the car was placed in company service for a period of time and then
sold as used. If the repair cost did not exceed 3 percent of the suggested retail price,
however, the car was sold as new without advising the dealer that any repairs had been
made. Because the $601.37 cost of repainting Dr. Gore's car was only about 1.5 percent
of its suggested retail price, BMW did not disclose the damage or repair to the
Birmingham dealer.
Dr. Gore asserted that his repainted car was worth less than a car that had not been
refinished. To prove his actual damages of $4,000, he relied on the testimony of a
former BMW dealer, who estimated that the value of a repainted BMW was
approximately 10 percent less than the value of a new car that had not been damaged
and repaired.4 To support his claim for punitive damages, Dr. Gore introduced evidence
that since 1983 BMW had sold 983 refinished cars as new, including 14 in Alabama,
without disclosing that the cars had been repainted before sale at a cost of more than
$300 per vehicle.5 U sing the actual damage estimate of $4,000 per vehicle, Dr. Gore
argued that a punitive award of $4 million would provide an appropriate penalty for
selling approximately 1,000 cars for more than they were worth.
In defense of its disclosure policy, BMW argued that it was under no obligation to
disclose repairs of minor damage to new cars and that Dr. Gore's car was as good as a
car with the original factory finish. It disputed Dr. Gore's assertion that the value of the
car was impaired by the repainting and argued that this good-faith belief made a
punitive award inappropriate. BMW also maintained that transactions in jurisdictions
other than Alabama had no relevance to Dr. Gore's claim.
4 The dealer who testified to the reduction in value is the former owner of the
Birmingham dealership sued in this action. He sold the dealership approximately one
year before the trial.
5 Dr. Gore did not explain the significance of the $300 cutoff.
565
The jury returned a verdict finding BMW liable for compensatory damages of $4,000. In
addition, the jury assessed $4 million in punitive damages, based on a determination
that the nondisclosure policy constituted "gross, oppressive or malicious" fraud.6 See
Ala. Code §§ 6-11-20, 6-11-21 (1993).
BMW filed a post-trial motion to set aside the punitive damages award. The company
introduced evidence to establish that its nondisclosure policy was consistent with the
laws of roughly 25 States defining the disclosure obligations of automobile
manufacturers, distributors, and dealers. The most stringent of these statutes required
disclosure of repairs costing more than 3 percent of the suggested retail price; none
mandated disclosure of less costly repairs.7 Relying on these statutes, BMW contended
that its conduct was lawful in these States and therefore could not provide the basis for
an award of punitive damages.
BMW also drew the court's attention to the fact that its nondisclosure policy had never
been adjudged unlawful before this action was filed. Just months before Dr. Gore's case
went to trial, the jury in a similar lawsuit filed by another Alabama BMW purchaser
found that BMW's failure to disclose paint repair constituted fraud. Yates v. BMWof
North America, Inc., 642 So. 2d 937 (Ala. 1993).8 Before the
6 The jury also found the Birmingham dealership liable for Dr. Gore's compensatory
damages and the German manufacturer liable for both the compensatory and punitive
damages. The dealership did not appeal the judgment against it. The Alabama Supreme
Court held that the trial court did not have jurisdiction over the German manufacturer
and therefore reversed the judgment against that defendant.
7 BMW acknowledged that a Georgia statute enacted after Dr. Gore purchased his car
would require disclosure of similar repairs to a car before it was sold in Georgia. Ga.
Code Ann. §§40-1-5(b)-(e) (1994).
8 While awarding a comparable amount of compensatory damages, the Yates jury
awarded no punitive damages at all. In Yates, the plaintiff also relied on the 1983
nondisclosure policy, but instead of offering evidence of 983 repairs costing more than
$300 each, he introduced a bulk exhibit
566
judgment in this case, BMW changed its policy by taking steps to avoid the sale of any
refinished vehicles in Alabama and two other States. When the $4 million verdict was
returned in this case, BMW promptly instituted a nationwide policy of full disclosure of
all repairs, no matter how minor.
In response to BMW's arguments, Dr. Gore asserted that the policy change
demonstrated the efficacy of the punitive damages award. He noted that while no jury
had held the policy unlawful, BMW had received a number of customer complaints
relating to undisclosed repairs and had settled some lawsuits.9 Finally, he maintained
that the disclosure statutes of other States were irrelevant because BMW had failed to
offer any evidence that the disclosure statutes supplanted, rather than supplemented,
existing causes of action for common-law fraud.
The trial judge denied BMW's post-trial motion, holding, inter alia, that the award was
not excessive. On appeal, the Alabama Supreme Court also rejected BMW's claim that
the award exceeded the constitutionally permissible amount. 646 So. 2d 619 (1994). The
court's excessiveness inquiry applied the factors articulated in Green Oil Co. v. Hornsby,
539 So. 2d 218, 223-224 (Ala. 1989), and approved in Pacific Mut. Life Ins.
Co. v. Haslip, 499 U. S. 1, 21-22 (1991). 646 So. 2d, at 624-625. Based on its analysis, the
court concluded that BMW's conduct was "reprehensible"; the nondisclosure was
profitable for the company; the judgment "would not have a substantial impact upon
[BMW's] financial position"; the litigation had been expensive; no criminal sanctions had
been imposed on BMW for the same conduct; the award of no pu-
containing 5,856 repair bills to show that petitioner had sold over 5,800 new BMW
vehicles without disclosing that they had been repaired.
9 Prior to the lawsuits filed by Dr. Yates and Dr. Gore, BMW and various BMW dealers
had been sued 14 times concerning presale paint or damage repair. According to the
testimony of BMW's in-house counsel at the post judgment hearing on damages, only
one of the suits concerned a car repainted by BMW.
567
nitive damages in Yates reflected "the inherent uncertainty of the trial process"; and the
punitive award bore a "reasonable relationship" to "the harm that was likely to occur
from [BMW's] conduct as well as ... the harm that actually occurred." 646 So. 2d, at 625-
627.
The Alabama Supreme Court did, however, rule in BMW's favor on one critical point:
The court found that the jury improperly computed the amount of punitive damages by
multiplying Dr. Gore's compensatory damages by the number of similar sales in other
jurisdictions. Id., at 627. Having found the verdict tainted, the court held that "a
constitutionally reasonable punitive damages award in this case is $2,000,000," id., at
629, and therefore ordered a remittitur in that amount.10 The court's discussion of the
amount of its remitted award expressly disclaimed any reliance on "acts that occurred in
other jurisdictions"; instead, the court explained that it had used a "comparative
analysis" that considered Alabama cases, "along with cases from other jurisdictions,
involving the sale of an automobile where the seller misrepresented the condition of the
vehicle and the jury awarded punitive damages to the purchaser." 11 Id., at 628.
10 The Alabama Supreme Court did not indicate whether the $2 million figure
represented the court's independent assessment of the appropriate level of punitive
damages, or its determination of the maximum amount that the jury could have
awarded consistent with the Due Process Clause.
11 Other than Yates v. BMW of North America, Inc., 642 So. 2d 937 (1993), in which no
punitive damages were awarded, the Alabama Supreme Court cited no such cases. In
another portion of its opinion, 646 So. 2d, at 629, the court did cite five Alabama cases,
none of which involved either a dispute arising out of the purchase of an automobile or
an award of punitive damages. G. M. Mosley Contractors, Inc. v. Phillips, 487 So. 2d 876,
879 (1986); Hollis v. Wyrosdick, 508 So. 2d 704 (1987); Campbell v. Burns, 512 So. 2d
1341, 1343 (1987); Ashbee v. Brock, 510 So. 2d 214 (1987); and Jawad v. Granade, 497
So. 2d 471 (1986). All of these cases support the proposition that appellate courts in
Alabama presume that jury verdicts are correct. In light of the Alabama Supreme Court's
conclusion that (1) the jury had computed its award by multiplying $4,000 by the
number of refinished vehicles sold in the United States and
568
Because we believed that a review of this case would help to illuminate "the character
of the standard that will identify unconstitutionally excessive awards" of punitive
damages, see Honda Motor Co. v. Oberg, 512 U. S. 415, 420 (1994), we granted
certiorari, 513 U. S. 1125 (1995).
II
Punitive damages may properly be imposed to further a State's legitimate interests in
punishing unlawful conduct and deterring its repetition. Gertz v. Robert Welch, Inc., 418
U. S. 323, 350 (1974); Newport v. Fact Concerts, Inc., 453 U. S. 247, 266-267 (1981); Has
lip, 499 U. S., at 22. In our federal system, States necessarily have considerable flexibility
in determining the level of punitive damages that they will allow in different classes of
cases and in any particular case. Most States that authorize exemplary damages afford
the jury similar latitude, requiring only that the damages awarded be reasonably
necessary to vindicate the State's legitimate interests in punishment and deterrence.
See TXO, 509 U. S., at 456; Has lip, 499 U. S., at 21, 22. Only when an award can fairly be
categorized as "grossly excessive" in relation to these interests does it enter the zone of
arbitrariness that violates the Due Process Clause of the Fourteenth Amendment.
Cf. TXO,509 U. S., at 456. For that reason, the federal excessiveness inquiry
appropriately begins with an identification of the state interests that a punitive award is
designed to serve. We therefore focus our attention first on the scope of Alabama's
legitimate interests in punishing BMW and deterring it from future misconduct.
No one doubts that a State may protect its citizens by prohibiting deceptive trade
practices and by requiring auto-
(2) that the award should have been based on Alabama conduct, respect for the error-
free portion of the jury verdict would seem to produce an award of $56,000 ($4,000
multiplied by 14, the number of repainted vehicles sold in Alabama).
569
mobile distributors to disclose presale repairs that affect the value of a new car. But the
States need not, and in fact do not, provide such protection in a uniform manner. Some
States rely on the judicial process to formulate and enforce an appropriate disclosure
requirement by applying principles of contract and tort law.12 Other States have
enacted various forms of legislation that define the disclosure obligations of automobile
manufacturers, distributors, and dealers.13
12 See, e. g., Rivers v. BMW of North America, Inc., 214 Ga. App. 880, 449 S. E. 2d 337
(1994) (nondisclosure of pres ale paint repairs that occurred before state disclosure
statute enacted); Wedmore v. Jordan Motors, Inc.,589 N. E. 2d 1180 (Ind. App. 1992)
(same).
13 Four States require disclosure of vehicle repairs costing more than 3 percent of
suggested retail price. Ariz. Rev. Stat. Ann. § 28-1304.03 (1989); N. C. Gen. Stat. § 20-
305. 1 (d)(5a) (1995); S. C. Code § 56-32-20 (Supp. 1995); Va. Code Ann. §46.2-1571(D)
(Supp. 1995). An additional three States mandate disclosure when the cost of repairs
exceeds 3 percent or $500, whichever is greater. Ala. Code §8-19-5(22)(c) (1993); Cal.
Veh. Code Ann. §§ 9990-9991 (West Supp. 1996); Okla. Stat., Tit. 47, § 1112.1 (1991).
Indiana imposes a 4 percent disclosure threshold. Ind. Code §§ 9-23-4-4, 9-23-4-5
(1993). Minnesota requires disclosure of repairs costing more than 4 percent of
suggested retail price or $500, whichever is greater. Minn. Stat. §325 F.6d 4 (1994). New
York requires disclosure when the cost of repairs exceeds 5 percent of suggested retail
price. N. Y. Gen. Bus. Law §§ 396-p(5)(a), (d) (McKinney Supp. 1996). Vermont imposes a
5 percent disclosure threshold for the first $10,000 in repair costs and 2 percent
thereafter. Vt. Stat. Ann., Tit. 9, § 4087(d) (1993). Eleven States mandate disclosure only
of damage costing more than 6 percent of retail value to repair. Ark. Code Ann. §23-112-
705 (1992); Idaho Code § 49-1624 (1994); Ill. Compo Stat., ch. 815, § 710/5 (1994); Ky.
Rev. Stat. Ann. § 190.0491(5) (Baldwin 1988); La. Rev. Stat. Ann. §32:1260 (West Supp.
1995); Miss. Motor Vehicle Comm'n, Regulation No. 1 (1992); N. H. Rev. Stat. Ann. §357-
C:5(III)(d) (1995); Ohio Rev. Code Ann. §4517.61 (1994); R. I. Gen. Laws §§31-5.1-18(d),
(f) (1995); Wis. Stat. §218.01(2d)(a) (1994); Wyo. Stat. §31-16-115 (1994). Two States
require disclosure of repairs costing $3,000 or more. See Iowa Code Ann. § 321.69
(Supp. 1996); N. D. Admin. Code §37-09-01-01 (1992). Georgia mandates disclosure of
paint damage that costs more than $500 to repair. Ga. Code Ann. §§ 40-15(b)-(e) (1994)
(enacted after respondent purchased his car). Florida re-
570
The result is a patchwork of rules representing the diverse policy judgments of
lawmakers in 50 States.
That diversity demonstrates that reasonable people may disagree about the value of a
full disclosure requirement. Some legislatures may conclude that affirmative disclosure
requirements are unnecessary because the self-interest of those involved in the
automobile trade in developing and maintaining the goodwill of their customers will
motivate them to make voluntary disclosures or to refrain from selling cars that do not
comply with self-imposed standards. Those legislatures that do adopt affirmative
disclosure obligations may take into account the cost of government regulation,
choosing to draw a line exempting minor repairs from such a requirement. In
formulating a disclosure standard, States may also consider other goals, such as
providing a "safe harbor" for automobile manufacturers, distributors, and dealers
against lawsuits over minor repairs.14
We may assume, arguendo, that it would be wise for every State to adopt Dr. Gore's
preferred rule, requiring full disclosure of every presale repair to a car, no matter how
trivial and regardless of its actual impact on the value of the car.
quires dealers to disclose paint repair costing more than $100 of which they have actual
knowledge. Fla. Stat. § 320.27(9)(n) (1992). Oregon requires manufacturers to disclose
all "postmanufacturing" damage and repairs. It is unclear whether this mandate would
apply to repairs such as those at issue here. Ore. Rev. Stat. § 650.155 (1991).
Many, but not all, of the statutes exclude from the computation of repair cost the value
of certain components-typically items such as glass, tires, wheels and bumpers-when
they are replaced with identical manufacturer's original equipment. E. g., Cal. Veh. Code
Ann. §§ 9990-9991 (West Supp. 1996); Ga. Code Ann. §§40-1-5(b)-(e) (1994); Ill. Compo
Stat., ch. 815, § 710/5 (1994); Ky. Rev. Stat. Ann. § 190.0491(5) (Baldwin 1988); Okla.
Stat., Tit. 47, § 1112.1 (1991); Va. Code Ann. §46.2-1571(D) (Supp. 1995); Vt. Stat. Ann.,
Tit. 9, § 4087(d) (1993).
14 Also, a state legislature might plausibly conclude that the administrative costs
associated with full disclosure would have the effect of raising car prices to the State's
residents.
571
But while we do not doubt that Congress has ample authority to enact such a policy for
the entire Nation, 15 it is clear that no single State could do so, or even impose its own
policy choice on neighboring States. See Bonaparte v. Tax Court, 104 U. S. 592, 594
(1881) ("No State can legislate except with reference to its own jurisdiction .... Each
State is independent of all the others in this particular").16 Similarly, one State's power
to impose burdens on the interstate market for automobiles is not only subordinate to
the federal power over interstate commerce, Gibbons v. Ogden, 9 Wheat. 1, 194-196
(1824), but is also constrained by the need to respect the interests of other States,
see, e. g., Healy v. Beer Institute, 491 U. S. 324, 335-336 (1989) (the Constitution has a
"special concern both with the maintenance of a national economic union unfettered by
state-imposed limitations on
15 Federal disclosure requirements are, of course, a familiar part of our law.
See, e. g., the Federal Food, Drug, and Cosmetic Act, as added by the Nutrition Labeling
and Education Act of 1990, 104 Stat. 2353, 21 U. S. C. § 343; the Truth In Lending Act, 82
Stat. 148, as amended, 15 U. S. C. § 1604; the Securities Exchange Act of 1934, 48 Stat.
892, 894, as amended, 15 U. S. C. §§ 781-78m; Federal Cigarette Labeling and
Advertising Act, 79 Stat. 283, as amended, 15 U. S. C. § 1333; Alcoholic Beverage
Labeling Act of 1988, 102 Stat. 4519, 27 U. S. C. § 215.
16 See also Bigelow v. Virginia, 421 U. S. 809, 824 (1975) ("A State does not acquire
power or supervision over the internal affairs of another State merely because the
welfare and health of its own citizens may be affected when they travel to that
State"); New York Life Ins. Co. v. Head, 234 U. S. 149, 161 (1914) ("[I]t would be
impossible to permit the statutes of Missouri to operate beyond the jurisdiction of that
State ... without throwing down the constitutional barriers by which all the States are
restricted within the orbits of their lawful authority and upon the preservation of which
the Government under the Constitution depends. This is so obviously the necessary
result of the Constitution that it has rarely been called in question and hence authorities
directly dealing with it do not abound"); Huntington v. Attrill, 146 U. S. 657, 669 (1892)
("Laws have no force of themselves beyond the jurisdiction of the State which enacts
them, and can have extra-territorial effect only by the comity of other States").
572
interstate commerce and with the autonomy of the individual States within their
respective spheres" (footnote omitted)); Edgar v. MITE Corp., 457 U. S. 624, 643 (1982).
We think it follows from these principles of state sovereignty and comity that a State
may not impose economic sanctions on violators of its laws with the intent of changing
the tortfeasors' lawful conduct in other States.17 Before this Court Dr. Gore argued that
the large punitive damages award was necessary to induce BMW to change the
nationwide policy that it adopted in 1983.18 But by attempting to alter BMW's
nationwide policy, Alabama would be infringing on the policy choices of other States. To
avoid such encroachment, the economic penalties that a State such as Alabama inflicts
on those who transgress its laws, whether the penalties take the form of legislatively
authorized fines or judicially imposed punitive damages, must be supported by the
State's interest in protecting its own consumers and its own economy. Alabama may
insist that BMW adhere to a particular disclosure policy in that State. Alabama does not
17 State power may be exercised as much by a jury's application of a state rule of law in
a civil lawsuit as by a statute. See New York Times Co. v. Sullivan, 376 U. S. 254, 265
(1964) ("The test is not the form in which state power has been applied but, whatever
the form, whether such power has in fact been exercised"); San Diego Building Trades
Council v. Garmon, 359 U. S. 236, 247 (1959) ("[RJegulation can be as effectively exerted
through an award of damages as through some form of preventive relief").
18Brief for Respondent 11-12, 23, 27-28; Tr. of Oral Arg. 50-54. Dr.
Gore's interest in altering the nationwide policy stems from his concern that BMW
would not (or could not) discontinue the policy in Alabama alone. Brief for Respondent
11. "If Alabama were limited to imposing punitive damages based only on BMW's gain
from fraudulent sales in Alabama, the resulting award would have no prospect of
protecting Alabama consumers from fraud, as it would provide no incentive for BMW to
alter the unitary, national policy of nondisclosure which yielded BMW millions of dollars
in profits." Id., at 23. The record discloses no basis for Dr. Gore's contention that BMW
could not comply with Alabama's law without changing its nationwide policy.
573
have the power, however, to punish BMW for conduct that was lawful where it
occurred and that had no impact on Alabama or its residents.19 Nor may Alabama
impose sanctions on BMW in order to deter conduct that is lawful in other jurisdictions.
In this case, we accept the Alabama Supreme Court's interpretation of the jury verdict as
reflecting a computation of the amount of punitive damages "based in large part on
conduct that happened in other jurisdictions." 646 So. 2d, at 627. As the Alabama
Supreme Court noted, neither the jury nor the trial court was presented with evidence
that any of BMW's out-of-state conduct was unlawful. "The only testimony touching the
issue showed that approximately 60% of the vehicles that were refinished were sold in
states where failure to disclose the repair was not an unfair trade practice." Id., at 627,
n. 6.20 The Alabama Supreme Court therefore properly eschewed reliance on BMW's
out-of-state conduct, id., at 628, and based its remitted award solely on
19 See Bordenkircher v. Hayes, 434 U. S. 357, 363 (1978) ("To punish a person because
he has done what the law plainly allows him to do is a due process violation of the most
basic sort"). Our cases concerning recidivist statutes are not to the contrary. Habitual
offender statutes permit the sentencing court to enhance a defendant's punishment for
a crime in light of prior convictions, including convictions in foreign jurisdictions.
See e. g., Ala. Code § 13A-5-9 (1994); Cal. Penal Code Ann. §§ 667.5(f), 668 (West Supp.
1996); Ill. Compo Stat., ch. 720, § 5/33B-1 (1994); N. Y. Penal Law §§ 70.04, 70.06, 70.08,
70.10 (McKinney 1987 and Supp. 1996); Tex. Penal Code Ann. § 12.42 (1994 and Supp.
1995-1996). A sentencing judge may even consider past criminal behavior which did not
result in a conviction and lawful conduct that bears on the defendant's character and
prospects for rehabilitation. Williams V. New York, 337 U. S. 241 (1949). But we have
never held that a sentencing court could properly punish lawful conduct. This distinction
is precisely the one we draw here. See n. 21, infra.
20 Given that the verdict was based in part on out-of-state conduct that was lawful
where it occurred, we need not consider whether one State may properly attempt to
change a tortfeasor's unlawful conduct in another State.
574
conduct that occurred within Alabama.21 The award must be analyzed in the light of the
same conduct, with consideration given only to the interests of Alabama consumers,
rather than those of the entire Nation. When the scope of the interest in punishment
and deterrence that an Alabama court may appropriately consider is properly limited, it
is apparent-for reasons that we shall now address-that this award is grossly excessive.
III
Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that
a person receive fair notice not only of the conduct that will subject him to punishment,
but also of the severity of the penalty that a State may impose.22 Three guideposts,
each of which indicates that BMW did not receive adequate notice of the magnitude of
the sanction that Alabama might impose for adhering to the nondisclosure policy
adopted in 1983, lead us to the conclusion that
210f course, the fact that the Alabama Supreme Court correctly concluded that it was
error for the jury to use the number of sales in other States as a multiplier in computing
the amount of its punitive sanction does not mean that evidence describing out-of-state
transactions is irrelevant in a case of this kind. To the contrary, as we stated in TXO
Production Corp. v. Alliance Resources Corp., 509 U. S. 443, 462, n. 28 (1993), such
evidence may be relevant to the determination of the degree of reprehensibility of the
defendant's conduct.
22 See Miller v. Florida, 482 U. S. 423 (1987) (Ex Post Facto Clause violated by
retroactive imposition of revised sentencing guidelines that provided longer sentence
for defendant's crime); Bouie v. City of Columbia, 378 U. S. 347 (1964) (retroactive
application of new construction of statute violated due process); id., at 350-355 (citing
cases); Lankford v. Idaho, 500 U. S. 110 (1991) (due process violated because defendant
and his counsel did not have adequate notice that judge might impose death sentence).
The strict constitutional safeguards afforded to criminal defendants are not applicable
to civil cases, but the basic protection against "judgments without notice" afforded by
the Due Process Clause, Shaffer v. Heitner, 433 U. S. 186, 217 (1977) (STEVENS, J.,
concurring in judgment), is implicated by civil penalties.
575
the $2 million award against BMW is grossly excessive: the degree of reprehensibility of
the nondisclosure; the disparity between the harm or potential harm suffered by Dr.
Gore and his punitive damages award; and the difference between this remedy and the
civil penalties authorized or imposed in comparable cases. We discuss these
considerations in turn.
Degree of Reprehensibility
Perhaps the most important indicium of the reasonableness of a punitive damages
award is the degree of reprehensibility of the defendant's conduct.23 As the Court
stated nearly 150 years ago, exemplary damages imposed on a defendant should reflect
"the enormity of his offense." Day v. Woodworth, 13 How. 363, 371 (1852). See also St.
Louis, 1. M. & S. R. Co. v. Williams, 251 U. S. 63, 66-67 (1919) (punitive award may not
be "wholly disproportioned to the offense"); Browning-Ferris Industries of Vt.,
Inc. v. Kelco Disposal, Inc.,492 U. S. 257, 301 (1989) (O'CONNOR, J., concurring in part
and dissenting in part) (reviewing court "should examine the gravity of the defendant's
conduct and the harshness of the award of punitive damages").24 This principle reflects
the accepted view that some wrongs are more blameworthy than others. Thus, we have
said that
23 "The flagrancy of the misconduct is thought to be the primary consideration in
determining the amount of punitive damages." Owen, A Punitive Damages Overview:
Functions, Problems and Reform, 39 Vill. L. Rev. 363, 387 (1994).
24 The principle that punishment should fit the crime "is deeply rooted and frequently
repeated in common-law jurisprudence." Solem v. Helm, 463 U. S. 277, 284 (1983).
See Burkett v. Lanata, 15 La. Ann. 337, 339 (1860) (punitive damages should be
"commensurate to the nature of the offence"); Blanchard v. Morris,15 Ill. 35, 36 (1853)
("[W]e cannot say [the exemplary damages] are excessive under the circumstances; for
the proofs show that threats, violence, and imprisonment, were accompanied by mental
fear, torture, and agony of mind"); Louisville & Northern R. Co. v. Brown, 127 Ky. 732,
749, 106 S. W. 795, 799 (1908) ("We are not aware of any case in which the court has
sustained a verdict as large as this one unless the injuries were permanent").
576
"nonviolent crimes are less serious than crimes marked by violence or the threat of
violence." Solem v. Helm,463 U. S. 277, 292-293 (1983). Similarly, "trickery and
deceit," TXO, 509 U. S., at 462, are more reprehensible than negligence. In TXO, both the
West Virginia Supreme Court and the Justices of this Court placed special emphasis on
the principle that punitive damages may not be "grossly out of proportion to the
severity of the offense." 25 Id., at 453, 462. Indeed, for JUSTICE KENNEDY, the
defendant's intentional malice was the decisive element in a "close and difficult"
case. Id., at 468.26
In this case, none of the aggravating factors associated with particularly reprehensible
conduct is present. The harm BMW inflicted on Dr. Gore was purely economic in nature.
The presale refinishing of the car had no effect on its performance or safety features, or
even its appearance for at least nine months after his purchase. BMW's conduct evinced
no indifference to or reckless disregard for the health and safety of others. To be sure,
infliction of economic injury, especially when done intentionally through affirmative acts
of misconduct, id., at 453, or when the target is financially vulnerable, can warrant a
substantial penalty. But this observation does not convert all acts that cause economic
harm into torts that are sufficiently reprehensible to justify a significant sanction in
addition to compensatory damages.
Dr. Gore contends that BMW's conduct was particularly reprehensible because
nondisclosure of the repairs to his car formed part of a nationwide pattern of tortious
conduct. Certainly, evidence that a defendant has repeatedly engaged in prohibited
conduct while knowing or suspecting that it was unlawful would provide relevant
support for an argu-
25 Pacific Mut. Life Ins. Co. v. Haslip, 499 U. S. 1,22 (1991).
26 The dissenters also recognized that "TXO's conduct was clearly wrongful, calculated,
and improper .... " TXO, 509 U. S., at 482 (opinion of O'CONNOR, J.).
577
ment that strong medicine is required to cure the defendant's disrespect for the law.
See id., at 462, n. 28. Our holdings that a recidivist may be punished more severely than
a first offender recognize that repeated misconduct is more reprehensible than an
individual instance of malfeasance. See Gryger v. Burke, 334 U. S. 728, 732 (1948).
In support of his thesis, Dr. Gore advances two arguments.
First, he asserts that the state disclosure statutes supplement, rather than supplant,
existing remedies for breach of contract and common-law fraud. Thus, according to Dr.
Gore, the statutes may not properly be viewed as immunizing from liability the
nondisclosure of repairs costing less than the applicable statutory threshold. Brief for
Respondent 18-19. Second, Dr. Gore maintains that BMW should have anticipated that
its failure to disclose similar repair work could expose it to liability for fraud. Id., at 4-5.
We recognize, of course, that only state courts may authoritatively construe state
statutes. As far as we are aware, at the time this action was commenced no state court
had explicitly addressed whether its State's disclosure statute provides a safe harbor for
nondisclosure of presumptively minor repairs or should be construed instead as
supplementing common-law dutiesP A review of the text of the stat-
27 In Jeter v. M & M Dodge, Inc., 634 So. 2d 1383 (La. App. 1994), a Louisiana Court of
Appeals suggested that the Louisiana disclosure statute functions as a safe harbor.
Finding that the cost of repairing presale damage to the plaintiff's car exceeded the
statutory disclosure threshold, the court held that the disclosure statute did not provide
a defense to the action. Id., at 1384.
During the pendency of this litigation, Alabama enacted a disclosure statute which
defines "material" damage to a new car as damage requiring repairs costing in excess of
3 percent of suggested retail price or $500, whichever is greater. Ala. Code §8-19-5(22)
(1993). Mter its decision in this case, the Alabama Supreme Court stated in dicta that
the remedies available under this section of its Deceptive Trade Practices Act did not
displace or alter pre-existing remedies available under either the common law or other
statutes. Hines v. Riverside Chevrolet-Olds, Inc., 655 So. 2d 909, 917, n. 2 (1994). It
refused, however, to "recognize, or impose on
578
utes, however, persuades us that in the absence of a statecourt determination to the
contrary, a corporate executive could reasonably interpret the disclosure requirements
as establishing safe harbors. In California, for example, the disclosure statute defines
"material" damage to a motor vehicle as damage requiring repairs costing in excess of 3
percent of the suggested retail price or $500, whichever is greater. Cal. Veh. Code Ann. §
9990 (West Supp. 1996). The Illinois statute states that in cases in which disclosure is
not required, "nondisclosure does not constitute a misrepresentation or omission of
fact." Ill. Compo Stat., ch. 815, § 710/5 (1994).28 Perhaps the statutes may also be
interpreted in another way. We simply emphasize that the record contains no evidence
that BMW's decision to follow a disclosure policy that coincided with the strictest extant
state statute was sufficiently reprehensible to justify a $2 million award of punitive
damages.
automobile manufacturers, a general duty to disclose every repair of damage, however
slight, incurred during the manufacturing process." Id., at 921. Instead, it held that
whether a defendant has a duty to disclose is a question of fact "for the jury to
determine." Id., at 918. In reaching that conclusion it overruled two earlier decisions
that seemed to indicate that as a matter of law there was no disclosure obligation in
cases comparable to this one. Id., at 920 (overruling Century 21-Reeves Realty,
Inc. v. McConnell Cadillac, Inc.,626 So. 2d 1273 (1993), and Cobb v. Southeast Toyota
Distributors, Inc., 569 So. 2d 395 (1990)).
28 See also Ariz. Rev. Stat. Ann. § 28-1304.03 (1989) ("[I]f disclosure is not required
under this section, a purchaser may not revoke or rescind a sales contract due solely to
the fact that the new motor vehicle was damaged and repaired prior to completion of
the sale"); Ind. Code § 9-23-4-5 (1993) (providing that "[r]epaired damage to a
customer-ordered new motor vehicle not exceeding four percent (4%) of the
manufacturer's suggested retail price does not need to be disclosed at the time of
sale"); N. C. Gen. Stat. § 20-305.1(e) (1993) (requiring disclosure of repairs costing more
than 5 percent of suggested retail price and prohibiting revocation or rescission of sales
contract on the basis of less costly repairs); Okla. Stat., Tit. 47, § 1112.1 (1991) (defining
"material" damage to a car as damage requiring repairs costing in excess of 3 percent of
suggested retail price or $500, whichever is greater).
579
Dr. Gore's second argument for treating BMW as a recidivist is that the company should
have anticipated that its actions would be considered fraudulent in some, if not all,
jurisdictions. This contention overlooks the fact that actionable fraud requires
a material misrepresentation or omission.29 This qualifier invites line-drawing of just
the sort engaged in by States with disclosure statutes and by BMW We do not think it
can be disputed that there may exist minor imperfections in the finish of a new car that
can be repaired (or indeed, left unrepaired) without materially affecting the car's
value.30 There is no evidence that BMW acted in bad faith when it sought to establish
the appropriate line between presumptively minor damage and damage requiring
disclosure to purchasers. For this purpose, BMW could reasonably rely on state
disclosure statutes for guidance. In this regard, it is also significant that there is no
evidence that BMW persisted in a course of conduct after it had been adjudged
unlawful on even one occasion, let alone repeated occasions.31
Finally, the record in this case discloses no deliberate false statements, acts of
affirmative misconduct, or concealment of evidence of improper motive, such as were
present in Haslip and TXO. Has lip, 499 U. S., at 5; TXO, 509 U. S., at 453. We accept, of
course, the jury's finding that BMW suppressed
29 Restatement (Second) of Torts § 538 (1977); W. Keeton, D. Dobbs, R. Keeton, & D.
Owen, Prosser and Keeton on Law of Torts § 108 (5th ed.1984).
30 The Alabama Supreme Court has held that a car may be considered "new" as a
matter of law even if its finish contains minor cosmetic flaws. Wilburn v. Larry Savage
Chevrolet, Inc., 477 So. 2d 384 (1985). We note also that at trial respondent only
introduced evidence of undisclosed paint damage to new cars repaired at a cost of $300
or more. This decision suggests that respondent believed that the jury might consider
some repairs too de minimis to warrant disclosure.
31 Before the verdict in this case, BMW had changed its policy with respect to Alabama
and two other States. Five days after the jury award, BMW altered its nationwide policy
to one of full disclosure.
580
a material fact which Alabama law obligated it to communicate to prospective
purchasers of repainted cars in that State. But the omission of a material fact may be
less reprehensible than a deliberate false statement, particularly when there is a good-
faith basis for believing that no duty to disclose exists.
That conduct is sufficiently reprehensible to give rise to tort liability, and even a modest
award of exemplary damages does not establish the high degree of culpability that
warrants a substantial punitive damages award. Because this case exhibits none of the
circumstances ordinarily associated with egregiously improper conduct, we are
persuaded that BMW's conduct was not sufficiently reprehensible to warrant imposition
of a $2 million exemplary damages award.
Ratio
The second and perhaps most commonly cited indicium of an unreasonable or excessive
punitive damages award is its ratio to the actual harm inflicted on the plaintiff.
See TXO, 509 U. S., at 459; Haslip, 499 U. S., at 23. The principle that exemplary
damages must bear a "reasonable relationship" to compensatory damages has a long
pedigree.32 Scholars have identified a number of early English statutes authorizing the
32 See, e. g., Grant v. McDonogh, 7 La. Ann. 447, 448 (1852) ("[E]xemplary damages
allowed should bear some proportion to the real damage
sustained"); Saunders v. Mullen, 66 Iowa 728, 729, 24 N. W. 529 (1885) (''When the
actual damages are so small, the amount allowed as exemplary damages should not be
so large"); Flannery v. Baltimore & Ohio R. Co., 15 D. C. 111, 125 (1885) (when punitive
damages award "is out of all proportion to the injuries received, we feel it our duty to
interfere"); Houston & Texas Central R. Co. v. Nichols,9 Am. & Eng. R. R. Cas. 361, 365
(Tex. 1882) ("Exemplary damages, when allowed, should bear proportion to the actual
damages sustained"); McCarthy v. Niskern, 22 Minn. 90, 91-92 (1875) (punitive damages
"enormously in excess of what may justly be regarded as compensation" for the injury
must be set aside "to prevent injustice").
581
award of multiple damages for particular wrongs. Some 65 different enactments during
the period between 1275 and 1753 provided for double, treble, or quadruple
damages.33 Our decisions in both Haslip and TXOendorsed the proposition that a
comparison between the compensatory award and the punitive award is significant.
In Haslip we concluded that even though a punitive damages award of "more than 4
times the amount of compensatory damages" might be "close to the line," it did not
"cross the line into the area of constitutional impropriety." 499 U. S., at 23-
24. TXO, following dicta in Haslip, refined this analysis by confirming that the proper
inquiry is "'whether there is a reasonable relationship between the punitive damages
award and the harm likely to result from the defendant's conduct as well as the harm
that actually has occurred.'" TXO, 509 U. S., at 460 (emphasis in original),
quoting Haslip, 499 U. S., at 21. Thus, in upholding the $10 million award in TXO, we
relied on the difference between that figure and the harm to the victim that would have
ensued if the tortious plan had succeeded. That difference suggested that the relevant
ratio was not more than 10 to 1.34
33 Owen, supra n. 23, at 368, and n. 23. One English statute, for example, provides that
officers arresting persons out of their jurisdiction shall pay double damages. 3 Edw., I.,
ch. 35. Another directs that in an action for forcible entry or detainer, the plaintiff shall
recover treble damages. 8 Hen. VI, ch. 9, § 6.
Present-day federal law allows or mandates imposition of multiple damages for a wide
assortment of offenses, including violations of the antitrust laws, see § 4 of the Clayton
Act, 38 Stat. 731, as amended, 15 U. S. C. § 15, and the Racketeer Influenced and
Corrupt Organizations Act, see 18 U. S. C. § 1964, and certain breaches of the trademark
laws, see § 35 of the Trademark Act of 1946, 60 Stat. 439, as amended, 15 U. S. C. §
1117, and the patent laws, see 66 Stat. 813, 35 U. S. C. § 284.
34 "While petitioner stresses the shocking disparity between the punitive award and the
compensatory award, that shock dissipates when one considers the potential loss to
respondents, in terms of reduced or eliminated royalties payments, had petitioner
succeeded in its illicit scheme. Thus, even if the actual value of the 'potential harm' to
respondents is not be-
582
The $2 million in punitive damages awarded to Dr. Gore by the Alabama Supreme Court
is 500 times the amount of his actual harm as determined by the jury.35 Moreover,
there is no suggestion that Dr. Gore or any other BMW purchaser was threatened with
any additional potential harm by BMW's nondisclosure policy. The disparity in this case
is thus dramatically greater than those considered in Haslip and TXO.36
Of course, we have consistently rejected the notion that the constitutional line is
marked by a simple mathematical formula, even one that compares actual and
potential damages to the punitive award. TXO,509 U. S., at 458.37 Indeed, low awards
of compensatory damages may properly support a higher ratio than high compensatory
awards, if, for example, a particularly egregious act has resulted in only a small amount
of economic damages. A higher ratio may also be justified in cases in which the injury is
hard to detect or the monetary value of noneconomic harm might have been difficult to
determine. It is appropriate, therefore, to reiterate our rejection of a categorical
approach. Once again, "we return to what we said ... in Haslip: 'We need not, and
tween $5 million and $8.3 million, but is closer to $4 million, or $2 million, or even $1
million, the disparity between the punitive award and the potential harm does not, in
our view, 'jar one's constitutional sensibilities.''' TXO, 509 U. S., at 462,
quoting Haslip, 499 U. S., at 18.
35 Even assuming each repainted BMW suffers a diminution in value of approximately
$4,000, the award is 35 times greater than the total damages of all 14 Alabama
consumers who purchased repainted BMW's.
36 The ratio here is also dramatically greater than any award that would be permissible
under the statutes and proposed statutes summarized in the appendix to JUSTICE
GINSBURG'S dissenting opinion. Post, at 615-616.
37 Conceivably the Alabama Supreme Court's selection of a 500-to-1 ratio was an
application of JUSTICE SCALIA'S identification of one possible reading of the plurality
opinion in TXO: Any future due process challenge to a punitive damages award could be
disposed of with the simple observation that "this is no worse than TXO." 509 U. S., at
472 (SCALIA, J., concurring in judgment). As we explain in the text, this award is
significantly worse than the award in TXO.
583
indeed we cannot, draw a mathematical bright line between the constitutionally
acceptable and the constitutionally unacceptable that would fit every case. We can say,
however, that [a] general concer[n] of reasonableness ... properly enteres] into the
constitutional calculus.'" Id., at 458 (quoting Has lip, 499 U. S., at 18). In most cases, the
ratio will be within a constitutionally acceptable range, and remittitur will not be
justified on this basis. When the ratio is a breathtaking 500 to 1, however, the award
must surely "raise a suspicious judicial eyebrow." TXO, 509 U. S., at 481 (O'CONNOR, J.,
dissenting).
Sanctions for Comparable Misconduct
Comparing the punitive damages award and the civil or criminal penalties that could be
imposed for comparable misconduct provides a third indicium of excessiveness. As
JusTICE O'CONNOR has correctly observed, a reviewing court engaged in determining
whether an award of punitive damages is excessive should "accord 'substantial
deference' to legislative judgments concerning appropriate sanctions for the conduct at
issue." Browning-Ferris Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U. S., at 301
(opinion concurring in part and dissenting in part). In Haslip, 499 U. S., at 23, the Court
noted that although the exemplary award was "much in excess of the fine that could be
imposed," imprisonment was also authorized in the criminal context.38 In this
38 Although the Court did not address the size of the punitive damages award
in Silkwood v. Kerr-McGee Corp., 464 U. S. 238 (1984), the dissenters commented on its
excessive character, noting that the "$10 million [punitive damages award] that the jury
imposed is 100 times greater than the maximum fine that may be imposed ... for a
single violation of federal standards" and "more than 10 times greater than the largest
single fine that the Commission has ever imposed." Id., at 263 (BLACKMUN, J.,
dissenting). In New York Times Co. v. Sullivan, 376 U. S. 254 (1964), the Court observed
that the punitive award for libel was "one thousand times greater than the maximum
fine provided by the Alabama criminal statute," and concluded that the "fear of damage
awards under a rule such as
584
case the $2 million economic sanction imposed on BMW is substantially greater than
the statutory fines available in Alabama and elsewhere for similar malfeasance.
The maximum civil penalty authorized by the Alabama Legislature for a violation of its
Deceptive Trade Practices Act is $2,000; 39 other States authorize more severe
sanctions, with the maxima ranging from $5,000 to $10,000.40 Significantly, some
statutes draw a distinction between first offenders and recidivists; thus, in New York the
penalty is $50 for a first offense and $250 for subsequent offenses. None of these
statutes would provide an out-of-state distributor with fair notice that the first
violation-or, indeed the first 14 violations-of its provisions might subject an offender to
a multimillion dollar penalty. Moreover, at the time BMW's policy was first challenged,
there does not appear to have been any judicial decision in Alabama or elsewhere
indicating that application of that policy might give rise to such severe punishment.
The sanction imposed in this case cannot be justified on the ground that it was
necessary to deter future misconduct without considering whether less drastic remedies
could be expected to achieve that goal. The fact that a multimillion dollar penalty
prompted a change in policy sheds no light on the question whether a lesser deterrent
would have adequately protected the interests of Alabama consumers. In
that invoked by the Alabama courts here may be markedly more inhibiting than the fear
of prosecution under a criminal statute." Id., at 277.
39 Ala. Code §8-19-11(b) (1993).
40 See, e. g., Ark. Code Ann. § 23-112-309(b) (1992) (up to $5,000 for violation of state
Motor Vehicle Commission Act that would allow suspension of dealer's license; up to
$10,000 for violation of Act that would allow revocation of dealer's license); Fla. Stat. §
320.27(12) (1992) (up to $1,000); Ga. Code Ann. §§40-1-5(g), 1O-1-397(a) (1994 and
Supp. 1996) (up to $2,000 administratively; up to $5,000 in superior court); Ind. Code §
9-23-6-4 (1993) ($50 to $1,000); N. H. Rev. Stat. Ann. §§ 357-C:15, 651:2 (1995 and
Supp. 1995) (corporate fine of up to $20,000); N. Y. Gen. Bus. Law § 396-p(6) (McKinney
Supp. 1995) ($50 for first offense; $250 for subsequent offenses).
585
the absence of a history of noncompliance with known statutory requirements, there is
no basis for assuming that a more modest sanction would not have been sufficient to
motivate full compliance with the disclosure requirement imposed by the Alabama
Supreme Court in this case.
IV
We assume, as the juries in this case and in the Yates case found, that the undisclosed
damage to the new BMW's affected their actual value. Notwithstanding the evidence
adduced by BMW in an effort to prove that the repainted cars conformed to the same
quality standards as its other cars, we also assume that it knew, or should have known,
that as time passed the repainted cars would lose their attractive appearance more
rapidly than other BMW's. Moreover, we of course accept the Alabama courts' view that
the state interest in protecting its citizens from deceptive trade practices justifies a
sanction in addition to the recovery of compensatory damages. We cannot, however,
accept the conclusion of the Alabama Supreme Court that BMW's conduct was
sufficiently egregious to justify a punitive sanction that is tantamount to a severe
criminal penalty.
The fact that BMW is a large corporation rather than an impecunious individual does not
diminish its entitlement to fair notice of the demands that the several States impose on
the conduct of its business. Indeed, its status as an active participant in the national
economy implicates the federal interest in preventing individual States from imposing
undue burdens on interstate commerce. While each State has ample power to protect
its own consumers, none may use the punitive damages deterrent as a means of
imposing its regulatory policies on the entire Nation.
As in Haslip, we are not prepared to draw a bright line marking the limits of a
constitutionally acceptable punitive damages award. Unlike that case, however, we are
fully convinced that the grossly excessive award imposed in this
586
case transcends the constitutional limitY Whether the appropriate remedy requires a
new trial or merely an independent determination by the Alabama Supreme Court of
the award necessary to vindicate the economic interests of Alabama consumers is a
matter that should be addressed by the state court in the first instance.
The judgment is reversed, and the case is remanded for further proceedings not
inconsistent with this opinion.
It is so ordered.
JUSTICE BREYER, with whom JUSTICE O'CONNOR and JUSTICE SOUTER join,
concurring.
The Alabama state courts have assessed the defendant $2 million in "punitive damages"
for having knowingly failed to tell a BMW automobile buyer that, at a cost of $600, it
had repainted portions of his new $40,000 car, thereby lowering its potential resale
value by about 10%. The Court's opinion, which I join, explains why we have concluded
that this award, in this case, was "grossly excessive" in relation to legitimate punitive
damages objectives, and hence an arbitrary deprivation of life, liberty, or property in
violation of the Due Process Clause. See TXO Production Corp. v. Alliance Resources
Corp., 509 U. S. 443, 453, 454 (1993) (A "grossly excessive" punitive award amounts to
an "arbitrary deprivation of property without due process of law") (pluralityopinion).
Members of this Court have generally thought, however, that if "fair procedures were
followed, a judgment that is a product of that process is entitled to a strong pre-
41JUSTICE GINSBURG expresses concern that we are "the only federal court policing"
this limit. Post, at 613. The small number of punitive damages questions that we have
reviewed in recent years, together with the fact that this is the first case in decades in
which we have found that a punitive damages award exceeds the constitutional limit,
indicates that this concern is at best premature. In any event, this consideration surely
does not justify an abdication of our responsibility to enforce constitutional protections
in an extraordinary case such as this one.
587
sumption of validity." Id., at 457. See also Pacific Mut. Life Ins. Co. v. Has lip, 499 U. S. 1,
40-42 (1991) (KENNEDY, J., concurring in judgment). And the Court also has found that
punitive damages procedures very similar to those followed here were not, by
themselves, fundamentally unfair. Id., at 15-24. Thus, I believe it important to explain
why this presumption of validity is overcome in this instance.
The reason flows from the Court's emphasis in Haslip upon the constitutional
importance of legal standards that provide "reasonable constraints" within which
"discretion is exercised," that assure "meaningful and adequate review by the trial court
whenever a jury has fixed the punitive damages," and permit "appellate review [that]
makes certain that the punitive damages are reasonable in their amount and rational in
light of their purpose to punish what has occurred and to deter its repetition." Id., at 20-
21. See also id., at 18 ("[U]nlimited jury discretion-or unlimited judicial discretion for
that matter-in the fixing of punitive damages may invite extreme results that jar one's
constitutional sensibilities").
This constitutional concern, itself harkening back to the Magna Carta, arises out of the
basic unfairness of depriving citizens of life, liberty, or property, through the application,
not of law and legal processes, but of arbitrary coercion. Daniels v. Williams, 474 U. S.
327, 331 (1986); Dent v. West Virginia, 129 U. S. 114, 123 (1889). Requiring the
application of law, rather than a decisionmaker's caprice, does more than simply
provide citizens notice of what actions may subject them to punishment; it also helps to
assure the uniform general treatment of similarly situated persons that is the essence of
law itself. See Railway Express Agency, Inc. v. New York, 336 U. S. 106, 112 (1949)
(Jackson, J., concurring) ("[T]here is no more effective practical guaranty against
arbitrary and unreasonable government than to require that the principles of law which
officials would impose upon a minority must be imposed generally").
588
Legal standards need not be precise in order to satisfy this constitutional concern.
See Haslip, supra, at 20 (comparing punitive damages standards to such legal standards
as "reasonable care," "due diligence," and "best interests of the child") (internal
quotation marks omitted). But they must offer some kind of constraint upon a jury or
court's discretion, and thus protection against purely arbitrary behavior. The standards
the Alabama courts applied here are vague and open ended to the point where they risk
arbitrary results. In my view, although the vagueness of those standards does not, by
itself, violate due process, see Has lip, supra, it does invite the kind of scrutiny the Court
has given the particular verdict before us. See id., at 18 ("[C]oncerns of ... adequate
guidance from the court when the case is tried to a jury properly enter into the
constitutional calculus"); TXO, supra, at 475 ("[I]t cannot be denied that the lack of clear
guidance heightens the risk that arbitrariness, passion, or bias will replace dispassionate
deliberation as the basis for the jury's verdict") (O'CONNOR, J., dissenting). This is
because the standards, as the Alabama Supreme Court authoritatively interpreted them
here, provided no significant constraints or protection against arbitrary results.
First, the Alabama statute that permits punitive damages does not itself contain a
standard that readily distinguishes between conduct warranting very small, and conduct
warranting very large, punitive damages awards. That statute permits punitive damages
in cases of "oppression, fraud, wantonness, or malice." Ala. Code §6-11-20(a) (1993).
But the statute goes on to define those terms broadly, to encompass far more than the
egregious conduct that those terms, at first reading, might seem to imply. An intentional
misrepresentation, made through a statement or silence, can easily amount to "fraud"
sufficient to warrant punitive damages. See § 6-11-20(b)(1) ("Fraud" includes
"intentional ... concealment of a material fact the concealing party had a
589
duty to disclose, which was gross, oppressive, or malicious and committed with the
intention ... of thereby depriving a person or entity of property") (emphasis added); § 6-
1120(b)(2) ("Malice" includes any "wrongful act without just cause or excuse ... [w]ith an
intent to injure the ... property of another") (emphasis added); § 6-11-20(b)(5)
("Oppression" includes "[sJubjecting a person to ... unjust hardship in conscious
disregard of that person's rights"). The statute thereby authorizes punitive damages for
the most serious kinds of misrepresentations, say, tricking the elderly out of their life
savings, for much less serious conduct, such as the failure to disclose repainting a car, at
issue here, and for a vast range of conduct in between.
Second, the Alabama courts, in this case, have applied the "factors" intended to
constrain punitive damages awards in a way that belies that purpose. Green Oil
Co. v. Hornsby, 539 So. 2d 218 (Ala. 1989), sets forth seven factors that appellate courts
use to determine whether or not a jury award was "grossly excessive" and which, in
principle, might make up for the lack of significant constraint in the statute. But, as the
Alabama courts have authoritatively interpreted them, and as their application in this
case illustrates, they impose little actual constraint.
(a) Green Oil requires that a punitive damages award "bear a reasonable relationship to
the harm that is likely to occur from the defendant's conduct as well as to the harm that
actually has occurred." Id., at 223. But this standard does little to guide a determination
of what counts as a "reasonable" relationship, as this case illustrates. The record
evidence of past, present, or likely future harm consists of (a) $4,000 of harm to Dr.
Gore's BMW; (b) 13 other similar Alabama instances; and (c) references to about 1,000
similar instances in other States. The Alabama Supreme Court, disregarding BMW's
failure to make relevant objection to the out-of-state instances at trial (as was the
court's right), held that the last mentioned, out-of-state instances did not
590
count as relevant harm. It went on to find "a reasonable relationship" between the
harm and the $2 million punitive damages award without "consider[ing] those acts that
occurred in other jurisdictions." 646 So. 2d 619, 628 (1994) (emphasis added). For
reasons explored by the majority in greater depth, see ante, at 574-586, the relationship
between this award and the underlying conduct seems well beyond the bounds of the
"reasonable." To find a "reasonable relationship" between purely economic harm
totaling $56,000, without significant evidence of future repetition, and a punitive award
of $2 million is to empty the "reasonable relationship" test of meaningful content. As
thus construed, it does not set forth a legal standard that could have significantly
constrained the discretion of Alabama factfinders.
(b) Green Oil's second factor is the "degree of reprehensibility" of the defendant's
conduct. Green Oil, supra,at 223. Like the "reasonable relationship" test, this factor
provides little guidance on how to relate culpability to the size of an award. The
Alabama court, in considering this factor, found "reprehensible" that BMW followed a
conscious policy of not disclosing repairs to new cars when the cost of repairs amounted
to less than 3% of the car's value. Of course, any conscious policy of not disclosing a
repair-where one knows the nondisclosure might cost the customer resale value-is
"reprehensible" to some degree. But, for the reasons discussed by the majority, ante, at
575-580, I do not see how the Alabama courts could find conduct that (they assumed)
caused $56,000 of relevant economic harm especially or unusually reprehensible
enough to warrant $2 million in punitive damages, or a significant portion of that award.
To find to the contrary, as the Alabama courts did, is not simply unreasonable; it is to
make "reprehensibility" a concept without constraining force, i. e., to deprive the
concept of its constraining power to protect against serious and capricious deprivations.
591
(c) Green Oil's third factor requires "punitive damages" to "remove the profit" of the
illegal activity and "be in excess of the profit, so that the defendant recognizes a
loss." Green Oil, 539 So. 2d, at 223. This factor has the ability to limit awards to a fixed,
rational amount. But as applied, that concept's potential was not realized, for the court
did not limit the award to anywhere near the $56,000 in profits evidenced in the record.
Given the record's description of the conduct and its prevalence, this factor could not
justify much of the $2 million award.
(d) Green Oil's fourth factor is the "financial position" of the defendant. Ibid. Since a
fixed dollar award will punish a poor person more than a wealthy one, one can
understand the relevance of this factor to the State's interest in retribution (though not
necessarily to its interest in deterrence, given the more distant relation between a
defendant's wealth and its responses to economic incentives). See TXO, 509 U. S., at
462, and n. 28 (plurality opinion); id., at 469 (KENNEDY, J., concurring in part and
concurring in judgment); Has lip,499 U. S., at 21-22; Browning-Ferris Industries of Vt.,
Inc. v. Kelco Disposal, Inc., 492 U. S. 257, 300 (1989) (O'CONNOR, J., concurring in part
and dissenting in part). This factor, however, is not necessarily intended to act as a
significant constraint on punitive awards. Rather, it provides an open-ended basis for
inflating awards when the defendant is wealthy, as this case may illustrate. That does
not make its use unlawful or inappropriate; it simply means that this factor cannot make
up for the failure of other factors, such as "reprehensibility," to constrain significantly an
award that purports to punish a defendant's conduct.
(e) Green Oil's fifth factor is the "costs of litigation" and the State's desire "to encourage
plaintiffs to bring wrongdoers to trial." 539 So. 2d, at 223. This standard provides
meaningful constraint to the extent that the enhancement it authorized is linked to a
fixed, ascertainable amount approximating actual costs, even when defined generously
to reflect
592
the contingent nature of plaintiffs' victories. But as this case shows, the factor cannot
operate as a constraint when an award much in excess of costs is approved for other
reasons. An additional aspect of the standard-the need to "encourage plaintiffs to bring
wrongdoers to trial"-is a factor that does not constrain, but enhances, discretionary
power-especially when unsupported by evidence of a special need to encourage
litigation (which the Alabama courts here did not mention).
(f) Green Oil's sixth factor is whether or not "criminal sanctions have been imposed on
the defendant for his conduct." Ibid. This factor did not apply here.
(g) Green Oil's seventh factor requires that "other civil actions" filed "against the same
defendant, based on the same conduct," be considered in mitigation. Id., at 224. That
factor did not apply here.
Thus, the first, second, and third Green Oil factors, in principle, might sometimes act as
constraints on arbitrary behavior. But as the Alabama courts interpreted those
standards in this case, even taking those three factors together, they could not have
significantly constrained the court system's ability to impose "grossly excessive" awards.
Third, the state courts neither referred to, nor made any effort to find, nor enunciated
any other standard that either directly, or indirectly as background, might have supplied
the constraining legal force that the statute and Green Oil standards (as interpreted
here) lack. Dr. Gore did argue to the jury an economic theory based on the need to
offset the totality of the harm that the defendant's conduct caused. Some theory of that
general kind might have provided a significant constraint on arbitrary awards (at least
where confined to the relevant harm-causing conduct, see ante, at 570-574). Some
economists, for example, have argued for a standard that would deter illegal activity
causing solely economic harm through the use of punitive damages awards that, as a
whole, would take from a wrongdoer the total cost of the
593
harm caused. See, e. g., S. Shavell, Economic Analysis of Accident Law 162 (1987) ("If
liability equals losses caused multiplied by ... the inverse of the probability of suit,
injurers will act optimally under liability rules despite the chance that they will escape
suit"); Cooter, Punitive Damages for Deterrence: When and How Much, 40 Ala. L. Rev.
1143, 1146-1148 (1989). My understanding of the intuitive essence of some of those
theories, which I put in crude form (leaving out various qualifications), is that they could
permit juries to calculate punitive damages by making a rough estimate of global harm,
dividing that estimate by a similarly rough estimate of the number of successful lawsuits
that would likely be brought, and adding generous attorney's fees and other costs.
Smaller damages would not sufficiently discourage firms from engaging in the harmful
conduct, while larger damages would "over-deter" by leading potential defendants to
spend more to prevent the activity that causes the economic harm, say, through
employee training, than the cost of the harm itself. See Galligan, Augmented Awards:
The Efficient Evolution of Punitive Damages, 51 La. L. Rev. 3, 17-20, 28-30 (1990). Larger
damages might also "double count" by including in the punitive damages award some of
the compensatory, or punitive, damages that subsequent plaintiffs would also recover.
The record before us, however, contains nothing suggesting that the Alabama Supreme
Court, when determining the allowable award, applied any "economic" theory that
might explain the $2 million recovery. Cf. Browning-Ferris, supra, at 300 (noting that the
Constitution "does not incorporate the views of the Law and Economics School," nor
does it " 'require the States to subscribe to any particular economic theory''')
(O'CONNOR, J., concurring in part and dissenting in part) (quoting CTS Corp. v. Dynamics
Corp. of America, 481U. S. 69, 92 (1987)). And courts properly tend to judge the
rationality of judicial actions in terms of the reasons that were given, and the facts that
were before the court, cf. TXO,
594
509 U. S., at 468 (KENNEDY, J., concurring in part and concurring in judgment), not those
that might have been given on the basis of some conceivable set of facts (unlike the
rationality of economic statutes enacted by legislatures subject to the public's control
through the ballot box, see, e. g., FCC v. Beach Communications, Inc., 508 U. S. 307, 315
(1993)). Therefore, reference to a constraining "economic" theory, which might have
counseled more deferential review by this Court, is lacking in this case.
Fourth, I cannot find any community understanding or historic practice that this award
might exemplify and which, therefore, would provide background standards
constraining arbitrary behavior and excessive awards. A punitive damages award of $2
million for intentional misrepresentation causing $56,000 of harm is extraordinary by
historical standards, and, as far as I am aware, finds no analogue until relatively recent
times. Amici for Dr. Gore attempt to show that this is not true, pointing to various
historical cases which, according to their calculations, represented roughly equivalent
punitive awards for similarly culpable conduct. See Brief for James D. A. Boyle et al.
as Amici Curiae 4-5 (hereinafter Legal Historians' Brief). Among others, they
cite Wilkes v. Wood, Lofft 1, 98 Eng. Rep. 489 (C. P. 1763) (£1,000 said to be equivalent
of $1.5 million, for warrantless search of papers); Huckle v. Money, 2 Wills. 205, 95 Eng.
Rep. 768 (K. B. 1763) (£300, said to be $450,000, for 6-hour false
imprisonment); Hewlett v. Cruchley, 5 Taunt. 277, 128 Eng. Rep. 696 (C. P. 1813)
(£2,000, said to be $680,000, for malicious prosecution); Merest v. Harvey, 5 Taunt. 442,
128 Eng. Rep. 761 (C. P. 1814) (£500, said to be $165,000, for poaching).
But amici apparently base their conversions on a mathematical assumption, namely,
that inflation has progressed at a constant 3% rate of inflation. See Legal Historians'
Brief 4. In fact, consistent, cumulative inflation is a modern phenomenon. See
McCusker, How Much Is That in Real Money? A Historical Price Index for Use as a
Deflator

595
of Money Values in the Economy of the United States, 101 Proceedings of American
Antiquarian Society 297, 310, 323332 (1992). Estimates based on historical rates of
valuation, while highly approximate, suggest that the ancient extraordinary awards are
small compared to the $2 million here at issue, or other modern punitive damages
figures. See Appendix to this opinion, infra, at 597-598 (suggesting that the modern
equivalent of the awards in the above cases is something like $150,000, $45,000,
$100,000, and $25,000, respectively). And, as the majority opinion makes clear, the
record contains nothing to suggest that the extraordinary size of the award in this case
is explained by the extraordinary wrongfulness of the defendant's behavior, measured
by historical or community standards, rather than arbitrariness or caprice.
Fifth, there are no other legislative enactments here that classify awards and impose
quantitative limits that would significantly cabin the fairly unbounded discretion created
by the absence of constraining legal standards. Cf., e. g., Tex. Civ. Prac. & Rem. Code
Ann. § 41.008 (Supp. 1996) (punitive damages generally limited to greater of double
damages, or $200,000, except cap does not apply to suits arising from certain serious
criminal acts enumerated in the statute); Conn. Gen. Stat. § 52-240b (1995) (punitive
damages may not exceed double compensatory damages in product liability cases); Fla.
Stat. § 768.73(1) (Supp. 1993) (punitive damages in certain actions limited to treble
compensatory damages); Ga. Code Ann. § 51-12-5.1(g) (Supp. 1995) ($250,000 cap in
certain actions).
The upshot is that the rules that purport to channel discretion in this kind of case, here
did not do so in fact. That means that the award in this case was both (a) the product of
a system of standards that did not significantly constrain a court's, and hence a jury's,
discretion in making that award; and (b) grossly excessive in light of the State's
legitimate punitive damages objectives.
596
The first of these reasons has special importance where courts review a jury-determined
punitive damages award. That is because one cannot expect to direct jurors like
legislators through the ballot box; nor can one expect those jurors to interpret law like
judges, who work within a discipline and hierarchical organization that normally
promotes roughly uniform interpretation and application of the law. Yet here Alabama
expects jurors to act, at least a little, like legislators or judges, for it permits them, to a
certain extent, to create public policy and to apply that policy, not to compensate a
victim, but to achieve a policy-related objective outside the confines of the particular
case.
To the extent that neither clear legal principles nor fairly obvious historical or
community-based standards (defining, say, especially egregious behavior) significantly
constrain punitive damages awards, is there not a substantial risk of outcomes so
arbitrary that they become difficult to square with the Constitution's assurance, to every
citizen, of the law's protection? The standards here, as authoritatively interpreted, in my
view, make this threat real and not theoretical. And, in these unusual circumstances,
where legal standards offer virtually no constraint, I believe that this lack of constraining
standards warrants this Court's detailed examination of the award.
The second reason-the severe disproportionality between the award and the legitimate
punitive damages objectivesreflects a judgment about a matter of degree. I recognize
that it is often difficult to determine just when a punitive award exceeds an amount
reasonably related to a State's legitimate interests, or when that excess is so great as to
amount to a matter of constitutional concern. Yet whatever the difficulties of drawing a
precise line, once we examine the award in this case, it is not difficult to say that this
award lies on the line's far side. The severe lack of proportionality between the size of
the award and the underlying punitive damages objectives shows that the award falls
into the cate-
597
gory of "gross excessiveness" set forth in this Court's prior cases.
These two reasons taken together overcome what would otherwise amount to a "strong
presumption of validity." TXO, 509 D. S., at 457. And, for those two reasons, I conclude
that the award in this unusual case violates the basic guarantee of nonarbitrary
governmental behavior that the Due Process Clause provides.
APPENDIX TO OPINION OF BREYER, J.
Although I recognize that all estimates of historic rates of inflation are subject to
dispute, including, I assume, the sources below, those sources suggest that the value of
the 18th and 19th century judgments cited by amici is much less than the
figures amici arrived at under their presumption of a constant 3% rate of inflation.
In 1763, £1 (Eng.) was worth £1.73 Pennsylvania currency.
See D. S. Bureau of the Census, Historical Statistics of the United States: Colonial Times
to 1970, Series Z-585, p. 1198 (Bicentennial ed. 1975). For the period 1766-1772, £1
(Penn.) was worth $45.99 (D. S. 1991). See McCusker, How Much Is That in Real Money?
A Historical Price Index for Use as a Deflator of Money Values in the Economy of the
United States, 101 American Antiquarian Society 297, 333 (1992). Thus, £1 (Eng. 1763) is
worth about $79.56 (D. S. 1991). Accounting for the 12% inflation of the D. S. dollar
between 1991 and 1995 (when amici filed their brief), see Economic Indicators, 104th
Cong., 2d Sess., p. 23 (Feb. 1996), £1 (Eng. 1763) is worth about $89.11 (D. S. 1995).
Calculated another way, £1 (Eng. 1763) is worth about £72.84 (Eng. 1991). See
McCusker, supra, at 312, 342, 350. And £1 (Eng. 1991) is worth $1.77 (D. S. 1991). See
78 Fed. Reserve Bulletin A68 (Feb. 1992). Thus, £1 (Eng. 1763) amounts to about
$128.93 (D. S. 1991). Again, accounting for inflation between 1991 and 1995, this
amounts to about $144.40 (D. S. 1995).
598
Thus, the above sources suggest that the £1,000 award in Wilkes in 1763 roughly
amounts to between $89,110 and $144,440 today, not $1.5 million. And the £300 award
in Huckle that same year would seem to be worth between $26,733 and $43,320 today,
not $450,000.
For the period of the Hewlett and Merest decisions, £1 (Eng. 1813) is worth about £25.3
(Eng. 1991). See McCusker, supra, at 344, 350. U sing the 1991 exchange rate, £1 (Eng.
1813) is worth about $44.78 (D. S. 1991). Accounting for inflation between 1991 and
1995, this amounts to about $50.16 (D. S. 1995).
Thus, the £2,000 and £500 awards in Hewlett and Merest would seem to be closer to
$100,320 and $25,080, respectively, than to amici's estimates of $680,000 and
$165,000.
JUSTICE SCALIA, with whom JUSTICE THOMAS joins, dissenting.
Today we see the latest manifestation of this Court's recent and increasingly insistent
"concern about punitive damages that 'run wild.'" Pacific Mut. Life Ins. Co. v. Has lip, 499
D. S. 1, 18 (1991). Since the Constitution does not make that concern any of our
business, the Court's activities in this area are an unjustified incursion into the province
of state governments.
In earlier cases that were the prelude to this decision, I set forth my view that a state
trial procedure that commits the decision whether to impose punitive damages, and the
amount, to the discretion of the jury, subject to some judicial review for
"reasonableness," furnishes a defendant with all the process that is "due." See TXO
Production Corp. v. Alliance Resources Corp., 509 D. S. 443, 470 (1993) (SCALIA, J.,
concurring in judgment); Haslip, supra, at 25-28 (SCALIA, J., concurring in judgment);
cf. Honda Motor Co. v. Oberg, 512 D. S. 415, 435-436 (1994) (SCALIA, J., concurring). I do
not regard the Fourteenth Amendment's Due Process Clause as a secret repository of
substantive guarantees against
599
"unfairness"-neither the unfairness of an excessive civil compensatory award, nor the
unfairness of an "unreasonable" punitive award. What the Fourteenth Amendment's
procedural guarantee assures is an opportunity to contest the reasonableness of a
damages judgment in state court; but there is no federal guarantee a damages award
actually be reasonable. See TXO, supra, at 471 (SCALIA, J., concurring in judgment).
This view, which adheres to the text of the Due Process Clause, has not prevailed in our
punitive damages cases. See TXO, 509 U. S., at 453-462 (plurality opinion); id., at 478481
(O'CONNOR, J., dissenting); Haslip, supra, at 18. When, however, a constitutional
doctrine adopted by the Court is not only mistaken but also insusceptible of principled
application, I do not feel bound to give it stare decisis effectindeed, I do not feel justified
in doing so. See, e. g., Witte v. United States, 515 U. S. 389, 406 (1995) (SCALIA, J.,
concurring in judgment); Walton v. Arizona, 497 U. S. 639, 673 (1990) (SCALIA, J.,
concurring in judgment in part and dissenting in part). Our punitive damages
jurisprudence compels such a response. The Constitution provides no warrant for
federalizing yet another aspect of our Nation's legal culture (no matter how much in
need of correction it may be), and the application of the Court's new rule of
constitutional law is constrained by no principle other than the Justices' subjective
assessment of the "reasonableness" of the award in relation to the conduct for which it
was assessed.
Because today's judgment represents the first instance of this Court's invalidation of a
state-court punitive assessment as simply unreasonably large, I think it a proper
occasion to discuss these points at some length.
I
The most significant aspects of today's decision-the identification of a "substantive due
process" right against a "grossly excessive" award, and the concomitant assumption
600
of ultimate authority to decide anew a matter of "reasonableness" resolved in lower
court proceedings-are of course not new. Haslip and TXO revived the notion, moribund
since its appearance in the first years of this century, that the measure of civil
punishment poses a question of constitutional dimension to be answered by this Court.
N either of those cases, however, nor any of the precedents upon which they relied,
actually took the step of declaring a punitive award unconstitutional simply because it
was "too big."
At the time of adoption of the Fourteenth Amendment, it was well understood that
punitive damages represent the assessment by the jury, as the voice of the community,
of the measure of punishment the defendant deserved.
See, e. g., Barry v. Edmunds, 116 U. S. 550, 565 (1886); Missouri Pacific R.
Co. v. Humes,115 U. S. 512, 521 (1885); Day v. Woodworth, 13 How. 363, 371 (1852).
See generally Haslip, supra, at 25-27 (SCALIA, J., concurring in judgment). Today's
decision, though dressed up as a legal opinion, is really no more than a disagreement
with the community's sense of indignation or outrage expressed in the punitive award
of the Alabama jury, as reduced by the State Supreme Court. It reflects not merely, as
the concurrence candidly acknowledges, "a judgment about a matter of
degree," ante, at 596; but a judgment about the appropriate degree of indignation or
outrage, which is hardly an analytical determination.
There is no precedential warrant for giving our judgment priority over the judgment of
state courts and juries on this matter. The only support for the Court's position is to be
found in a handful of errant federal cases, bunched within a few years of one other,
which invented the notion that an unfairly severe civil sanction amounts to a violation of
constitutionalliberties. These were the decisions upon which the TXOplurality relied in
pronouncing that the Due Process Clause "imposes substantive limits 'beyond which
penalties may not go,'" 509 U. S., at 454 (quoting Seaboard Air Line R.
Co. v. Seegers, 207 U. S. 73, 78 (1907)); see also 509 U. S.,
601
at 478-481 (O'CONNOR, J., dissenting); Has lip, supra, at 18. Although they are our
precedents, they are themselves too shallowly rooted to justify the Court's recent
undertaking. The only case relied upon in which the Court actually invalidated a civil
sanction does not even support constitutional review for excessiveness, since it really
concerned the validity, as a matter of procedural due process, of state legislation that
imposed a significant penalty on a common carrier which lacked the means of
determining the legality of its actions before the penalty was imposed.
See Southwestern Telegraph & Telephone Co. v. Danaher, 238 U. S. 482, 489-491 (1915).
The amount of the penalty was not a subject of independent scrutiny. As for the
remaining cases, while the opinions do consider arguments that statutory penalties can,
by reason of their excessiveness, violate due process, not a single one of these
judgments invalidates a damages award. See Seaboard, supra,at 78-79; Waters-Pierce
Oil Co. v. Texas (No.1), 212 U. S. 86, 111-112 (1909); Standard Oil Co. of
Ind. v. Missouri,224 U. S. 270, 286, 290 (1912); St. Louis,
More importantly, this latter group of cases-which again are the sole precedential
foundation put forward for the rule of constitutional law espoused by today's Court-
simply fabricated the "substantive due process" right at issue. Seaboard assigned no
precedent to its bald assertion that the Constitution imposes "limits beyond which
penalties may not go," 207 U. S., at 78. Waters-Pierce cited only Coffey v. County of
Harlan, 204 U. S. 659 (1907), a case which inquired into the constitutionality of
state procedure, id., at 662-663. Standard Oil simply cited Waters-Pierce, and St.
Louis, 1. M. & S. R. Co. offered in addition to these cases only Collins v. Johnston, 237 U.
S. 502 (1915), which said nothing to support the notion of a "substantive due process"
right against excessive civil penalties, but to the contrary asserted that the prescribing
and imposing of criminal punishment were "functions peculiarly belonging to the several
States,"
602
id., at 509-510. Thus, the only authority for the Court's position is simply not
authoritative. These cases fall far short of what is needed to supplant this country's
longstanding practice regarding exemplary awards, see, e. g., Has lip, 499 U. S., at 15-
18; id., at 25-28 (SCALIA, J., concurring in judgment).
II
One might understand the Court's eagerness to enter this field, rather than leave it with
the state legislatures, if it had something useful to say. In fact, however, its opinion
provides virtually no guidance to legislatures, and to state and federal courts, as to what
a "constitutionally proper" level of punitive damages might be.
We are instructed at the outset of Part II of the Court's opinion-the beginning of its
substantive analysis-that "the federal excessiveness inquiry ... begins with an
identification of the state interests that a punitive award is designed to serve." Ante, at
568. On first reading this, one is faced with the prospect that federal punitive damages
law (the new field created by today's decision) will be beset by the sort of "interest
analysis" that has laid waste the formerly comprehensible field of conflict of laws. The
thought that each assessment of punitive damages, as to each offense, must be
examined to determine the precise "state interests" pursued, is most unsettling.
Moreover, if those "interests" are the most fundamental determinant of an award, one
would think that due process would require the assessing jury to be instructed about
them.
It appears, however (and I certainly hope), that all this is a false alarm. As Part II of the
Court's opinion unfolds, it turns out to be directed, not to the question "How much
punishment is too much?" but rather to the question "Which acts can be punished?"
"Alabama does not have the power," the Court says, "to punish BMW for conduct that
was lawful where it occurred and that had no impact on Alabama or its
residents." Ante, at 572-573. That may be true, though
603
only in the narrow sense that a person cannot be held liable to be punished on the basis
of a lawful act. But if a person has been held subject to punishment because he
committed an unlawful act, the degree of his punishment assuredly can be increased on
the basis of any other conduct of his that displays his wickedness, unlawful or not.
Criminal sentences can be computed, we have said, on the basis of "information
concerning every aspect of a defendant's life," Williams v. New York, 337 U. S. 241, 250-
252 (1949). The Court at one point seems to acknowledge this, observing that, although
a sentencing court "[cannot] properly punish lawful conduct," it may in assessing the
penalty "consider ... lawful conduct that bears on the defendant's character." Ante, at
573, n. 19. That concession is quite incompatible, however, with the later assertion that,
since "neither the jury nor the trial court was presented with evidence that any of
BMW's out-of-state conduct was unlawful," the Alabama Supreme Court "therefore
properly eschewed reliance on BMW's outof-state conduct, ... and based its remitted
award solely on conduct that occurred within Alabama." Ante, at 573-574. Why could
the Supreme Court of Alabama not consider lawful (but disreputable) conduct, both
inside and outside Alabama, for the purpose of assessing just how bad an actor
BMWwas?
The Court follows up its statement that "Alabama does not have the power ... to punish
BMW for conduct that was lawful where it occurred" with the statement: "Nor may
Alabama impose sanctions on BMW in order to deter conduct that is lawful in other
jurisdictions." Ante, at 572-573. The Court provides us no citation of authority to
support this proposition-other than the barely analogous cases cited earlier in the
opinion, see ante, at 571-572-and I know of none.
These significant issues pronounced upon by the Court are not remotely presented for
resolution in the present case. There is no basis for believing that Alabama has sought to
control conduct elsewhere. The statutes at issue merely
604
permit civil juries to treat conduct such as petitioner's as fraud, and authorize an award
of appropriate punitive damages in the event the fraud is found to be "gross,
oppressive, or malicious," Ala. Code § 6-11-20(b)(1) (1993). To be sure, respondent did
invite the jury to consider out-of-state conduct in its calculation of damages, but any
increase in the jury's initial award based on that consideration is not a component of the
remitted judgment before us. As the Court several times recognizes, in computing the
amount of the remitted award the Alabama Supreme Court-whether it was
constitutionally required to or not-"expressly disclaimed any reliance on acts that
occurred in other jurisdictions." Ante, at 567 (internal quotation marks omitted); see
also ante, at 573-574.* Thus, the only question presented by this case is whether that
award, limited to petitioner's Alabama conduct and viewed in light of the factors
identified as properly informing the inquiry, is excessive. The Court's sweeping (and
largely unsupported) statements regarding the relationship of punitive awards to lawful
or unlawful out-of-state conduct are the purest dicta.
III
In Part III of its opinion, the Court identifies "[t]hree guideposts" that lead it to the
conclusion that the award in this case is excessive: degree of reprehensibility, ratio
between punitive award and plaintiff's actual harm, and legisla-
*The Alabama Supreme Court said:
"[W]e must conclude that the award of punitive damages was based in large part on
conduct that happened in other jurisdictions .... Although evidence of similar acts in
other jurisdictions is admissible as to the issue of 'pattern and practice' of such acts, ...
this jury could not use the number of similar acts that a defendant has committed in
other jurisdictions as a multiplier when determining the dollar amount of a punitive
damages award. Such evidence may not be considered in setting the size of the civil
penalty, because neither the jury nor the trial court had evidence before it showing in
which states the conduct was wrongful." 646 So. 2d 619, 627 (1994).
605
tive sanctions provided for comparable misconduct. Ante, at 574-585. The legal
significance of these "guideposts" is nowhere explored, but their necessary effect is to
establish federal standards governing the hitherto exclusively state law of damages.
Apparently (though it is by no means clear) all three federal "guideposts" can be
overridden if "necessary to deter future misconduct," ante, at 584-a loophole that will
encourage state reviewing courts to uphold awards as necessary for the "adequat[e]
protect[ion]" of state consumers, ibid. By effectively requiring state reviewing courts to
concoct rationalizations-whether within the "guideposts" or through the loophole-to
justify the intuitive punitive reactions of state juries, the Court accords neither category
of institution the respect it deserves.
Of course it will not be easy for the States to comply with this new federal law of
damages, no matter how willing they are to do so. In truth, the "guideposts" mark a
road to nowhere; they provide no real guidance at all. As to "degree of reprehensibility"
of the defendant's conduct, we learn that "'nonviolent crimes are less serious than
crimes marked by violence or the threat of violence,'" ante, at 576
(quoting Solem v. Helm, 463 U. S. 277, 292-293 (1983)), and that "'trickery and deceit'"
are "more reprehensible than negligence," ante, at 576. As to the ratio of punitive to
compensatory damages, we are told that a "'general concer[n] of reasonableness ...
enter[s] into the constitutional calculus,'" ante, at 583 (quoting TXO, 509 U. S., at 458)-
though even "a breathtaking 500 to 1" will not necessarily do anything more than "'raise
a suspicious judicial eyebrow,'" ante, at 583 (quoting TXO, supra, at 481 (O'CONNOR, J.,
dissenting), an opinion which, when confronted with that "breathtaking" ratio,
approved it). And as to legislative sanctions provided for comparable misconduct, they
should be accorded "'substantial deference,'" ante, at 583 (quoting Browning-Ferris
Industries of Vt., Inc. v. Kelco Disposal, Inc., 492 U. S. 257, 301 (1989) (O'CONNOR, J.,
concurring in part and dissenting
606
in part)). One expects the Court to conclude: "To thine own self be true."
These crisscrossing platitudes yield no real answers in no real cases. And it must be
noted that the Court nowhere says that these three "guideposts" are
the only guideposts; indeed, it makes very clear that they are not-explaining away the
earlier opinions that do not really follow these "guideposts" on the basis
of additional factors, thereby "reiterat[ing] our rejection of a categorical
approach." Ante, at 582. In other words, even these utter platitudes, if they should ever
happen to produce an answer, may be overridden by other unnamed considerations.
The Court has constructed a framework that does not genuinely constrain, that does not
inform state legislatures and lower courts-that does nothing at all except confer an
artificial air of doctrinal analysis upon its essentially ad hoc determination that this
particular award of punitive damages was not "fair."
The Court distinguishes today's result from Haslip and TXO partly on the ground that
"the record in this case discloses no deliberate false statements, acts of affirmative
misconduct, or concealment of evidence of improper motive, such as were present
in Haslip and TXO." Ante, at 579. This seemingly rejects the findings necessarily made by
the jury-that petitioner had committed a fraud that was "gross, oppressive, or
malicious," Ala. Code §6-11-20(b)(1) (1993). Perhaps that rejection is intentional; the
Court does not say.
The relationship between judicial application of the new "guideposts" and jury findings
poses a real problem for the Court, since as a matter of logic there is no more
justification for ignoring the jury's determination as to how reprehensible petitioner's
conduct was (i. e., how much it deserves to be punished), than there is for ignoring its
determination that it was reprehensible at all (i. e., that the wrong was willful and
punitive damages are therefore recoverable). That the issue has been framed in terms
of a constitutional right against unreasonably excessive awards should not obscure
607
the fact that the logical and necessary consequence of the Court's approach is the
recognition of a constitutional right against unreasonably imposed awards as well. The
elevation of "fairness" in punishment to a principle of "substantive due process" means
that every punitive award unreasonably imposed is unconstitutional; such an award is
by definition excessive, since it attaches a penalty to conduct undeserving of
punishment. Indeed, if the Court is correct, it must be that every claim that a state jury's
award of compensatory damages is "unreasonable" (because not supported by the
evidence) amounts to an assertion of constitutional injury. See TXO, supra, at 471
(SCALIA, J., concurring in judgment). And the same would be true for determinations of
liability. By today's logic, every dispute as to evidentiary sufficiency in a state civil suit
poses a question of constitutional moment, subject to review in this Court. That is a
stupefying proposition.
For the foregoing reasons, I respectfully dissent.
JUSTICE GINSBURG, with whom THE CHIEF JUSTICE joins, dissenting.
The Court, I am convinced, unnecessarily and unwisely ventures into territory
traditionally within the States' domain, and does so in the face of reform measures
recently adopted or currently under consideration in legislative arenas. The Alabama
Supreme Court, in this case, endeavored to follow this Court's prior instructions; and,
more recently, Alabama's highest court has installed further controls on awards of
punitive damages (see infra, at 613-614, n. 6). I would therefore leave the state court's
judgment undisturbed, and resist unnecessary intrusion into an area dominantly of state
concern.
I
The respect due the Alabama Supreme Court requires that we strip from this case a
false issue: No impermissible "extraterritoriality" infects the judgment before us; the
exces-
608
siveness of the award is the sole issue genuinely presented. The Court ultimately so
recognizes, see ante, at 573-574, but further clarification is in order.
Dr. Gore's experience was not unprecedented among customers who bought BMW
vehicles sold as flawless and brand-new. In addition to his own encounter, Gore
showed, through paint repair orders introduced at trial, that on 983 other occasions
since 1983, BMW had shipped new vehicles to dealers without disclosing paint repairs
costing at least $300, Tr. 585-586; at least 14 of the repainted vehicles, the evidence
also showed, were sold as new and undamaged to consumers in Alabama. 646 So. 2d
619, 623 (Ala. 1994). Sales nationwide, Alabama's Supreme Court said, were admissible
"as to the issue of a 'pattern and practice' of such acts." Id., at 627. There was "no
error," the court reiterated, "in the admission of the evidence that showed how
pervasive the nondisclosure policy was and the intent behind BMW NA's adoption of
it." Id., at 628. That determination comports with this Court's expositions. See TXO
Production Corp. v. Alliance Resources Corp., 509 U. S. 443, 462, and n. 28 (1993)
(characterizing as "well-settled" the admissibility of "evidence of [defendant's] alleged
wrongdoing in other parts of the country" and of defendant's "wealth"); see also Brief
for Petitioner 22 (recognizing that similar acts, out-of-state, traditionally have been
considered relevant "for the limited purpose of determining that the conduct before the
[c]ourt was reprehensible because it was part of a pattern rather than an isolated
incident").
Alabama's highest court next declared that the
"jury could not use the number of similar acts that a defendant has committed in other
jurisdictions as a multiplier when determining the dollar amount of a punitive damages
award. Such evidence may not be considered in setting the size of the civil penalty,
because neither the jury nor the trial court had evidence before it showing in which
states the conduct was wrong-
609
ful." 646 So. 2d, at 627 (emphasis in original) (footnote omitted).
Because the Alabama Supreme Court provided this clear statement of the State's law,
the multiplier problem encountered in Gore's case is not likely to occur again. Now, as a
matter of Alabama law, it is plainly impermissible to assess punitive damages by
multiplication based on out-of-state events not shown to be unlawful. See, e. g.,
Independent Life and Accident Ins. Co. v. Harrington, 658 So. 2d 892, 902-903 (Ala. 1994)
(under BMW v. Gore, trial court erred in relying on defendant insurance company's out-
of-state insurance policies in determining harm caused by defendant's unlawful actions).
No Alabama authority, it bears emphasis-no statute, judicial decision, or trial judge
instruction-ever countenanced the jury's multiplication of the $4,000 diminution in
value estimated for each refinished car by the number of such cars (approximately
1,000) shown to have been sold nationwide. The sole prompt to the jury to use
nationwide sales as a multiplier came from Gore's lawyer during summation. App. 31,
Tr. 812-813. Notably, counsel for BMW failed to object to Gore's multiplication
suggestion, even though BMW's counsel interrupted to make unrelated objections four
other times during Gore's closing statement. Tr. 810811, 854-855, 858, 870-871. Nor did
BMW's counsel request a charge instructing the jury not to consider out-of-state sales in
calculating the punitive damages award. See Record 513-529 (listing all charges
requested by counsel).
Following the verdict, BMW's counsel challenged the admission of the paint repair
orders, but not, alternately, the jury's apparent use of the orders in a multiplication
exercise. Curiously, during postverdict argument, BMW's counsel urged that if the repair
orders were indeed admissible, then Gore would have a "full right" to suggest a
multiplier-based disgorgement. Tr. 932.
610
In brief, Gore's case is idiosyncratic. The jury's improper multiplication, tardily featured
by petitioner, is unlikely to recur in Alabama and does not call for error correction by
this Court.
Because the jury apparently (and erroneously) had used acts in other States as a
multiplier to arrive at a $4 million sum for punitive damages, the Alabama Supreme
Court itself determined" 'the maximum amount that a properly functioning jury could
have awarded.'" 646 So. 2d, at 630 (Houston, J., concurring specially) (quoting Big B,
Inc. v. Cottingham, 634 So. 2d 999, 1006 (Ala. 1993)). The per curiam opinion
emphasized that in arriving at $2 million as "the amount of punitive damages to be
awarded in this case, [the court did] not consider those acts that occurred in other
jurisdictions." 646 So. 2d, at 628 (emphasis in original). As this Court recognizes, the
Alabama high court "properly eschewed reliance on BMW's out-of-state conduct and
based its remitted award solely on conduct that occurred within Alabama." Ante, at 573-
574 (citation omitted). In sum, the Alabama Supreme Court left standing the jury's
decision that the facts warranted an award of punitive damages-a determination not
contested in this Court-and the state court concluded that, considering only acts in
Alabama, $2 million was "a constitutionally reasonable punitive damages award." 646
So. 2d, at 629.
II A
Alabama's Supreme Court reports that it "thoroughly and painstakingly" reviewed the
jury's award, ibid.,according to principles set out in its own pathmarking decisions and in
this Court's opinions in TXO and Pacific Mut. Life Ins. Co. v. Has lip, 499 U. S. 1, 21
(1991). 646 So. 2d, at 621. The Alabama court said it gave weight to several factors,
including BMW's deliberate ("reprehensible") presentation of refinished cars as new and
undamaged, without disclosing that the value of those cars had been reduced by an
estimated
611
10%,1 the financial position of the defendant, and the costs of litigation. Id., at 625-626.
These standards, we previously held, "impos[e] a sufficiently definite and meaningful
constraint on the discretion of Alabama factfinders in awarding punitive damages." Has
lip, 499 U. S., at 22; see also TXO, 509 U. S., at 462, n. 28. Alabama's highest court could
have displayed its labor pains more visibly,2 but its judgment is nonetheless entitled to a
presumption of legitimacy. See Rowan v. Runnels, 5 How. 134, 139 (1847) ("[T]his court
will always feel itself bound to respect the decisions of the State courts, and from the
time they are made will regard them as conclusive in all cases upon the construction of
their own constitution and laws.").
We accept, of course, that Alabama's Supreme Court applied the State's own law
correctly. Under that law, the State's objectives-"punishment and deterrence"-guide
punitive damages awards. See Birmingham v. Benson, 631 So. 2d 902, 904 (Ala. 1994).
Nor should we be quick to find a constitutional infirmity when the highest state court
endeavored a corrective for one counsel's slip and the other's oversight-counsel for
plaintiff's excess in summation, unobjected to by counsel for defendant, see supra, at
609-and when the state court did so intending to follow the process approved in
our Haslip and TXO decisions.
B
The Court finds Alabama's $2 million award not simply excessive, but grossly so, and
therefore unconstitutional.
1 According to trial testimony, in late May 1992, BMW began redirecting refinished cars
out of Alabama and two other States. Tr. 964. The jury returned its verdict in favor of
Gore on June 12, 1992. Five days later, BMW changed its national policy to one of full
disclosure. Id., at 1026.
2 See, e. g., Brief for Law and Economics Scholars et al. as Amici Curiae 6-28 (economic
analysis demonstrates that Alabama Supreme Court's judgment was not unreasonable);
W. Landes & R. Posner, Economic Structure of Tort Law 160-163 (1987) (economic
model for assessing propriety of punitive damages in certain tort cases).
612
The decision leads us further into territory traditionally within the States' domain,3 and
commits the Court, now and again, to correct "misapplication of a properly stated rule
of law." But cf. this Court's Rule 10 ("A petition for a writ of certiorari is rarely granted
when the asserted error consists of erroneous factual findings or the misapplication of a
properly stated rule of law.").4 The Court is not well equipped
3 See ante, at 568 ("In our federal system, States necessarily have considerable
flexibility in determining the level of punitive damages that they will allow in different
classes of cases and in any particular case."); Browning-Ferris Industries of Vt.,
Inc. v. Kelco Disposal, Inc., 492 U. S. 257, 278 (1989) (In any "lawsuit where state law
provides the basis of decision, the propriety of an award of punitive damages for the
conduct in question, and the factors the jury may consider in determining their amount,
are questions of state law."); Silkwood v. Kerr-McGee Corp., 464 U. S. 238, 255 (1984)
("Punitive damages have long been a part of traditional state tort law.").
4 Petitioner invites the Court to address the question of multiple punitive damages
awards stemming from the same alleged misconduct. The Court does not take up the
invitation, and rightly so, in my judgment, for this case does not present the issue. For
three reasons, the question of multiple awards is hypothetical, not real, in Gore's case.
First, the punitive damages award in favor of Gore is the only such award yet entered
against BMW on account of its nondisclosure policy.
Second, BMW did not raise the issue of multiple punitives below. Indeed, in its reply
brief before the Alabama Supreme Court, BMW stated:
"Gore confuses our point about fairness among plaintiffs. He treats this point as a
premature 'multiple punitive damages' argument. But, contrary to Gore's contention,
we are not asking this Court to hold, as a matter of law, that a 'constitutional violation
occurs when a defendant is subjected to punitive damages in two separate cases.'''
Reply Brief for Appellant in Nos. 1920324, 1920325 (Ala. Sup. Ct.), p. 48 (internal
citations omitted).
Third, if BMW had already suffered a punitive damages judgment in connection with its
nondisclosure policy, Alabama's highest court presumably would have taken that fact
into consideration. In reviewing punitive damages awards attacked as excessive, the
Alabama Supreme Court considers whether "there have been other civil actions against
the same defendant, based on the same conduct." 646 So. 2d 619, 624 (1994)
(quoting Green Oil Co. v. Hornsby, 539 So. 2d 218, 224 (Ala. 1989)). If so, "this
613
for this mission. Tellingly, the Court repeats that it brings to the task no "mathematical
formula," ante, at 582, no "categorical approach," ibid., no "bright line," ante, at 585. It
has only a vague concept of substantive due process, a "raised eyebrow" test,
see ante, at 583, as its ultimate guide.5
In contrast to habeas corpus review under 28 U. S. C. § 2254, the Court will work at this
business alone. It will not be aided by the federal district courts and courts of appeals. It
will be the only federal court policing the area. The Court's readiness to superintend
state-court punitive damages awards is all the more puzzling in view of the Court's
longstanding reluctance to countenance review, even by courts of appeals, of the size of
verdicts returned by juries in federal district court proceedings. See generally 11 C.
Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 2820 (2d ed. 1995). And
the reexamination prominent in state courts 6 and in legislative arenas, see Appendix,
should be taken into account in mitigation of the punitive damages award." 646 So. 2d,
at 624. The Alabama court accordingly observed that Gore's counsel had filed 24 other
actions against BMW in Alabama and Georgia, but that no other punitive damages
award had so far resulted. Id., at 626.
JUSTICE BREYER'S concurring opinion offers nothing more solid.
Under Pacific Mut. Life Ins. Co. v. Haslip, 499 U. S. 1 (1991), he acknowledges, Alabama's
standards for punitive damages, standing alone, do not violate due process. Ante, at
588. But they "invit[e] the kind of scrutiny the Court has given the particular verdict
before us." Ibid. Pursuing that invitation, JUSTICE BREYER concludes that, matching the
particular facts of this case to Alabama's "legitimate punitive damages
objectives," ante,at 596, the award was" 'gross[ly] excessiv[e],'" ante, at 597. The
exercise is engaging, but ultimately tells us only this: too big will be judged unfair. What
is the Court's measure of too big? Not a cap of the kind a legislature could order, or a
mathematical test this Court can divine and impose. Too big is, in the end, the amount
at which five Members of the Court bridle.
6 See, e. g., Distinctive Printing and Packaging Co. v. Cox, 232 Neb. 846, 857, 443 N. W.
2d 566, 574 (1989) (per curiam) ("[P]unitive, vindictive, or exemplary damages
contravene Neb. Const. art. VII, § 5, and thus are not allowed in this
jurisdiction."); Santana v. Registrars of Voters of Worcester, 398 Mass. 862, 502 N. E. 2d
132 (1986) (punitive damages are not permitted, unless expressly authorized by
statute); Fisher Properties, Inc. v.
614
infra this page, serves to underscore why the Court's enterprise is undue.
For the reasons stated, I dissent from this Court's disturbance of the judgment the
Alabama Supreme Court has made.
OPINION OF KENNEDY, J.
SPECTOR V. NORWEGIAN CRUISE LINE LTD.
545 U. S. ____ (2005)
SUPREME COURT OF THE UNITED STATES
NO. 03-1388
DOUGLAS SPECTOR, et al., PETITIONERS v. NORWEGIAN CRUISE LINE LTD.
on writ of certiorari to the united states court of appeals for the fifth circuit
[June 6, 2005]
Justice Kennedy announced the judgment of the Court and delivered the opinion of
the Court with respect to Parts I, II–A–1, and II–B–2, an opinion with respect to Parts II–
A–2, II–B–1, II–B–3, and III–B, in which Justice Stevens and Justice Souter join, and an
opinion with respect to Part III–A, in which Justice Stevens, Justice Souter, and Justice
Thomas join.
This case presents the question whether Title III of the Americans with Disabilities Act
of 1990 (ADA), 104 Stat. 353, 42 U. S. C. §12181 et seq., applies to foreign-flag cruise
ships in United States waters. The Court of Appeals for the Fifth Circuit held Title III did
not apply because of a presumption, which it sought to derive from this Court’s case
law, that, absent a clear indication of congressional intent, general statutes do not apply
to foreign-flag ships. 356 F. 3d 641, 644–646 (2004). The Court of Appeals for the
Eleventh Circuit, on the other hand, has held that the ADA does apply to foreign-flag
cruise ships in United States waters. See Stevens v. Premier Cruises, Inc., 215 F. 3d 1237
(2000). We granted certiorari to resolve the conflict. 542 U. S. ___ (2004).
Our cases hold that a clear statement of congressional intent is necessary before a
general statutory requirement can interfere with matters that concern a foreign-flag
vessel’s internal affairs and operations, as contrasted with statutory requirements that
concern the security and well-being of United States citizens or territory. While the clear
statement rule could limit Title III’s application to foreign-flag cruise ships in some
instances, when it requires removal of physical barriers, it would appear the rule is
inapplicable to many other duties Title III might impose. We therefore reverse the
decision of the Court of Appeals for the Fifth Circuit that the ADA is altogether
inapplicable to foreign vessels; and we remand for further proceedings.
I would need to make. Id., at 36a–42a. The District Court granted NCL’s motion to dismiss
The respondent Norwegian Cruise Line Ltd. (NCL), a Bermuda Corporation with a
principal place of business in Miami, Florida, operates cruise ships that depart from, and
return to, ports in the United States. The ships are essentially floating resorts. They
provide passengers with staterooms or cabins, food, and entertainment. The cruise
ships stop at different ports of call where passengers may disembark. Most of the
passengers on these cruises are United States residents; under the terms and conditions
of the tickets, disputes between passengers and NCL are to be governed by United
States law; and NCL relies upon extensive advertising in the United States to promote its
cruises and increase its revenues.
Despite the fact that the cruises are operated by a company based in the United
States, serve predominately United States residents, and are in most other respects
United States-centered ventures, almost all of NCL’s cruise ships are registered in other
countries, flying so-called flags of convenience. The two NCL cruise ships that are the
subject of the present litigation, the Norwegian Sea and the Norwegian Star, are both
registered in the Bahamas.
The petitioners are disabled individuals and their companions who purchased tickets
in 1998 or 1999 for round-trip cruises on the Norwegian Sea or the Norwegian Star, with
departures from Houston, Texas. Naming NCL as the defendant, the petitioners filed a
class action in the United States District Court for the Southern District of Texas on
behalf of all persons similarly situated. They sought declaratory and injunctive relief
under Title III of the ADA, which prohibits discrimination on the basis of disability. The
petitioners asserted that cruise ships are covered both by Title III’s prohibition on
discrimination in places of “public accommodation,” §12182(a), and by its prohibition on
discrimination in “specified public transportation services,” §12184(a). Both provisions
require covered entities to make “reasonable modifications in policies, practices, or
procedures” to accommodate disabled individuals, §§12182(b)(2)(A)(ii), 12184(b)(2)(A),
and re- quire removal of “architectural barriers, and communi- cation barriers that are
structural in nature” where such removal is “readily achievable,” §§12182(b)(2)(A)(iv),
12184(b)(2)(C).
The District Court held that, as a general matter, Title III applies to foreign-flag cruise
ships in United States territorial waters. Civ. Action No. H–00–2649 (SD Tex., Sept. 10,
2002), App. to Pet. for Cert. 35a. The District Court found, however, that the petitioners’
claims regarding physical barriers to access could not go forward because the agencies
charged with promulgating architectural and structural guidelines for ADA compliance
(the Architectural and Transportation Barriers Compliance Board, the Department of
Transportation, and the Department of Justice) had not done so for cruise ships. In
these circumstances, the court held, it is unclear what structural modifications NCL
the barrier-removal claims, but denied NCL’s motion with respect to all the other
claims. Id., at 47a.
The Court of Appeals for the Fifth Circuit affirmed in part and reversed in part. It
reasoned that our cases, particularly Benz v. Compania Naviera Hidalgo, S. A., 353 U. S.
138 (1957), and McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U. S.
10 (1963), stand for the proposition that general statutes do not apply to foreign-flag
vessels in United States territory absent a clear indication of congressional intent. 356
F. 3d, at 644 (“[T]o apply domestic law to foreign vessels entering United States waters,
there must be present the affirmative intention of the Congress clearly expressed”
(quoting Benz, supra, at 147 (internal quotation marks omitted)); 356 F. 3d, at 646
(Benz and McCulloch “prohibit United States courts from applying domestic statutes to
foreign-flagged ships without specific evidence of congressional intent”). As Title III does
not contain a specific provision mandating its application to foreign-flag vessels, the
Court of Appeals sustained the District Court’s dismissal of the petitioners’ barrier-
removal claims on this alternative ground and reversed the District Court on the
remaining Title III claims. 356 F. 3d, at 650–651.
The action was ordered dismissed for failure to state a claim, Fed. Rule Civ.
Proc. 12(b)(6), before extensive discovery. We cannot then discuss the specific
allegations in much detail but must confine our opinion to the relevant general
principles. (On November 24, 2004, the responsible agencies finally did issue draft
guidelines for large passenger vessels and a Notice of Proposed Rulemaking. See 69 Fed.
Reg. 69244, 69249. These developments are not dispositive of the legal question on
which we granted certiorari, and we do not address how they might affect the ultimate
resolution of the petitioners’ claims.)
II
A
1 ships. That formulation is inconsistent with the Court’s case law and with sound
Title III of the ADA prohibits discrimination against the disabled in the full and equal
enjoyment of pub- lic accommodations, 42 U. S. C. §12182(a), and public transportation
services, §12184(a). The general prohi- bitions are supplemented by various, more
specific requirements. Entities that provide public accommo- dations or public
transportation: (1) may not impose “eligibility criteria” that tend to screen out disabled
individuals, §§12182(b)(2)(A)(i), 12184(b)(1); (2) must make “reasonable modifications
in polices, practices, or procedures, when such modifications are necessary” to provide
disabled individuals full and equal enjoy- ment, §§12182(b)(2)(A)(ii), 12184(b)(2)(A); (3)
must pro- vide auxiliary aids and services to disabled individ- uals, §§12182(b)(2)(A)(iii),
12184(b)(2)(B); and (4) must remove architectural and structural barriers, or if barrier
removal is not readily achievable, must ensure equal access for the disabled through
alternative methods, §§12182(b)(2)(A)(iv)–(v), 12184(b)(2)(C).
These specific requirements, in turn, are subject to important exceptions and
limitations. Eligibility criteria that screen out disabled individuals are permitted when
“necessary for the provision” of the services or facilities being offered,
§§12182(b)(2)(A)(i), 12184(b)(1). Policies, practices, and procedures need not be
modified, and auxiliary aids need not be provided, if doing so would “fundamentally
alter” the services or accommodations being offered. §§12182(b)(2)(A)(ii)–(iii). Auxiliary
aids are also unnecessary when they would “result in an undue burden,”
§12182(b)(2)(A)(iii). As we have noted, moreover, the barrier removal and alternative
access requirements do not apply when these requirements are not “readily
achievable,” §§12182(b)(2)(A)(iv)–(v). Additionally, Title III does not impose
nondiscrimination or accommodation requirements if, as a result, disabled individuals
would pose “a significant risk to the health or safety of others that cannot be eliminated
by a modification of policies, practices, or procedures or by the provision of auxiliary
aids or services,” §12182(b)(3).
Although the statutory definitions of “public accommodation” and “specified public
transportation” do not expressly mention cruise ships, there can be no serious doubt
that the NCL cruise ships in question fall within both definitions under conventional
principles of interpretation. §§12181(7)(A)–(B),(I),(L), 12181(10). The Court of Appeals
for the Fifth Circuit, nevertheless, held that Title III does not apply to foreign-flag cruise
ships in United States waters because the statute has no clear statement or explicit text
mandating coverage for these ships. This Court’s cases, particularly Benz and McCulloch,
do hold, in some circumstances, that a general statute will not apply to certain aspects
of the internal operations of foreign vessels temporarily in United States waters, absent
a clear statement. The broad clear statement rule adopted by the Court of Appeals,
however, would apply to every facet of the business and operations of foreign-flag
principles of statutory interpretation.
2
This Court has long held that general statutes are presumed to apply to conduct that
takes place aboard a foreign-flag vessel in United States territory if the interests of the
United States or its citizens, rather than interests internal to the ship, are at stake.
See Cunard S. S. Co. v. Mellon, 262 U. S. 100, 127 (1923) (holding that the general terms
of the National Prohibition Act apply to foreign-flag ships in United States waters
because “[t]here is in the act no provision making it inapplicable” to such
ships); Uravic v. F. Jarka Co., 282 U. S. 234, 240 (1931) (holding that “general words”
should be “generally applied” and that therefore there is “no reason for limiting the
liability for torts committed [aboard foreign-flag ships in United States territory] when
they go beyond the scope of discipline and private matters that do not interest the
territorial power”). The general rule that United States statutes apply to foreign-flag
ships in United States territory is subject only to a narrow exception. Absent a clear
statement of congressional intent, general statutes may not apply to foreign-flag vessels
insofar as they regulate matters that involve only the internal order and discipline of the
vessel, rather than the peace of the port. This qualification derives from the
understanding that, as a matter of international comity, “all matters of discipline and all
things done on board which affec[t] only the vessel or those belonging to her, and [do]
not involve the peace or dignity of the country, or the tranquility of the port, should be
left by the local government to be dealt with by the authorities of the nation to which
the vessel belonged.” Wildenhus’s Case, 120 U. S. 1, 12 (1887). This exception to the
usual presumption, however, does not extend beyond matters of internal order and
discipline. “[I]f crimes are committed on board [a foreign-flag vessel] of a character to
disturb the peace and tranquility of the country to which the vessel has been brought,
the offenders have never by comity or usage been entitled to any exemption from the
operation of the local laws.” Ibid.
The two cases in recent times in which the presumption against applying general
statutes to foreign vessels’ internal affairs has been invoked, Benz and McCulloch,
concern labor relations. The Court held that the general terms of the National Labor
Relations Act (NLRA), 49 Stat. 449, 29 U. S. C. §151 et seq., did not govern the respective
rights and duties of a foreign ship and its crew because the NLRA standards would
interfere with the foreign vessel’s internal affairs in those circumstances. These cases
recognized a narrow rule, applicable only to statutory duties that implicate the internal
order of the foreign vessel rather than the welfare of American citizens. McCulloch, 372
U. S., at 21 (holding that “the law of the flag state ordinarily governs the internal
affairs of a ship” (emphasis added)); see also Benz, 353 U. S., at 146–147. The Court held
the NLRA inapplicable to labor relations between a foreign vessel and its foreign crew
not because foreign ships are generally exempt from the NLRA, but because the
particular application of the NLRA would interfere with matters that concern only the
internal operations of the ship. In contrast, the Court held that the NLRA is fully
applicable to labor relations between a foreign vessel and American longshoremen
because this relationship, unlike the one between a vessel and its own crew, does not
implicate a foreign ship’s internal order and discipline. Longshoremen v. Ariadne
Shipping Co., 397 U. S. 195, 198–201 (1970).
This narrow clear statement rule is supported by sound principles of statutory
construction. It is reasonable to presume Congress intends no interference with matters
that are primarily of concern only to the ship and the foreign state in which it is
registered. It is also reasonable, however, to presume Congress does intend its statutes
to apply to entities in United States territory that serve, employ, or otherwise affect
American citizens, or that affect the peace and tranquility of the United States, even if
those entities happen to be foreign-flag ships.
Cruise ships flying foreign flags of convenience offer public accommodations and
transportation services to over 7 million United States residents annually, departing
from and returning to ports located in the United States. Large numbers of disabled
individuals, many of whom have mobility impairments that make other kinds of vacation
travel difficult, take advantage of these cruises or would like to do so. To hold there is
no Title III protection for disabled persons who seek to use the amenities of foreign
cruise ships would be a harsh and unexpected interpretation of a statute designed to
provide broad protection for the disabled. §12101. The clear statement rule adopted by
the Court of Appeals for the Fifth Circuit, moreover, would imply that other general
federal statutes—including, for example, Title II of the Civil Rights Act of 1964, 78 Stat.
243, 42 U. S. C. §2000a et seq.—would not apply aboard foreign cruise ships in United
States waters. A clear statement rule with this sweeping application is unlikely to reflect
congressional intent.
The relevant category for which the Court demands a clear congressional statement,
then, consists not of all applications of a statute to foreign-flag vessels but only those
applications that would interfere with the foreign vessel’s internal affairs. This
proposition does not mean the clear statement rule is irrelevant to the ADA, however. If
Title III by its terms does impose duties that interfere with a foreign-flag cruise ship’s
internal affairs, the lack of a clear congressional statement can mean that those specific
applications of Title III are precluded. On remand, the Court of Appeals may need to
consider which, if any, Title III requirements interfere with the internal affairs of foreign-
flag vessels. As we will discuss further, however, Title III’s own limitations and
qualifications may make this inquiry unnecessary.
B
1
The precise content of the category “internal affairs” (or, as it is variously denoted in
the case law, “internal order” or “internal operations”) is difficult to define with
precision. There is, moreover, some ambiguity in our cases as to whether the relevant
category of activities is restricted to matters that affect only the internal order of the
ship when there is no effect on United States interests, or whether the clear statement
rule further comes into play if the predominant effect of a statutory requirement is on a
foreign ship’s internal affairs but the requirement also promotes the welfare of United
States residents or territory. We need not attempt to define the relevant protected
category with precision. It suffices to observe that the guiding principles in determining
whether the clear statement rule is triggered are the desire for international comity and
the presumed lack of interest by the territorial sovereign in matters that bear no
substantial relation to the peace and tranquility of the port.
It is plain that Title III might impose any number of duties on cruise ships that have
nothing to do with a ship’s internal affairs. The pleadings and briefs in this case
illustrate, but do not exhaust, the ways a cruise ship might offend such a duty. The
petitioners allege the respondent charged disabled passengers higher fares and required
disabled passengers to pay special surcharges, Plaintiffs’ First Amended Original
Complaint in No. H–00–2649 (SD Tex.), ¶32, App. 15 (hereinafter Complaint); Brief for
Petitioners 17–20; maintained evacuation programs and equipment in locations not
accessible to disabled individuals, Complaint ¶19, App. 12; Brief for Petitioners 21;
required disabled individuals, but not other passengers, to waive any potential medical
liability and to travel with a companion, id., at 8, 17–18; and reserved the right to
remove from the ship any disabled individual whose presence endangers the “comfort”
of other passengers, id., at 8, 20. The petitioners also allege more generally that
respondent “failed to make reasonable modifications in policies, practices, and
procedures” necessary to ensure the petitioners’ full enjoyment of the services
respondent offered. Complaint ¶30, App. 15. These are bare allegations, and their truth
is not conceded. We express no opinion on the factual support for those claims. We can
say, however, that none of these alleged Title III violations implicate any requirement
that would interfere with the internal affairs and management of a vessel as our cases
have employed that term.
At least one subset of the petitioners’ allegations, however, would appear to involve
requirements that might be construed as relating to the internal affairs of foreign-flag
cruise ships. These allegations concern physical barriers to access on board. For
example, according to the petitioners, most of the cabins on the respondent’s cruise
ships, including the most attractive cabins in the most desirable locations, are not
accessible to disabled passengers. Brief for Petitioners 17–18; Complaint ¶16, App. 11.
The petitioners also allege that the ships’ coamings—the raised edges around their
doors—make many areas of the ships inaccessible to mobility-impaired passengers who
use wheelchairs or scooters. Brief for Petitioners 24. Removal of these and other access
barriers, the petitioners suggest, may be required by Title III’s structural barrier removal
requirement, §§12182(b)(2)(A)(iv), 12184(b)(2)(C).
Although these physical barriers affect the passengers as well as the ship and its crew,
the statutory requirement could mandate a permanent and significant alteration of a
physical feature of the ship—that is, an element of basic ship design and construction. If
so, these applications of the barrier removal requirement likely would interfere with the
internal affairs of foreign ships. A permanent and significant modification to a ship’s
physical structure goes to fundamental issues of ship design and construction, and it
might be impossible for a ship to comply with all the requirements different jurisdictions
might impose. The clear statement rule would most likely come into play if Title III were
read to require permanent and significant structural modifications to foreign vessels. It
is quite a different question, however, whether Title III would require this. The Title III
requirements that might impose permanent and substantial changes to a ship’s
architecture and design, are, like all of Title III’s requirements, subject to the statute’s
own specific limitations and qualifications. These limitations may make resort to the
clear statement rule unnecessary.
2
Title III requires barrier removal if it is “readily achievable,” §12182(b)(2)(A)(iv). The
statute defines that term as “easily accomplishable and able to be carried out without
much difficulty or expense,” §12181(9). Title III does not define “difficulty” in §12181(9),
but use of the disjunctive—“easily accomplishable and able to be carried out without
much difficulty or expense”—indicates that it extends to considerations in addition to
cost. Furthermore, Title III directs that the “readily achievable” determination take into
account “the impact … upon the operation of the facility,” §12181(9)(B).
Surely a barrier removal requirement under Title III that would bring a vessel into
noncompliance with the International Convention for the Safety of Life at Sea (SOLAS),
Nov. 1, 1974, [1979–1980], 32 U. S. T. 47, T. I. A. S. No. 9700, or any other international
legal obligation, would create serious difficulties for the vessel and would have a
substantial impact on its operation, and thus would not be “readily achievable.” This
understanding of the statute, urged by the United States, is eminently reasonable. Brief
as Amicus Curiae 27–28; ADA Title III Technical Assistance Manual III–1.2000(D) (Supp.
1994), available at http://www.usdoj.gov/crt/ada/taman3up.html (as visited May 31,
2005, and available in Clerk of Court’s case file); 56 Fed. Reg. 45600 (1991). If, moreover,
Title III’s “readily achievable” exemption were not to take conflicts with international
law into account, it would lead to the anomalous result that American cruise ships are
obligated to comply with Title III even if doing so brings them into noncompliance with
SOLAS, whereas foreign ships—which unlike American ships have the benefit of the
internal affairs clear statement rule—would not be so obligated. Congress could not
have intended this result.
It is logical and proper to conclude, moreover, that whether a barrier modification is
“readily achievable” under Title III must take into consideration the modification’s effect
on shipboard safety. A separate provision of Title III mandates that the statute’s
nondiscrimination and accommodation requirements do not apply if disabled individuals
would pose “a significant risk to the health or safety of others that cannot be eliminated
by a modification of policies, practices, or procedures or by the provision of auxiliary
aids or services,” §12182(b)(3). This reference is to a safety threat posed by a disabled
individual, whereas here the question would be whether the structural modification
itself may pose the safety threat. It would be incongruous, nevertheless, to attribute to
Congress an intent to require modifications that threaten safety to others simply
because the threat comes not from the disabled person but from the accommodation
itself. The anomaly is avoided by concluding that a structural modification is not readily
achievable within the meaning of §12181(9) if it would pose a direct threat to the health
or safety of others.
3 In Ariadne Shipping, however, the Court held that the NLRA does apply to labor relations
Because Title III does not require structural modifications that would conflict with
international legal obligations or pose any real threat to the safety of the crew or other
passengers, it may well follow—though we do not decide the question here—that Title
III does not require any permanent and significant structural modifications that interfere
with the internal affairs of any cruise ship, foreign flag or domestic. If that is indeed the
case, recourse to the clear statement rule would not be necessary.
Cases may arise, however, where it is prudent for a court to turn first to the internal
affairs clear statement rule rather than deciding the precise scope and operation of the
statute. Suppose, for example, it is a difficult question whether a particular Title III
barrier removal requirement is readily achievable, but the requirement does entail a
permanent and significant structural modification, interfering with a foreign ship’s
internal affairs. In that case a court sensibly could invoke the clear statement rule
without determining whether Title III actually imposes the requirement. On the other
hand, there may be many cases where it is not obvious that a particular physical
modification relates to a vessel’s basic architecture and construction, but it is clear the
modification would conflict with SOLAS or some other international legal obligation. In
those cases, a court may deem it appropriate to hold that the physical barrier
modification in question is not readily achievable, without resort to the clear statement
rule.
III
A otherwise unambiguous statutes that would intrude on sensitive domains in a way that
In light of the preceding analysis, it is likely that under a proper interpretation of
“readily achievable” Title III would impose no requirements that interfere with the
internal affairs of foreign-flag cruise ships. If Title III did impose a duty that required
cruise ships to make permanent and significant structural modifications that did not
conflict with international law or threaten safety, or if the statute otherwise interfered
with a foreign ship’s internal affairs, the clear statement rule recognized
in Benz and McCulloch would come into play at that point. The Title III requirement in
question, however, would still apply to domestic cruise ships, and Title III requirements
having nothing to do with internal affairs would continue to apply to domestic and
foreign ships alike.
This application-by-application use of the internal affairs clear statement rule is
consistent with how the rule has traditionally operated. In Benz and McCulloch, the
Court concluded that the NLRA did not apply to labor relations between a foreign-flag
ship and its foreign crew because of interference with the foreign ships’ internal affairs.
between a foreign-flag ship and American longshoremen. Ariadne
Shipping acknowledged the clear statement rule invoked in Benz and McCulloch but held
that the “considerations that informed the Court’s construction of the statute in [those
cases] are clearly inapplicable” to the question whether the statute applies to foreign
ships’ labor relations with American longshoremen. 397 U. S., at 199. Ariadne
Shipping held that the longshoremen’s “short-term, irregular and casual connection
with the [foreign] vessels plainly belied any involvement on their part with the ships’
‘internal discipline and order.’ ” Id., at 200. Therefore, application of the NLRA to foreign
ships’ relations with American longshoremen “would have threatened no interference in
the internal affairs of foreign-flag ships.” Ibid. If the clear statement rule restricts some
applications of the NLRA to foreign ships (e.g., labor relations with the foreign crew), but
not others (e.g., labor relations with American longshoremen), it follows that the case-
by-case application is also required under Title III of the ADA. The rule, where it is even
necessary to invoke it, would restrict some applications of Title III to foreign ships (e.g.,
certain structural barrier modification requirements), but not others (e.g., the
prohibition on discriminatory ticket pricing).
The internal affairs clear statement rule is an implied limitation on otherwise
unambiguous general terms of the statute. It operates much like the principle that
general statutes are construed not to apply extraterritorially, EEOC v. Arabian American
Oil Co., 499 U. S. 244, 260 (1991), or the rule that general statutes are presumed not to
impose monetary liability on nonconsenting States, Atascadero State
Hospital v. Scanlon,473 U. S. 234 (1985). Implied limitation rules avoid applications of
Congress is unlikely to have intended had it considered the matter. In these instances,
the absence of a clear congressional statement is, in effect, equivalent to a statutory
qualification saying, for example, “Notwithstanding any general language of this statute,
this statute shall not apply extraterritorially”; or “… this statute shall not abrogate the
sovereign immunity of nonconsenting States”; or “… this statute does not regulate the
internal affairs of foreign-flag vessels.” These clear statement rules ensure Congress
does not, by broad or general language, legislate on a sensitive topic inadvertently or
without due deliberation. An all-or-nothing approach, under which a statute is
altogether inapplicable if but one of its specific applications trenches on the domain
protected by a clear statement rule, would convert the clear statement rule from a
principle of interpretive caution into a trap for an unwary Congress. If Congress passes
broad legislation that has some applications that implicate a clear statement rule—say,
some extraterritorial applications, or some applications that would regulate foreign
ships’ internal affairs—an all-or-nothing approach would require that the entire statute,
or some arbitrary set of applications larger than the domain protected by the clear
statement rule, would be nullified. We decline to adopt that posture.
B against States that have not consented to be sued in federal court.” Id., at ___ (slip op.,
Our holding that the clear statement rule operates only when a ship’s internal affairs
are affected does not implicate our holding in Clark v. Martinez, 543 U. S. ___
(2005). Martinez held that statutory language given a limiting construction in one
context must be interpreted consistently in other contexts, “even though other of the
statute’s applications, standing alone, would not support the same limitation.” Id., at
___ (slip op., at 8). This was simply a rule of consistent interpretation of the statu- tory
words, with no bearing on the implementation of a clear statement rule addressed to
particular statutory applications.
The statute in Martinez, 8 U. S. C. §1231(a)(6), authorized detention of aliens pending
their removal. In Zadvydas v. Davis, 533 U. S. 678, 696–699 (2001), the Court had
interpreted this statute to impose time limits on detention of aliens held for certain
reasons stated in the statute. The Court held that an alternative interpretation, one
allowing indefinite detention of lawfully admitted aliens, would raise grave
constitutional doubts. Having determined the meaning of §1231(a)(6)’s text
in Zadvydas, we were obliged in Martinez to follow the same interpretation even in a
context where the constitutional concerns were not present.Martinez, 543 U. S., at ___
(slip op., at 5–9). As already made clear, the question was one of textual interpretation,
not the scope of some implied exception. The constitutional avoidance canon simply
informed the choice among plausible readings of §1231(a)(6)’s text: “The canon of
constitutional avoidance,” Martinez explained, “comes into play only when, after the
application of ordinary textual analysis, the statute is found to be susceptible of more
than one construction; and the canon functions as a means of choosing between
them.” Id., at ___ (slip op., at 13) (emphasis deleted).
Martinez gives full respect to the distinction between rules for resolving textual
ambiguity and implied limitations on otherwise unambiguous text.
Indeed, Martinez relies on the distinction to reconcile its holding with two cases which
did involve a clear statement rule, Raygor v. Regents of Univ. of Minn., 534 U. S.
533(2002), and Jinks v. Richland County, 538 U. S. 456 (2003). Raygor had held that the
tolling provision in the supplemental jurisdiction statute, 28 U. S. C. §1367(d), does not
apply to nonconsenting States because the statute lacks the required clear statement
that States are within its coverage. Later, in Jinks, we held that the §1367(d) tolling
provision does apply to suits against counties. The counties were not protected by a
clear statement rule analogous to the one applicable to States. See Martinez, 543 U. S.,
at ___ (slip op., at 11–12, and n. 6); see also id., at ___ (slip op., at 6–8) (Thomas, J.,
dissenting). “This progression of decisions,” we held in Martinez, “does not remotely
establish that §1367(d) has two different meanings, equivalent to the unlimited-
detention/limited-detention meanings of §1231(a)(6) urged upon us here. They hold
that the single and unchanging disposition of §1367(d) … does not apply to claims
at 12). The distinction between Zadvydas and Martinez, on the one hand,
and Raygor and Jinks, on the other, is the distinction between a canon for choosing
among plausible meanings of an ambiguous statute and a clear statement rule that
implies a special substantive limit on the application of an otherwise unambiguous
mandate.
The internal affairs clear statement rule is an implied limitation rule, not a principle for
resolving textual ambiguity. Our cases, then, do not compel or permit the conclusion
that if any one application of Title III might interfere with a foreign-flag ship’s internal
affairs, Title III is inapplicable to foreign ships in every other instance.
***
The Court of Appeals for the Fifth Circuit held that general statutes do not apply to
foreign-flag ships in United States waters. This Court’s cases, however, stand only for
the proposition that general statutes are presumed not to impose requirements that
would interfere with the internal affairs of foreign-flag vessels. Except insofar as Title III
regulates a vessel’s internal affairs—a category that is not always well defined and that
may require further judicial elaboration—the statute is applicable to foreign ships in
United States waters to the same extent that it is applicable to American ships in those
waters.
Title III’s own limitations and qualifications prevent the statute from imposing
requirements that would conflict with international obligations or threaten shipboard
safety. These limitations and qualifications, though framed in general terms, employ a
conventional vocabulary for instructing courts in the interpretation and application of
the statute. If, on remand, it becomes clear that even after these limitations are taken
into account Title III nonetheless imposes certain requirements that would interfere
with the internal affairs of foreign ships—perhaps, for example, by requiring permanent
and substantial structural modifications—the clear statement rule would come into
play. It is also open to the court on remand to consider application of the clear
statement rule at the outset if, as a prudential matter, that appears to be the more
appropriate course.
We reverse the judgment of the Court of Appeals and remand the case for further
proceedings.
It is so ordered.
OPINION OF GINSBURG, J.
SPECTOR V. NORWEGIAN CRUISE LINE LTD.
545 U. S. ____ (2005)
SUPREME COURT OF THE UNITED STATES
NO. 03-1388
DOUGLAS SPECTOR, et al., PETITIONERS v. NORWEGIAN CRUISE LINE LTD.
on writ of certiorari to the united states court of appeals for the fifth circuit
[June 6, 2005]
Justice Ginsburg, with whom Justice Breyer joins, concurring in part and concurring in
the judgment.
I agree with the Court’s holding that Title III of the Americans with Disabilities Act of
1990 covers cruise ships, ante, at 6, and allows them to resist modifications “that would
conflict with international legal obligations,” ante, at 12–13. I therefore join Parts I, II–
A–1, and II–B–2 of the Court’s opinion. I would give no wider berth, however, to the
“internal affairs” clear statement rule in determining Title III’s application to
respondent’s cruise ships, the Norwegian Sea and Norwegian Star. But see ante, at 14.
That rule, as I understand it, derives from, and is moored to, the broader guide that
statutes “should not be interpreted to regulate foreign persons or conduct if that
regulation would conflict with principles of international law.”Hartford Fire Ins.
Co. v. California, 509 U. S. 764, 815 (1993) (Scalia, J., dissenting); see also id., at 816
(describing McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U. S.
10 (1963), as applying this principle); Murray v. Schooner Charming Betsy, 2 Cranch 64,
118 (1804). Title III is properly read to avoid such conflict, but should not be hemmed in
where there is no potential for international discord.[Footnote 1]
The first of the modern cases to address the application of a domestic statute to a
foreign-flag ship in U. S. waters, Benz v. Compania Naviera Hidalgo, S. A., 353 U. S.
138 (1957), did not resort to the tag, “internal affairs” rule, to explain the Court’s
decision.[Footnote 2] Benz held that the Labor Management Relations Act did not reach
relations between “a foreign employer and a foreign crew operating under an
agreement made abroad under the laws of another nation.” Id., at 142. As we concluded
in Benz, before reading our law to “run interference in such a delicate field of
international relations,” “where the possibilities of international discord are so evident
and retaliative action so certain,” the Court should await Congress’ clearly expressed
instruction. Id., at 147.
Six years later, in McCulloch v. Sociedad Nacional de Marineros de Honduras, 372 U. S.
10 (1963), the Court relied on Benz to hold that the National Labor Relations Act does
not regulate the representation of alien seamen recruited in Honduras to serve aboard
vessels under Honduran flags. Applying our law “to the internal management and
affairs” of the vessels in question, we observed, McCulloch, 372 U. S., at 20, would
produce a “head-on collision” with the regulatory regime installed under the Honduran
labor code, id., at 21. “[S]uch highly charged international circumstances,” we said,
called for adherence to the venerable interpretive guide that “ ‘an act of Congress ought
never to be construed to violate the law of nations if any other possible construction
remains.’ ” Ibid. (quoting Schooner Charming Betsy, 2 Cranch, at 118).
Cf. Longshoremen v. Ariadne Shipping Co., 397 U. S. 195, 200 (1970) (applying U. S. law
to foreign ships’ labor relations with longshoreworkers employed at U. S. ports is proper
because doing so “would … threate[n] no interference in the internal affairs of foreign-
flag ships likely to lead to conflict with foreign or international law”).
The noninterference principle underlying the internal affairs clear statement rule is
served in this case by the Court’s interpretation of Title III’s “readily achievable”
provision, 42 U. S. C. §12182(b)(2)(A)(iv). See ante, at 12–13. Construing this language to
allow ships to resist modifications “that would conflict with international legal
obligations,” ante, at 13, the Court ensures that Title III will not provoke “international
discord” of the kind Benz and McCulloch sought to avoid. I agree with this
interpretation, but would create no larger space for the internal affairs rule.
The plurality, however, suggests that the clear statement rule has a further office: It
may block structural modifications prompted by Title III that are “readily achievable”—
because they do not conflict with international legal obligations—but nonetheless
“interfer[e] with a foreign ship’s internal affairs.” Ante, at 14. I disagree with this
conception of the rule. In positing an extended application of the internal affairs rule,
the plurality cuts the rule loose from its foundation.
As Benz and McCulloch demonstrate, the clear statement rule is an interpretive principle
counseling against construction of a statute in a manner productive of international
discord. When international relations are not at risk, and there is good reason to apply
our own law, asserted internal affairs of a ship should hold no greater sway than
asserted management prerogatives of a landlocked enterprise.[Footnote 3]
As the plurality rightly notes, Title III is a broad remedial statute designed to protect
persons with disabilities in a variety of activities and settings. See ante, at 8–9;
§12101(b). The United States has a strong interest in ensuring that U. S. resident cruise
passengers enjoy Title III’s protections on both domestic and foreign ships. See §12101;
Brief for United States as Amicus Curiae 10.[Footnote 4] Once conflicts with
international legal obligations are avoided, I see no reason to demand a clearer
congressional statement that Title III reaches the vessels in question, ships that regularly
sail to and from U. S. ports and derive most of their income from U. S. passengers. In
sum, I agree that §12182(b) (2)(A)(iv), properly read, does not require shipowners to
make modifications that would conflict with international legal obligations. But I would
attribute to the internal affairs clear statement rule no further limitation on Title III’s
governance in this case.
SCALIA, J., DISSENTING
SPECTOR V. NORWEGIAN CRUISE LINE LTD.
545 U. S. ____ (2005)
SUPREME COURT OF THE UNITED STATES
NO. 03-1388
DOUGLAS SPECTOR, et al., PETITIONERS v. NORWEGIAN CRUISE LINE LTD.
on writ of certiorari to the united states court of appeals for the fifth circuit
[June 6, 2005]
Justice Scalia, with whom The Chief Justice and Justice O’Connor join, and with whom
Justice Thomas joins as to Part I–A, dissenting.
I respectfully dissent. The plurality correctly recognizes that Congress must clearly
express its intent to apply its laws to foreign-flag ships when those laws interfere with
the ship’s internal order. Its attempt to place Title III of the Americans with Disabilities
Act of 1990 (ADA), outside this rule through creative statutory interpretation and
piecemeal application of its provisions is unsupported by our case law. Title III plainly
affects the internal order of foreign-flag cruise ships, subjecting them to the possibility
of conflicting international obligations. I would hold that, since there is no clear
statement of coverage, Title III does not apply to foreign-flag cruise ships.
I
A
As the plurality explains, where a law would interfere with the regulation of a ship’s
internal order, we require a clear statement that Congress intended such a result.
See ante, at 6. This rule is predicated on the “rule of international law that the law of
the flag ship ordinarily governs the internal affairs of a ship,” McCulloch v. Sociedad
Nacional de Marineros de Honduras, 372 U. S. 10, 21 (1963), and is designed to avoid
“the possibilit[y] of international discord,” Benz v. Compania Naviera Hidalgo, S. A., 353
U. S. 138, 147 (1957); see also McCulloch, supra, at 19. The clear-statement rule finds
support not only in Benz and McCulloch, but in cases like Cunard S. S. Co. v. Mellon, 262
U. S. 100, 128–129 (1923), where we held that the National Prohibition Act, 41 Stat. 305,
forbade foreign-flag ships from carrying or serving alcohol in United States territorial
waters. Though we did not say so expressly in that case, prohibiting the carrying and
serving of alcohol in United States waters cannot be said to affect the “internal order” of
the ship, because it does not in any way affect the operation or functioning of the
craft.[Footnote 1] Similarly, in Lauritzen v. Larsen, 345 U. S. 571 (1953), and Hellenic
Lines Ltd. v. Rhoditis, 398 U. S. 306 (1970), we did not employ a clear-statement rule in
determining whether foreign seamen injured aboard foreign-flag ships could recover
under the Jones Act, 41 Stat. 1007, 46 U. S. C. App. §688. We distinguished these cases
in McCulloch, explaining that a clear statement is not required “in different contexts,
such as the Jones Act … where the pervasive regulation of the internal order of a ship
may not be present.” 372 U. S., at 19, n. 9 (emphasis added).[Footnote 2]
As the plurality concedes, ante, at 10–11, the structural modifications that Title III of
the ADA requires under its barrier-removal provisions, see 42 U. S. C.
§§12182(b)(2)(A)(iv), 12184(b)(2)(C), would plainly affect the ship’s “internal order.”
Rendering exterior cabins handicapped-accessible, changing the levels of coamings, and
adding public restrooms—the types of modifications petitioners request—would require
alteration of core physical aspects of the ship, some of which relate to safety. (Safety
has, under international law, traditionally been the province of a ship’s flag state.) This is
quite different from prohibiting alcohol in United States waters or imposing tort liability
for injuries sustained on foreign ships in port—the laws at issue in Cunard and the Jones
Act cases. Those restrictions affected the ship only in limited circumstances, and in ways
ancillary to its operation at sea. A ship’s design and construction, by contrast, are at
least as integral to the ship’s operation and functioning as the bargaining relationship
between shipowner and crew at issue in Benz and McCulloch.
Moreover, the structural changes petitioners request would be permanent. Whereas a
ship precluded from serving or carrying alcohol in United States waters may certainly
carry and serve alcohol on its next trip from Italy to Greece, structural modifications
made to comply with American laws cannot readily be removed once the ship leaves our
waters and ceases to carry American passengers. This is again much like the situation
presented in Benz and McCulloch, where the application of American labor laws would
have continued to govern contracts between foreign shipowners and their foreign crews
well beyond their time in our waters.
The purpose of the “internal order” clear-statement requirement is to avoid casually
subjecting oceangoing vessels to laws that pose obvious risks of conflict with the laws of
the ship’s flag state, the laws of other nations, and international obligations to which
the vessels are subject. That structural modifications required under Title III qualify as
matters of “internal order” is confirmed by the fact that they may already conflict with
the International Convention for the Safety of Life at Sea (SOLAS), Nov. 1, 1974, [1979–
1980] 32 U. S. T. 47, T. I. A. S. No. 9700. That treaty, which establishes the safety
standards govern- ing the design and maintenance of oceangoing ships, has been
ratified by 155 countries. See International Mari- time Organization, Summary of Status
of Conventions, http://www.imo.org/Conventions/mainframe.asp?topic_id= 247 (all
Internet materials as visited June 2, 2005, and available in Clerk of Court’s case file). The
ADA Accessibility Guidelines (ADAAG) Review Advisory Committee—the Government
body Congress has charged with formulating the Title III barrier-removal guidelines—has
promulgated rules requiring at least one accessible means of egress to be an elevator,
whereas SOLAS, which requires at least two means of escape, does not allow elevators
to be one of them. See Passenger Vessel Access Advisory Committee, Final Report:
Recommendations for Accessibility Guidelines for Passenger Vehicles, ch. 13, pt. I (Dec.
2000), http://www.access-board.gov/news/pvaac-rept.htm (hereinafter PVAAC Report)
(explaining potential conflicts between ADAAG regulations and SOLAS). The ADAAG
rules set coaming heights for doors required to be accessible at one-half inch; SOLAS
sets coaming heights for some exterior doors at three to six inches to ensure that those
doors will be watertight. Ibid.
Similar inconsistencies may exist between Title III’s structural requirements and the
disability laws of other countries. The United Kingdom, for example, is considering the
promulgation of rules to govern handicapped accessibility to passenger vehicles,
including cruise ships. The rules being considered currently include exact specifications,
down to the centimeter, for the height of handrails, beds and electrical switches, and
the width of door openings. See Disabled Persons Transport Advisory Committee, The
design of large passenger ships and passenger infrastructure: Guidance on meeting the
needs of disabled people (Nov. 2000), http://www.dptac.gov.uk/
pubs/guideship/pdf/dptacbroch.pdf. Though many of these regulations may be
compatible with Title III, it is easy to imagine conflicts arising, given the detailed nature
of ADAAG’s regulations. See PVAAC Report, chs. 1–11. As we have previously noted,
even this “possibility of international discord” with regard to a seagoing vessel’s internal
order, McCulloch, 372 U. S., at 21 (emphasis added), gives rise to the presumption of
noncoverage absent clear statement to the contrary.
The Court asserts that Title III would not produce conflicts with the requirements of
SOLAS and would not compromise safety concerns. This argument comes at the expense
of an expansive en passant interpretation of the exceptions to the barrier-removal
requirements of Title III—which interpretation will likely have more significant
nationwide effects than the Court’s holding concerning Title III’s application to foreign-
flag vessels. Assuming, however, that the argument is even correct,[Footnote 3] it is
entirely beside the point. It has never been a condition for application of the foreign-flag
clear-statement rule that an actual conflict with foreign or international law be
established—any more than that has been a condition for application of the clear-
statement rule regarding extraterritorial effect of congressional enactments. The reason
to apply the rule here is that the structure of a ship pertains to the ship’s internal order,
which is a matter presumably left to the flag state unless Congress indicates otherwise.
The basis for that presumption of congressional intent is principally (though perhaps not
exclusively) that subjecting such matters to the commands of various jurisdictions raises
the possibility (not necessarily the certainty) of conflict among jurisdictions and with
international treaties. Even if the Court could, by an imaginative interpretation of Title
III, demonstrate that in this particular instance there would be no conflict with the laws
of other nations or with international treaties,[Footnote 4] it would remain true that a
ship’s structure is preeminently part of its internal order; and it would remain true that
subjecting ship structure to multiple national requirements invites conflict. That is what
triggers application of the clear-statement rule.
Safety concerns—and specifically safety as related to ship structure—are traditionally
the responsibility of the flag state. Which is to say they are regarded as part of the ship’s
internal order. And even if Title III makes ample provision for a safety exception to the
barrier-removal requirements, what it considers necessary for safety is not necessarily
what other nations or international treaties consider necessary.
The foregoing renders quite unnecessary the Court’s worry that Title III might require
American cruise ships to adhere to Congress’s prescription in violation of SOLAS.
See ante, at 12. If and when that possibility presents itself, the Court remains free to do
what it does here: to interpret Title III so as to avoid any conflict. But the availability of
such an interpretation has no bearing upon whether the structural features of an
oceangoing vessel are part of its internal order. (I must observe, however, that it seems
much more plausible that Congress intended to require American cruise ships to adhere
to Title III regardless of SOLAS, than that—what the Court apparently believes—
Congress intended Title III to be interpreted with an eye to SOLAS.) In any event, the
application of Title III to oceangoing vessels under American flag is not at issue here. I
would therefore hold that, because Title III’s barrier-removal provisions clearly have the
possibility of subjecting foreign-flag ships to conflicting international obligations, no
reading of Title III—no matter how creative—can alter the presumption that Title III
does not apply to foreign-flag ships without a clear statement from Congress.[Footnote
5]
B foreign-flag ships. Raygor v. Regents of Univ. of Minn., 534 U. S. 533 (2002),
The plurality holds that, even “[i]f Title III did impose a duty that required [foreign-flag]
cruise ships to make permanent and significant structural modifications[,] or …
otherwise interfered with a foreign ship’s internal affairs … Title III requirements having
nothing to do with internal affairs would continue to apply to domestic and foreign
ships alike.” Ante, at 14. I disagree. Whether or not Title III’s prescriptions regarding
such matters implicate the “internal order” of the ship, they still relate to the ships’
maritime operations and are part of the same Title III.[Footnote 6] The requirements of
that enactment either apply to foreign-flag ships or they do not. It is not within our
power to design a statute some of whose provisions apply to foreign-flag ships and
other of whose provisions do not—any more than it is within our power to prescribe
that the statute applies to foreign-flag cruise ships 60% of whose passengers are United
States citizens and does not apply to other foreign-flag cruise ships.
The plurality’s assertion that those portions of Title III that do not implicate a ship’s
internal order apply to foreign-flag ships displays a confusion between a principle of
interpretation based upon a true-to-fact presumption of congressional intent, and a
court-made rule. The plurality seems to forget that it is a matter of determining whether
Congress in fact intended that its enactment cover foreign-flag ships. To believe that
there was any such intent section-by-section and paragraph-by-paragraph is delusional.
Either Congress enacted Title III only with domestic entities (and not foreign-flag ships)
in mind, or it intended Title III to apply across-the-board. It could not possibly be the
real congressional intent that foreign-flag cruise ships be considered “place[s] of public
accommodation” or “specified public transportation” for purposes of certain provisions
but not for others. That Congress had separate foreign-flag intent with respect to each
requirement—and would presumably adopt a clear statement provision-by-provision—
is utterly implausible. And far from its being the case that this creates “a trap for an
unwary Congress,” ante, at 16, it is the plurality’s disposition that, in piecemeal fashion,
applies to foreign-flag ships provisions never enacted with foreign-flag vessels in
mind.[Footnote 7] We recently addressed a similar question in Clark v. Martinez, 543 U.
S. ___ (2005), where we explained that a statutory provision must be interpreted
consistently from case to case. “It is not at all unusual to give a statut[e] … a limiting
construction called for by one of the statute’s applications, even though other of the
statute’s applications, standing alone, would not support the same limitation.” Id., at
___ (slip op., at 8). That principle should apply here. Since some applications of Title III
plainly affect the internal order of foreign-flag ships, the absence of a clear statement
renders the statute inapplicable—even though some applications of the statute, if
severed from the rest, would not require clear statement.
This does not mean that a clear statement is required whenever a court applies Title III
to any entity—only that a clear statement is required to apply any part of Title III to
and Jinks v. Richland County, 538 U. S. 456 (2003), do not dictate otherwise. Raygorheld
that 28 U. S. C. §1367(d) does not include, in its tolling of the limitations period, claims
against States, because it contains no clear statement that States are covered. Jinks held
that §1367(d)’s tolling provision does apply to claims against political subdivisions of
States, because no clear-statement requirement applies to those entities. In other
words, a clear statement is required to apply §1367(d) to States, just as a clear
statement is required to apply Title III to foreign-flag ships. A clear statement
is not required to apply §1367(d) to political subdivisions of States, just as a clear
statement is not required to apply Title III to domestic ships or other domestic entities.
The question in each of these cases is whether the statute at issue covers certain
entities, not whether some provisions of a statute cover a given entity.
The fine-tuning of legislation that the plurality requires would be better left to
Congress. To attempt it through the process of case-by-case adjudication is a recipe for
endless litigation and confusion. The plurality’s resolution of today’s case proves the
point. It requires this Title III claimant (and every other one who brings a claim against a
foreign shipowner) to show that each particular remedy he seeks does not implicate the
internal order of the ship. That showing, where structural modification is involved,
would not only require the district court to determine what is “readily achievable,” ante,
at 12–14, and what would “pose ‘a significant risk to the health or safety of
others,’ ” ante, at 13 (quoting §12182(b)(3)), but would also require it to determine the
obligations imposed by foreign law and international treaties.[Footnote 8] All this to
establish the preliminary point that Title III applies and the claim can proceed to
adjudication. If Congress desires to impose this time-consuming and intricate process, it
is certainly able to do so—though I think it would likely prefer some more manageable
solution.[Footnote 9] But for the plurality to impose it as a novel consequence of the
venerable clear-statement rule seems to me unreasonable. I would therefore decline to
apply all of Title III to foreign-flag ships without a clear statement from Congress.
II
As the Court appears to concede, neither the “public accommodation” provision nor
the “specified public transportation” provision of Title III clearly covers foreign-flag
cruise ships. The former prohibits discrimination “on the basis of disability in the full and
equal enjoyment of the goods, services, facilities, privileges, advantages, or
accommodations of any place of public accommodation by any person who owns, leases
(or leases to), or operates a place of public accommodation.” 42 U. S. C. §12182(a).
Though Congress gave a seemingly exhaustive list of entities constituting “public
accommodation[s]”—including inns, hotels, restaurants, theaters, banks, zoos, and
laundromats—it failed to mention ships, much less foreign-flag ships. See §12181(7).
Particularly where Congress has provided such detailed specification, this is not a clear
statement that foreign-flag ships are covered. Petitioners also claim that, because cruise
ships are essentially floating hotels that contain restaurants and other facilities explicitly
named in §12181(7), they should be covered. While this may support the argument
that cruise ships are “public accommodations,” it does not support the position that
Congress intended to reach foreign-flag cruise ships.
The “specified public transportation” provision prohibits discrimination on the basis of
disability “in the full and equal enjoyment of specified public transportation services
provided by a private entity that is primarily engaged in the business of transporting
people and whose operations affect commerce.” §12184(a). The definition of “specified
public transportation” includes “transportation by bus, rail, or any other conveyance
(other than by aircraft) that provides the general public with general or special service
(including charter service) on a regular and continuing basis.” §12181(10). “[A]ny other
conveyance” clearly covers ships. But even if the statute specifically mentioned ships,
that would not be a clear statement that foreign-flag ships are included—any more than
the reference to “employer” in the NLRA constituted a clear statement that foreign-flag
ship employers were covered, see McCulloch, 372 U. S., at 19–21.
Title III of the ADA stands in contrast to other statutes in which Congress has made
clear its intent to extend its laws to foreign ships. For example, the Maritime Drug Law
Enforcement Act, 94 Stat. 1159, 46 U. S. C. App. §1901 et seq., which permits the
inspection and apprehension of vessels suspected of possessing controlled substances,
applies to “vessel[s] subject to the jurisdiction of the United States,” §1903(a), which
includes vessels “located within the customs waters of the United States,”
§1903(c)(1)(D), and “vessels registered in a foreign nation where the flag nation has
consented or waived objection” to United States jurisdiction, §1903(c)(1)(C). Section 5
of the Johnson Act, 64 Stat. 1135, as amended, 106 Stat. 61, 15 U. S. C. §1175(a),
restricts the use of gambling devices “on a vessel … documented under the laws of a
foreign country.” See also 14 U. S. C. §89(a) (Coast Guard may engage in searches on
“waters over which the United States has jurisdiction” of “any vessel subject to the
jurisdiction, or to the operation of any law, of the United States”); 18 U. S. C. §2274
(making it unlawful for “the owner, master or person in charge or command of any
private vessel, foreign or domestic … within the territorial waters of the United States”
willfully to cause or permit the destruction or injury of their vessel in certain
circumstances).
That the Department of Justice and the Department of Transportation—the Executive
agencies charged with enforcing the ADA—appear to have concluded that Congress
intended Title III to apply to foreign-flag cruise ships does not change my view. We
“accept only those agency interpretations that are reasonable in light of the principles
of construction courts normally employ.” ARAMCO, 499 U. S. 244, 260 (1991) (Scalia, J.,
concurring in part and concurring in judgment) (declining to adopt the Equal
Employment Opportunity Commission’s determination that Title VII applied to
employers abroad); see also id., at 257–258 (opinion of the Court) (same). In light of our
longstanding clear-statement rule, it is not reasonable to apply Title III here.
I would therefore affirm the Fifth Circuit’s judgment that Title III of the ADA does not
apply to foreign-flag cruise ships in United States territorial waters.
OPINION OF THOMAS, J.
SPECTOR V. NORWEGIAN CRUISE LINE LTD.
545 U. S. ____ (2005)
SUPREME COURT OF THE UNITED STATES
NO. 03-1388
DOUGLAS SPECTOR, et al., PETITIONERS v. NORWEGIAN CRUISE LINE LTD.
on writ of certiorari to the united states court of appeals for the fifth circuit
[June 6, 2005]
Justice Thomas, concurring in part, dissenting in part, and concurring in the judgment
in part.
When a law regulates the internal order of ships, Congress must clearly express its
intent to apply the law to foreign-flag ships. Ante, at 6–8 (plurality opinion); post, at 1–2
(Scalia, J., dissenting). I agree with Justice Scalia that this rule applies to any structural
changes to a ship that Title III of the Americans with Disabilities Act of 1990 (ADA) might
require, for such changes to a ship’s physical structure pertain to its internal
affairs.Post, at 2–4 (Scalia, J., dissenting); see ante, at 11 (plurality opinion). I further
agree with Justice Scalia that this clear statement rule applies once the possibility,
rather than the certainty, of international discord arises; and that the clear statement
rule therefore does not require or permit the kind of express conflicts-of-law analysis
that the plurality demands. Post, at 4–6 (Scalia, J., dissenting); ante, at 12–13 (majority
opinion). Moreover, I do not think that courts should (as the plurality permits) employ
the rule selectively, applying it when “prudent” but declining to apply it when
“appropriate.” Ante, at 13–14 (plurality opinion); see also post, at 10, n. 8 (Scalia, J.,
dissenting); Small v. United States, 544 U. S. ___, (2005) (slip op., at 11) (Thomas, J.,
dissenting) (“Whatever the utility of canons as guides to congressional intent, they are
useless when modified in ways that Congress could never have imagined”). For those
reasons, I join part I–A of Justice Scalia’s dissent. While I conclude that the rule applies
to certain aspects of Title III, I agree with the plurality that it does not require an “all-or-
nothing approach.” Ante, at 16. Consequently, those applications of Title III that do not
pertain to internal affairs apply to foreign-flag vessels. For that reason, I join part IIIA of
the plurality opinion. Clark.
I reach this result, however, only because I continue to reject the “lowest common
denominator” principle the Court articulated for the first time in Clark v. Martinez, 544
U. S. ___ (2005). See id., at ___ (slip op., at 9–11) (Thomas, J., dissenting). The Court, by
contrast, accepts Clark. Moreover, it claims that applying Title III of the ADA to matters
that are not within the realm of a ship’s internal order is consistent with Clark. The
plurality’s efforts to distinguish Clark are implausible.
The plurality says that today’s case differs from Clark because it invokes a clear
statement rule to interpret unambiguous text. According to the
plurality, Clark concerned the application of a previously adopted limiting construction
of ambiguous text, which this Court imposed to ameliorate unrelated constitutional
doubts. Ante, at 16–17. As an initial matter, however, the statute at issue
in Zadvydas v. Davis, 533 U. S. 678(2001) and Clark was not ambiguous. Clark, supra, at
___ (slip op., at 16–17) (Thomas, J., dissenting). Even assuming for the sake of argument
that it was ambiguous, the distinction the plurality draws has no basis in Clark. In Clark,
this Court addressed the period of detention 8 U. S. C. §1231(a)(6) authorized for
inadmissible aliens. This was a question left open by Zadvydas, supra, which had
addressed the period of detention under the same statute but with respect to a
different class of aliens—those who had been admitted into the country. In Zadvydas,
this Court had concluded that the possibility of indefinite detention of admitted aliens
raised significant constitutional doubts and, in light of those doubts, it limited the
Attorney General’s power to detain admitted aliens. 533 U. S., at 689–690, 699. Section
1231(a)(6) does not distinguish between the two classes of aliens. Thus, this Court
in Clark concluded it was compelled to apply that same construction, which was
warranted only by the specific constitutional concerns arising for admitted aliens, to the
unadmitted aliens before it. 543 U. S., at __ (slip op., at 8). Clark’s conclusion stemmed
from the narrowing construction adopted in Zadvydas, not the type of rule or canon
that gave rise to that construction. 543 U. S., at ___ (slip op., at 6–7).
The plurality’s reasoning cannot be squared with Clark’s “lowest common
denominator” principle. Under Clark, “[t]he lowest common denominator, as it were,
must govern.” Id., at ___ (slip op., at 8). Just as in Zadvydas and Clark, this Court is called
upon to interpret the same statutory text with respect to two different classes of
cases—those that implicate the internal affairs of a vessel and those that do not. And
just like the statute at issue in Zadvydas and Clark, Title III “applies without
differentiation” to the internal and external affairs of foreign-flag vessels, as well as the
internal and external affairs of domestic-flag ships. 543 U. S., at ___ (slip op., at 6). Thus,
the limiting construction of Title III’s definitions excluding foreign cruise ships from
those definitions must govern all applications of the statute, not just those applications
that pertain to internal affairs. According to Clark, the Court may not narrow Title III on
a case-by-case basis, depending on whether a particular application of Title III interferes
with a ship’s internal order. In fact, it may not apply Title III to any ship or, for that
matter, any entity at all, because Title III does not distinguish between any of the
covered entities. This demonstrates why the principle Clark established is flawed.
Today’s decision, then, cabins the Clark principle to apply only when the canon of
constitutional avoidance is invoked to choose among ambiguous readings of a statute.
But even here Clark will continue to make mischief. As I explained in Clark, the lowest
common denominator principle requires courts to search out a single hypothetical
constitutionally doubtful case to limit a statute’s terms in the wholly different case
actually before the court, lest the court fail to adopt a reading of the statute that
reflects the lowest common denominator. Id., at ___ (slip op., at 14) (dissent). This
requires a reverse-Salerno analysis that upends our facial challenge requirements.
See Clark, supra, at ___ (slip op., at 10); see also United States v. Salerno, 481 U. S. 739,
745 (1987) (for a facial challenge to succeed, there must be no circumstance in which
the statute is constitutional). For this and other reasons I have explained,
the Clark analysis allows much havoc to be wrought from the canon of constitutional
avoidance. See Clark, supra, at __ (slip op., at 10–15) (dissent).
In sum, I believe that Title III of the ADA, insofar as it requires structural changes, lacks
a sufficiently clear statement that it applies to the internal affairs of foreign vessels. In
my view the clear statement rule does not render Title III entirely inapplicable to foreign
vessels; instead, Title III applies to foreign ships only to the extent to which it does not
bear on their internal affairs. I therefore would remand for consideration of those Title
III claims that do not pertain to the structure of the ship. Accordingly, I concur in part III
A of the plurality opinion, join part I A of Justice Scalia’s dissent, and concur in the
judgment in part.
U.S. Supreme Court
Pennoyer v. Neff, 95 U.S. 714 (1878)
Pennoyer v. Neff
95 U.S. 714
ERROR TO THE CIRCUIT COURT OF THE UNITED STATES
FOR THE DISTRICT OF OREGON
MR. JUSTICE FIELD delivered the opinion of the court.
This is an action to recover the possession of a tract of land, of the alleged value of
$15,000, situated in the State of Oregon. The plaintiff asserts title to the premises by a
patent of the United States issued to him in 1866, under the act of Congress of Sept. 27,
1850, usually known as the Donation Law of Oregon. The defendant claims to have
acquired the premises under a sheriff's deed, made upon a sale of the property on
execution issued upon a judgment recovered against the plaintiff in one of the circuit
courts of the State. The case turns upon the validity of this judgment.
It appears from the record that the judgment was rendered in February, 1866, in favor
of J. H. Mitchell, for less than $300, including costs, in an action brought by him upon a
demand for services as an attorney; that, at the time the action was commenced and
the judgment rendered, the defendant therein, the plaintiff here, was a nonresident of
the State;
Page 95 U. S. 720
that he was not personally served with process, and did not appear therein; and that the
judgment was entered upon his default in not answering the complaint, upon a
constructive service of summons by publication.
The Code of Oregon provides for such service when an action is brought against a
nonresident and absent defendant who has property within the State. It also provides,
where the action is for the recovery of money or damages, for the attachment of the
property of the nonresident. And it also declares that no natural person is subject to the
jurisdiction of a court of the State
"unless he appear in the court, or be found within the State, or be a resident thereof, or
have property therein; and, in the last case, only to the extent of such property at the
time the jurisdiction attached."
Construing this latter provision to mean that, in an action for money or damages where
a defendant does not appear in the court, and is not found within the State, and is not a
resident thereof, but has property therein, the jurisdiction of the court extends only
over such property, the declaration expresses a principle of general, if not universal,
law. The authority of every tribunal is necessarily restricted by the territorial limits of
the State in which it is established. Any attempt to exercise authority beyond those
limits would be deemed in every other forum, as has been said by this Court, an
illegitimate assumption of power, and be resisted as mere abuse. D'Arcy v. Ketchum et
al., 11 How. 165. In the case against the plaintiff, the property here in controversy sold
under the judgment rendered was not attached, nor in any way brought under the
jurisdiction of the court. Its first connection with the case was caused by a levy of the
execution. It was not, therefore, disposed of pursuant to any adjudication, but only in
enforcement of a personal judgment, having no relation to the property, rendered
against a nonresident without service of process upon him in the action or his
appearance therein. The court below did not consider that an attachment of the
property was essential to its jurisdiction or to the validity of the sale, but held that the
judgment was invalid from defects in the affidavit upon which the order of publication
was obtained and in the affidavit by which the publication was proved.
Page 95 U. S. 721
There is some difference of opinion among the members of this Court as to the rulings
upon these alleged defects. The majority are of opinion that, inasmuch as the statute
requires, for an order of publication, that certain facts shall appear by affidavit to the
satisfaction of the court or judge, defects in such affidavit can only be taken advantage
of on appeal, or by some other direct proceeding, and cannot be urged to impeach the
judgment collaterally. The majority of the court are also of opinion that the provision of
the statute requiring proof of the publication in a newspaper to be made by the
"affidavit of the printer, or his foreman, or his principal clerk" is satisfied when the
affidavit is made by the editor of the paper. The term "printer," in their judgment, is
there used not to indicate the person who sets up the type -- he does not usually have a
foreman or clerks -- it is rather used as synonymous with publisher. The Supreme Court
of New York so held in one case; observing that, for the purpose of making the required
proof, publishers were "within the spirit of the statute." Bunce v. Reed, 16 Barb. (N. Y.)
350. And, following this ruling, the Supreme Court of California held that an affidavit
made by a "publisher and proprietor" was sufficient. Sharp v. Daugney, 33 Cal. 512. The
term "editor," as used when the statute of New York was passed, from which the
Oregon law is borrowed, usually included not only the person who wrote or selected the
articles for publication, but the person who published the paper and put it into
circulation. Webster, in an early edition of his Dictionary, gives as one of the definitions
of an editor, a person "who superintends the publication of a newspaper." It is
principally since that time that the business of an editor has been separated from that
of a publisher and printer, and has become an independent profession.
If, therefore, we were confined to the rulings of the court below upon the defects in the
affidavits mentioned, we should be unable to uphold its decision. But it was also
contended in that court, and is insisted upon here, that the judgment in the State court
against the plaintiff was void for want of personal service of process on him, or of his
appearance in the action in which it was rendered and that the premises in controversy
could not be subjected to the payment of the demand
Page 95 U. S. 722
of a resident creditor except by a proceeding in rem, that is, by a direct proceeding
against the property for that purpose. If these positions are sound, the ruling of the
Circuit Court as to the invalidity of that judgment must be sustained notwithstanding
our dissent from the reasons upon which it was made. And that they are sound would
seem to follow from two well established principles of public law respecting the
jurisdiction of an independent State over persons and property. The several States of
the Union are not, it is true, in every respect independent, many of the right and powers
which originally belonged to them being now vested in the government created by the
Constitution. But, except as restrained and limited by that instrument, they possess and
exercise the authority of independent States, and the principles of public law to which
we have referred are applicable to them. One of these principles is that every State
possesses exclusive jurisdiction and sovereignty over persons and property within its
territory. As a consequence, every State has the power to determine for itself the civil
status and capacities of its inhabitants; to prescribe the subjects upon which they may
contract, the forms and solemnities with which their contracts shall be executed, the
rights and obligations arising from them, and the mode in which their validity shall be
determined and their obligations enforced; and also the regulate the manner and
conditions upon which property situated within such territory, both personal and real,
may be acquired, enjoyed, and transferred. The other principle of public law referred to
follows from the one mentioned; that is, that no State can exercise direct jurisdiction
and authority over persons or property without its territory. Story, Confl. Laws, c. 2;
Wheat. Int. Law, pt. 2, c. 2. The several States are of equal dignity and authority, and the
independence of one implies the exclusion of power from all others. And so it is laid
down by jurists as an elementary principle that the laws of one State have no operation
outside of its territory except so far as is allowed by comity, and that no tribunal
established by it can extend its process beyond that territory so as to subject either
persons or property to its decisions. "Any exertion of authority of this sort beyond this
limit," says Story, "is a mere nullity, and incapable of binding
Page 95 U. S. 723
such persons or property in any other tribunals." Story, Confl.Laws, sect. 539.
But as contracts made in one State may be enforceable only in another State, and
property may be held by nonresidents, the exercise of the jurisdiction which every State
is admitted to possess over persons and property within its own territory will often
affect persons and property without it. To any influence exerted in this way by a State
affecting persons resident or property situated elsewhere, no objection can be justly
taken; whilst any direct exertion of authority upon them, in an attempt to give ex-
territorial operation to its laws, or to enforce an ex-territorial jurisdiction by its
tribunals, would be deemed an encroachment upon the independence of the State in
which the persons are domiciled or the property is situated, and be resisted as
usurpation.
Thus the State, through its tribunals, may compel persons domiciled within its limits to
execute, in pursuance of their contracts respecting property elsewhere situated,
instruments in such form and with such solemnities as to transfer the title, so far as such
formalities can be complied with; and the exercise of this jurisdiction in no manner
interferes with the supreme control over the property by the State within which it is
situated. Penn v. Lord Baltimore, 1 Ves. 444; Massie v. Watts, 6 Cranch 148; Watkins v.
Holman, 16 Pet. 25; Corbett v. Nutt, 10 Wall. 464.
So the State, through its tribunals, may subject property situated within its limits owned
by nonresidents to the payment of the demand of its own citizens against them, and the
exercise of this jurisdiction in no respect infringes upon the sovereignty of the State
where the owners are domiciled. Every State owes protection to its own citizens, and,
when nonresidents deal with them, it is a legitimate and just exercise of authority to
hold and appropriate any property owned by such nonresidents to satisfy the claims of
its citizens. It is in virtue of the State's jurisdiction over the property of the nonresident
situated within its limits that its tribunals can inquire into that nonresident's obligations
to its own citizens, and the inquiry can then be carried only to the extent necessary to
control the disposition of the property. If the nonresident
Page 95 U. S. 724
have no property in the State, there is nothing upon which the tribunals can adjudicate.
These views are not new. They have been frequently expressed, with more or less
distinctness, in opinions of eminent judges, and have been carried into adjudications in
numerous cases. Thus, in Picquet v. Swan, 5 Mas. 35, Mr. Justice Story said:--
"Where a party is within a territory, he may justly be subjected to its process, and bound
personally by the judgment pronounced on such process against him. Where he is not
within such territory, and is not personally subject to its laws, if, on account of his
supposed or actual property being within the territory, process by the local laws may, by
attachment, go to compel his appearance, and, for his default to appear, judgment may
be pronounced against him, such a judgment must, upon general principles, be deemed
only to bind him to the extent of such property, and cannot have the effect of a
conclusive judgment in personam, for the plain reason, that, except so far as the
property is concerned, it is a judgment coram non judice."
And in Boswell's Lessee v. Otis, 9 How. 336, where the title of the plaintiff in ejectment
was acquired on a sheriff's sale under a money decree rendered upon publication of
notice against nonresidents, in a suit brought to enforce a contract relating to land, Mr.
Justice McLean said:--
"Jurisdiction is acquired in one of two modes: first, as against the person of the
defendant by the service of process; or, secondly, by a procedure against the property
of the defendant within the jurisdiction of the court. In the latter case, the defendant is
not personally bound by the judgment beyond the property in question. And it is
immaterial whether the proceeding against the property be by an attachment or bill in
chancery. It must be substantially a proceeding in rem."
These citations are not made as authoritative expositions of the law, for the language
was perhaps not essential to the decision of the cases in which it was used, but as
expressions of the opinion of eminent jurists. But in Cooper v. Reynolds, reported in the
10th of Wallace, it was essential to the disposition of the case to declare the effect of a
personal action against an absent party, without the jurisdiction of the court, not served
Page 95 U. S. 725
with process or voluntarily submitting to the tribunal, when it was sought to subject his
property to the payment of a demand of a resident complainant; and, in the opinion
there delivered, we have a clear statement of the law as to the efficacy of such actions,
and the jurisdiction of the court over them. In that case, the action was for damages for
alleged false imprisonment of the plaintiff; and, upon his affidavit that the defendants
had fled from the State, or had absconded or concealed themselves so that the ordinary
process of law could not reach them, a writ of attachment was sued out against their
property. Publication was ordered by the court, giving notice to them to appear and
plead, answer or demur, or that the action would be taken as confessed and proceeded
in ex parte as to them. Publication was had, but they made default, and judgment was
entered against them, and the attached property was sold under it. The purchaser
having been put into possession of the property, the original owner brought ejectment
for its recovery. In considering the character of the proceeding, the Court, speaking
through Mr. Justice Miller, said:--
"Its essential purpose or nature is to establish, by the judgment of the court, a demand
or claim against the defendant, and subject his property lying within the territorial
jurisdiction of the court to the payment of that demand. But the plaintiff is met at the
commencement of his proceedings by the fact that the defendant is not within the
territorial jurisdiction, and cannot be served with any process by which he can be
brought personally within the power of the court. For this difficulty, the statute has
provided a remedy. It says that, upon affidavit's being made of that fact, a writ of
attachment may be issued and levied on any of the defendant's property, and a
publication may be made warning him to appear; and that thereafter the court may
proceed in the case, whether he appears or not. If the defendant appears, the cause
becomes mainly a suit in personam, with the added incident that the property attached
remains liable, under the control of the court, to answer to any demand which may be
established against the defendant by the final judgment of the court. But if there is no
appearance of the defendant, and no service of process on him, the case becomes in its
essential nature a proceeding in rem, the only effect of which is to subject the property
attached to the payment of the demand which the court may find to be due to the
plaintiff. That such is
Page 95 U. S. 726
the nature of this proceeding in this latter class of cases is clearly evinced by two well
established propositions: first, the judgment of the court, though in form a personal
judgment against the defendant, has no effect beyond the property attached in that
suit. No general execution can be issued for any balance unpaid after the attached
property is exhausted. No suit can be maintained on such a judgment in the same court,
or in any other; nor can it be used as evidence in any other proceeding not affecting the
attached property; nor could the costs in that proceeding be collected of defendant out
of any other property than that attached in the suit. Second, the court in such a suit
cannot proceed unless the officer finds some property of defendant on which to levy
the writ of attachment. A return that none can be found is the end of the case, and
deprives the court of further jurisdiction, though the publication may have been duly
made and proven in court."
The fact that the defendants in that case had fled from the State, or had concealed
themselves, so as not to be reached by the ordinary process of the court, and were not
nonresidents, was not made a point in the decision. The opinion treated them as being
without the territorial jurisdiction of the court, and the grounds and extent of its
authority over persons and property thus situated were considered when they were not
brought within its jurisdiction by personal service or voluntary appearance.
The writer of the present opinion considered that some of the objections to the
preliminary proceedings in the attachment suit were well taken, and therefore
dissented from the judgment of the Court, but, to the doctrine declared in the above
citation, he agreed, and he may add that it received the approval of all the judges. It is
the only doctrine consistent with proper protection to citizens of other States. If,
without personal service, judgments in personam, obtained ex parte against
nonresidents and absent parties, upon mere publication of process, which, in the great
majority of cases, would never be seen by the parties interested, could be upheld and
enforced, they would be the constant instruments of fraud and oppression. Judgments
for all sorts of claims upon contracts and for torts, real or pretended, would be thus
obtained, under which property would be seized, when the evidence of the transactions
upon
Page 95 U. S. 727
which they were founded, if they ever had any existence, had perished.
Substituted service by publication, or in any other authorized form, may be sufficient to
inform parties of the object of proceedings taken where property is once brought under
the control of the court by seizure or some equivalent act. The law assumes that
property is always in the possession of its owner, in person or by agent, and it proceeds
upon the theory that its seizure will inform him not only that it is taken into the custody
of the court, but that he must look to any proceedings authorized by law upon such
seizure for its condemnation and sale. Such service may also be sufficient in cases where
the object of the action is to reach and dispose of property in the State, or of some
interest therein, by enforcing a contract or a lien respecting the same, or to partition it
among different owners, or, when the public is a party, to condemn and appropriate it
for a public purpose. In other words, such service may answer in all actions which are
substantially proceedings in rem. But where the entire object of the action is to
determine the personal rights and obligations of the defendants, that is, where the suit
is merely in personam, constructive service in this form upon a nonresident is ineffectual
for any purpose. Process from the tribunals of one State cannot run into another State,
and summon parties there domiciled to leave its territory and respond to proceedings
against them. Publication of process or notice within the State where the tribunal sits
cannot create any greater obligation upon the nonresident to appear. Process sent to
him out of the State, and process published within it, are equally unavailing in
proceedings to establish his personal liability.
The want of authority of the tribunals of a State to adjudicate upon the obligations of
nonresidents, where they have no property within its limits, is not denied by the court
below: but the position is assumed, that, where they have property within the State, it is
immaterial whether the property is in the first instance brought under the control of the
court by attachment or some other equivalent act, and afterwards applied by its
judgment to the satisfaction of demands against its owner; or such demands be first
established in a personal action, and
Page 95 U. S. 728
the property of the nonresident be afterwards seized and sold on execution. But the
answer to this position has already been given in the statement that the jurisdiction of
the court to inquire into and determine his obligations at all is only incidental to its
jurisdiction over the property. Its jurisdiction in that respect cannot be made to depend
upon facts to be ascertained after it has tried the cause and rendered the judgment. If
the judgment be previously void, it will not become valid by the subsequent discovery of
property of the defendant, or by his subsequent acquisition of it. The judgment, if void
when rendered, will always remain void; it cannot occupy the doubtful position of being
valid if property be found, and void if there be none. Even if the position assumed were
confined to cases where the nonresident defendant possessed property in the State at
the commencement of the action, it would still make the validity of the proceedings and
judgment depend upon the question whether, before the levy of the execution, the
defendant had or had not disposed of the property. If, before the levy, the property
should be sold, then, according to this position, the judgment would not be binding. This
doctrine would introduce a new element of uncertainty in judicial proceedings. The
contrary is the law: the validity of every judgment depends upon the jurisdiction of the
court before it is rendered, not upon what may occur subsequently. In Webster v.
Reid, reported in 11th of Howard, the plaintiff claimed title to land sold under
judgments recovered in suits brought in a territorial court of Iowa, upon publication of
notice under a law of the territory, without service of process; and the court said:
"These suits were not a proceeding in rem against the land, but were in
personam against the owners of it. Whether they all resided within the territory or not
does not appear, nor is it a matter of any importance. No person is required to answer
in a suit on whom process has not been served, or whose property has not been
attached. In this case, there was no personal notice, nor an attachment or other
proceeding against the land, until after the judgments. The judgments, therefore, are
nullities, and did not authorize the executions on which the land was sold. "
Page 95 U. S. 729
The force and effect of judgments rendered against nonresidents without personal
service of process upon them, or their voluntary appearance, have been the subject of
frequent consideration in the courts of the United States and of the several States, as
attempts have been made to enforce such judgments in States other than those in
which they were rendered, under the provision of the Constitution requiring that "full
faith and credit shall be given in each State to the public acts, records, and judicial
proceedings of every other State;" and the act of Congress providing for the mode of
authenticating such acts, records, and proceedings, and declaring that, when thus
authenticated,
"they shall have such faith and credit given to them in every court within the United
States as they have by law or usage in the courts of the State from which they are or
shall or taken."
In the earlier cases, it was supposed that the act gave to all judgments the same effect
in other States which they had by law in the State where rendered. But this view was
afterwards qualified so as to make the act applicable only when the court rendering the
judgment had jurisdiction of the parties and of the subject matter, and not to preclude
an inquiry into the jurisdiction of the court in which the judgment was rendered, or the
right of the State itself to exercise authority over the person or the subject
matter.M'Elmoyle v. Cohen, 13 Pet. 312. In the case of D'Arcy v. Ketchum, reported in
the 11th of Howard, this view is stated with great clearness. That was an action in the
Circuit Court of the United States for Louisiana, brought upon a judgment rendered in
New York under a State statute, against two joint debtors, only one of whom had been
served with process, the other being a nonresident of the State. The Circuit Court held
the judgment conclusive and binding upon the nonresident not served with process, but
this Court reversed its decision, observing, that it was a familiar rule that countries
foreign to our own disregarded a judgment merely against the person, where the
defendant had not been served with process nor had a day in court; that national
comity was never thus extended; that the proceeding was deemed an illegitimate
assumption of power, and resisted as mere abuse; that no faith and credit or force and
effect had been given to such judgments by any State of the Union, so far
Page 95 U. S. 730
as known; and that the State courts had uniformly, and in many instances, held them to
be void. "The international law," said the court,
"as it existed among the States in 1790, was that a judgment rendered in one State,
assuming to bind the person of a citizen of another, was void within the foreign State,
when the defendant had not been served with process or voluntarily made defence,
because neither the legislative jurisdiction nor that of courts of justice had binding
force."
And the Court held that the act of Congress did not intend to declare a new rule, or to
embrace judicial records of this description. As was stated in a subsequent case, the
doctrine of this Court is that the act
"was not designed to displace that principle of natural justice which requires a person to
have notice of a suit before he can be conclusively bound by its result, nor those rules of
public law which protect persons and property within one State from the exercise of
jurisdiction over them by another."
The Lafayette Insurance Co. v. French et al., 18 How. 404.
This whole subject has been very fully and learnedly considered in the recent case
of Thompson v. Whitman,18 Wall. 457, where all the authorities are carefully reviewed
and distinguished, and the conclusion above stated is not only reaffirmed, but the
doctrine is asserted that the record of a judgment rendered in another State may be
contradicted as to the facts necessary to give the court jurisdiction against its recital of
their existence. In all the cases brought in the State and Federal courts, where attempts
have been made under the act of Congress to give effect in one State to personal
judgments rendered in another State against nonresidents, without service upon them,
or upon substituted service by publication, or in some other form, it has been held,
without an exception, so far as we are aware, that such judgments were without any
binding force except as to property, or interests in property, within the State, to reach
and affect which was the object of the action in which the judgment was rendered, and
which property was brought under control of the court in connection with the process
against the person. The proceeding in such cases, though in the form of a personal
action, has been uniformly treated, where service was not obtained, and the party did
not voluntarily
Page 95 U. S. 731
appear, as effectual and binding merely as a proceeding in rem, and as having no
operation beyond the disposition of the property, or some interest therein. And the
reason assigned for this conclusion has been that which we have already stated -- that
the tribunals of one State have no jurisdiction over persons beyond its limits, and can
inquire only into their obligations to its citizens when exercising its conceded jurisdiction
over their property within its limits. In Bissell v. Briggs, decided by the Supreme Court of
Massachusetts as early as 1813, the law is stated substantially in conformity with these
views. In that case, the court considered at length the effect of the constitutional
provision, and the act of Congress mentioned, and after stating that, in order to entitle
the judgment rendered in any court of the United States to the full faith and credit
mentioned in the Constitution, the court must have had jurisdiction not only of the
cause, but of the parties, it proceeded to illustrate its position by observing, that, where
a debtor living in one State has goods, effects, and credits in another, his creditor living
in the other State may have the property attached pursuant to its laws, and, on
recovering judgment, have the property applied to its satisfaction, and that the party in
whose hands the property was would be protected by the judgment in the State of the
debtor against a suit for it, because the court rendering the judgment had jurisdiction to
that extent; but that, if the property attached were insufficient to satisfy the judgment,
and the creditor should sue on that judgment in the State of the debtor, he would fail
because the defendant was not amenable to the court rendering the judgment. In other
words, it was held that over the property within the State the court had jurisdiction by
the attachment, but had none over his person, and that any determination of his
liability, except so far as was necessary for the disposition of the property, was invalid.
In Kilbourn v. Woodworth, 5 Johns. (N.Y.) 37, an action of debt was brought in New York
upon a personal judgment recovered in Massachusetts. The defendant in that judgment
was not served with process, and the suit was commenced by the attachment of a
bedstead belonging to the defendant, accompanied with a summons to appear, served
on his wife after she had left her place in Massachusetts. The court held that
Page 95 U. S. 732
the attachment bound only the property attached as a proceeding in rem, and that it
could not bind the defendant, observing, that to bind a defendant personally when he
was never personally summoned or had notice of the proceeding would be contrary to
the first principles of justice, repeating the language in that respect of Chief Justice
DeGrey, used in the case of Fisher v. Lane, 3 Wils. 297, in 1772. See also Borden v.
Fitch,15 Johns. (N. Y.) 121, and the cases there cited, and Harris v. Hardeman et al., 14
How. 334. To the same purport, decisions are found in all the State courts. In several of
the cases, the decision has been accompanied with the observation that a personal
judgment thus recovered has no binding force without the State in which it is rendered,
implying that, in such State, it may be valid and binding. But if the court has no
jurisdiction over the person of the defendant by reason of his nonresidence, and
consequently no authority to pass upon his personal rights and obligations; if the whole
proceeding, without service upon him or his appearance, is coram non judice and void; if
to hold a defendant bound by such a judgment is contrary to the first principles of
justice -- it is difficult to see how the judgment can legitimately have any force within
the State. The language used can be justified only on the ground that there was no
mode of directly reviewing such judgment or impeaching its validity within the State
where rendered, and that therefore it could be called in question only when its
enforcement was elsewhere attempted. In later cases, this language is repeated with
less frequency than formerly, it beginning to be considered, as it always ought to have
been, that a judgment which can be treated in any State of this Union as contrary to the
first principles of justice, and as an absolute nullity, because rendered without any
jurisdiction of the tribunal over the party, is not entitled to any respect in the State
where rendered. Smith v. McCutchen, 38 Mo. 415; Darrance v. Preston, 18 Iowa,
396; Hakes v. Shupe, 27 id. 465; Mitchell's Administrator v. Gray, 18 Ind. 123.
Be that as it may, the courts of the United States are not required to give effect to
judgments of this character when any right is claimed under them. Whilst they are not
foreign tribunals in their relations to the State courts, they are tribunals
Page 95 U. S. 733
of a different sovereignty, exercising a distinct and independent jurisdiction, and are
bound to give to the judgments of the State courts only the same faith and credit which
the courts of another State are bound to give to them.
Since the adoption of the Fourteenth Amendment to the Federal Constitution, the
validity of such judgments may be directly questioned, and their enforcement in the
State resisted, on the ground that proceedings in a court of justice to determine the
personal rights and obligations of parties over whom that court has no jurisdiction do
not constitute due process of law. Whatever difficulty may be experienced in giving to
those terms a definition which will embrace every permissible exertion of power
affecting private rights, and exclude such as is forbidden, there can be no doubt of their
meaning when applied to judicial proceedings. They then mean a course of legal
proceedings according to those rules and principles which have been established in our
systems of jurisprudence for the protection and enforcement of private rights. To give
such proceedings any validity, there must be a tribunal competent by its constitution --
that is, by the law of its creation -- to pass upon the subject matter of the suit; and if
that involves merely a determination of the personal liability of the defendant, he must
be brought within its jurisdiction by service of process within the State, or his voluntary
appearance.
Except in cases affecting the personal status of the plaintiff and cases in which that
mode of service may be considered to have been assented to in advance, as hereinafter
mentioned, the substituted service of process by publication, allowed by the law of
Oregon and by similar laws in other States, where actions are brought against
nonresidents, is effectual only where, in connection with process against the person for
commencing the action, property in the State is brought under the control of the court,
and subjected to its disposition by process adapted to that purpose, or where the
judgment is sought as a means of reaching such property or affecting some interest
therein; in other words, where the action is in the nature of a proceeding in rem. As
stated by Cooley in his Treatise on Constitutional Limitations 405, for any other purpose
than to subject the property of a nonresident to valid claims against
Page 95 U. S. 734
him in the State, "due process of law would require appearance or personal service
before the defendant could be personally bound by any judgment rendered."
It is true that, in a strict sense, a proceeding in rem is one taken directly against
property, and has for its object the disposition of the property, without reference to the
title of individual claimants; but, in a larger and more general sense, the terms are
applied to actions between parties where the direct object is to reach and dispose of
property owned by them, or of some interest therein. Such are cases commenced by
attachment against the property of debtors, or instituted to partition real estate,
foreclose a mortgage, or enforce a lien. So far as they affect property in the State, they
are substantially proceedings in rem in the broader sense which we have mentioned.
It is hardly necessary to observe that, in all we have said, we have had reference to
proceedings in courts of first instance, and to their jurisdiction, and not to proceedings
in an appellate tribunal to review the action of such courts. The latter may be taken
upon such notice, personal or constructive, as the State creating the tribunal may
provide. They are considered as rather a continuation of the original litigation than the
commencement of a new action. Nations et al. v. Johnson et al., 24 How. 195.
It follows from the views expressed that the personal judgment recovered in the State
court of Oregon against the plaintiff herein, then a nonresident of the State, was
without any validity, and did not authorize a sale of the property in controversy.
To prevent any misapplication of the views expressed in this opinion, it is proper to
observe that we do not mean to assert by anything we have said that a State may not
authorize proceedings to determine the status of one of its citizens towards a
nonresident which would be binding within the State, though made without service of
process or personal notice to the nonresident. The jurisdiction which every State
possesses to determine the civil status and capacities of all its inhabitants involves
authority to prescribe the conditions on which proceedings affecting them may be
commenced and carried on within its territory. The State, for example, has absolute
Page 95 U. S. 735
right to prescribe the conditions upon which the marriage relation between its own
citizens shall be created, and the causes for which it may be dissolved. One of the
parties guilty of acts for which, by the law of the State, a dissolution may be granted
may have removed to a State where no dissolution is permitted. The complaining party
would, therefore, fail if a divorce were sought in the State of the defendant; and if
application could not be made to the tribunals of the complainant's domicile in such
case, and proceedings be there instituted without personal service of process or
personal notice to the offending party, the injured citizen would be without redress.
Bish. Marr. and Div., sect. 156.
Neither do we mean to assert that a State may not require a nonresident entering into a
partnership or association within its limits, or making contracts enforceable there, to
appoint an agent or representative in the State to receive service of process and notice
in legal proceedings instituted with respect to such partnership, association, or
contracts, or to designate a place where such service may be made and notice given,
and provide, upon their failure, to make such appointment or to designate such place
that service may be made upon a public officer designated for that purpose, or in some
other prescribed way, and that judgments rendered upon such service may not be
binding upon the nonresidents both within and without the State. As was said by the
Court of Exchequer in Vallee v. Dumergue, 4 Exch. 290,
"It is not contrary to natural justice that a man who has agreed to receive a particular
mode of notification of legal proceedings should be bound by a judgment in which that
particular mode of notification has been followed, even though he may not have actual
notice of them."
See also The Lafayette Insurance Co. v. French et al., 18 How. 404, and Gillespie v.
Commercial Mutual Marine Insurance Co., 12 Gray (Mass.), 201. Nor do we doubt that a
State, on creating corporations or other institutions for pecuniary or charitable
purposes, may provide a mode in which their conduct may be investigated, their
obligations enforced, or their charters revoked, which shall require other than personal
service upon their officers or members. Parties becoming members of such corporations
or institutions would hold their
Page 95 U. S. 736
interest subject to the conditions prescribed by law. Copin v. Adamson, Law Rep. 9 Ex.
345.
In the present case, there is no feature of this kind, and consequently no consideration
of what would be the effect of such legislation in enforcing the contract of a nonresident
can arise. The question here respects only the validity of a money judgment rendered in
one State in an action upon a simple contract against the resident of another without
service of process upon him or his appearance therein.
Judgment affirmed.
MR. JUSTICE HUNT dissenting.
I am compelled to dissent from the opinion and judgment of the court, and, deeming
the question involved to be important, I take leave to record my views upon it.
The judgment of the court below was placed upon the ground that the provisions of the
statute were not complied with. This is of comparatively little importance, as it affects
the present case only. The judgment of this Court is based upon the theory that the
legislature had no power to pass the law in question; that the principle of the statute is
vicious, and every proceeding under it void. It, therefore, affects all like cases, past and
future, and in every State.
The precise case is this: a statute of Oregon authorizes suits to be commenced by the
service of a summons. In the case of a nonresident of the State, it authorizes the service
of the summons to be made by publication for not less than six weeks, in a newspaper
published in the county where the action is commenced. A copy of the summons must
also be sent by mail, directed to the defendant at his place of residence, unless it be
shown that the residence is not known and cannot be ascertained. It authorizes a
judgment and execution to be obtained in such proceeding. Judgment in a suit
commenced by one Mitchell in the Circuit Court of Multnomah County, where the
summons was thus served, was obtained against Neff, the present plaintiff, and the land
in question, situate in Multnomah County, was bought by the defendant Pennoyer at a
sale upon the judgment in such suit. This court now holds that, by reason of the absence
of a personal service of
Page 95 U. S. 737
the summons on the defendant, the Circuit Court of Oregon had no jurisdiction, its
judgment could not authorize the sale of land in said county, and, as a necessary result,
a purchaser of land under it obtained no title; that, as to the former owner, it is a case of
depriving a person of his property without due process of law.
In my opinion, this decision is at variance with the long established practice under the
statutes of the States of this Union, is unsound in principle, and, I fear, may be
disastrous in its effects. It tends to produce confusion in titles which have been obtained
under similar statutes in existence for nearly a century; it invites litigation and strife, and
overthrows a well settled rule of property.
The result of the authorities on the subject, and the sound conclusions to be drawn from
the principles which should govern the decision, as I shall endeavor to show, are these:--
1. A sovereign State must necessarily have such control over the real and personal
property actually being within its limits, as that it may subject the same to the payment
of debts justly due to its citizens.
2. This result is not altered by the circumstance that the owner of the property is
nonresident, and so absent from the State that legal process cannot be served upon him
personally.
3. Personal notice of a proceeding by which title to property is passed is not
indispensable; it is competent to the State to authorize substituted service by
publication or otherwise, as the commencement of a suit against nonresidents, the
judgment in which will authorize the sale of property in such State.
4. It belongs to the legislative power of the State to determine what shall be the modes
and means proper to be adopted to give notice to an absent defendant of the
commencement of a suit; and if they are such as are reasonably likely to communicate
to him information of the proceeding against him, and are in good faith designed to give
him such information, and an opportunity to defend is provided for him in the event of
his appearance in the suit, it is not competent to the judiciary to declare that such
proceeding is void as not being by due process of law.
5. Whether the property of such nonresident shall be seized
Page 95 U. S. 738
upon attachment as the commencement of a suit which shall be carried into judgment
and execution, upon which it shall then be sold, or whether it shall be sold upon an
execution and judgment without such preliminary seizure, is a matter not of
constitutional power, but of municipal regulation only.
To say that a sovereign State has the power to ordain that the property of nonresidents
within its territory may be subjected to the payment of debts due to its citizens, if the
property is levied upon at the commencement of a suit, but that it has not such power if
the property is levied upon at the end of the suit, is a refinement and a depreciation of a
great general principle that, in my judgment, cannot be sustained.
A reference to the statutes of the different States, and to the statutes of the United
States, and to the decided cases, and a consideration of the principles on which they
stand, will more clearly exhibit my view of the question.
The statutes are of two classes: first, those which authorize the commencement of
actions by publication, accompanied by an attachment which is levied upon property,
more or less, of an absent debtor; second, those giving the like mode of commencing a
suit without an attachment.
The statute of Oregon relating to publication of summons, supra, p. 95 U. S. 718, under
which the question arises, is nearly a transcript of a series of provisions contained in the
New York statute, adopted thirty years since. The latter authorizes the commencement
of a suit against a nonresident by the publication of an order for his appearance, for a
time not less than six weeks, in such newspapers as shall be most likely to give notice to
him, and the deposit of a copy of the summons and complaint in the post office,
directed to him at his residence, if it can be ascertained; and provides for the allowance
to defend the action before judgment, and within seven years after its rendition, upon
good cause shown, and that, if the defence be successful, restitution shall be ordered. It
then declares: "But the title to property sold under such judgment to a purchaser in
good faith shall not be thereby affected." Code, sects. 34, 35; 5 Edm.Rev.Stat. of N.Y.,
pp. 37-39.
Provisions similar in their effect, in authorizing the commencement of suits by
attachment against absent debtors, in
Page 95 U. S. 739
which all of the property of the absent debtor, real and personal, not merely that seized
upon the attachment, is placed under the control of trustees, who sell it for the benefit
of all the creditors, and make just distribution thereof, conveying absolute title to the
property sold have been upon the statute book of New York for more than sixty years.
2 id., p. 2 and following; 1 Rev.Laws, 1813, p. 157.
The statute of New York, before the Code, respecting proceedings in chancery where
absent debtors are parties, had long been in use in that State, and was adopted in all
cases of chancery jurisdiction. Whenever a defendant resided out of the State, his
appearance might be compelled by publication in the manner pointed out. A decree
might pass against him, and performance be compelled by sequestration of his real or
personal property, or by causing possession of specific property to be delivered, where
that relief is sought. T he relief was not confined to cases of mortgage foreclosure, or
where there was a specific claim upon the property, but included cases requiring the
payment of money as well. 2 Edm.Rev.Stat. N.Y., pp. 193-195; 186, m.
I doubt not that many valuable titles are now held by virtue of the provisions of these
statutes.
The statute of California authorizes the service of a summons on a nonresident
defendant by publication, permitting him to come in and defend upon the merits within
one year after the entry of judgment. Code, sects. 10,412, 10,473. In its general
character, it is like the statutes of Oregon and New York already referred to.
The Code of Iowa, sect. 2618, that of Nevada, sect. 1093, and that of Wisconsin, are to
the same general effect. The Revised Statutes of Ohio, sects. 70, 75, 2 Swan &
Critchfield, provide for a similar publication, and that the defendant may come in to
defend within five years after the entry of the judgment, but that the title to property
held by any purchaser in good faith under the judgment shall not be affected thereby.
The attachment laws of New Jersey, Nixon Dig. (4th ed.), p. 55, are like those of New
York already quoted, by which title may be transferred to all the property of a
nonresident debtor. And the provisions of the Pennsylvania statute regulating
Page 95 U. S. 740
proceedings in equity, Brightly's Purden's Dig., p. 5988, sects. 51, 52, give the same
authority in substance, and the same result is produced as under the New York statute.
Without going into a wearisome detail of the statutes of the various States, it is safe to
say that nearly every State in the Union provides a process by which the lands and other
property of a nonresident debtor may be subjected to the payment of his debts,
through a judgment or decree against the owner, obtained upon a substituted service of
the summons or writ commencing the action.
The principle of substituted service is also a rule of property under the statutes of the
United States.
The act of Congress "to amend the law of the District of Columbia in relation to judicial
proceedings therein," approved Feb. 23, 1867, 14 Stat. 403, contains the same general
provisions. It enacts (sect. 7) that publication may be substituted for personal service
when the defendant cannot be found in suits for partition, divorce, by attachment, for
the foreclosure of mortgages and deeds of trust, and for the enforcement of mechanics'
liens and all other liens against real or personal property, and in all actions at law or in
equity having for their immediate object the enforcement or establishment of any
lawful right, claim, or demand to or against any real or personal property within the
jurisdiction of the court.
A following section points out the mode of proceeding, and closes in these words:
"The decree, besides subjecting the thing upon which the lien has attached to the
satisfaction of the plaintiff's demand against the defendant, shall adjudge that the
plaintiff recover his demand against the defendant, and that he may have execution
thereof as at law."
Sect. 10.
A formal judgment against the debtor is thus authorized by means of which any other
property of the defendant within the jurisdiction of the court, in addition to that which
is the subject of the lien, may be sold, and the title transferred to the purchaser.
All these statutes are now adjudged to be unconstitutional and void. The titles obtained
under them are not of the value
Page 95 U. S. 741
of the paper on which they are recorded, except where a preliminary attachment was
issued.
Some of the statutes and several of the authorities I cite go further than the present
case requires. In this case, property lying in the State where the suit was brought,
owned by the nonresident debtor, was sold upon the judgment against him, and it is on
the title to that property that the controversy turns.
The question whether, in a suit commenced like the present one, a judgment can be
obtained which, if sued upon in another State, will be conclusive against the debtor, is
not before us; nor does the question arise as to the faith and credit to be given in one
State to a judgment recovered in another. The learning on that subject is not applicable.
The point is simply whether land lying in the same State may be subjected to process at
the end of a suit thus commenced.
It is here necessary only to maintain the principle laid down by Judge Cooley in his work
on Constitutional Limitations, p. 404, and cited by Mr. Justice Field in Galpin v. Page, 3
Sawyer 93, in these words:
"The fact that process was not personally served is a conclusive objection to the
judgment as a personal claim, unless the defendant caused his appearance to be
entered in the attachment proceedings. Where a party has property in a State, and
resides elsewhere, his property is justly subject to all valid claims that may exist against
him there; but, beyond this, due process of law would require appearance or personal
service before the defendant could be personally bound by any judgment rendered."
The learned author does not make it a condition that there should be a preliminary
seizure of the property by attachment; he lays down the rule that all a person's property
in a State may be subjected to all valid claims there existing against him.
The objection now made that suits commenced by substituted service, as by
publication, and judgments obtained without actual notice to the debtor, are in
violation of that constitutional provision that no man shall be deprived of his property
"without due process of law," has often been presented.
In Matter of the Empire City Bank, 18 N.Y. 199, which
Page 95 U. S. 742
was a statutory proceeding to establish and to enforce the responsibility of the
stockholders of a banking corporation, and the proceedings in which resulted in a
personal judgment against the stockholders for the amount found due, the eminent and
learned Judge Denio, speaking as the organ of the Court of Appeals, says:
"The notice of hearing is to be personal, or by service at the residence of the parties
who live in the county, or by advertisement as to others. It may therefore happen that
some of the persons who are made liable will not have received actual notice, and the
question is whether personal service of process or actual notice to the party is essential
to constitute due process of law. We have not been referred to any adjudication holding
that no man's right of property can be affected by judicial proceedings unless he have
personal notice. It may be admitted that a statute which should authorize any debt or
damages to be adjudged against a person upon a purely ex parte proceeding, without a
pretence of notice or any provision for defending, would be a violation of the
Constitution, and be void; but where the legislature has prescribed a kind of notice by
which it is reasonably probable that the party proceeded against will be apprised of
what is going on against him, and an opportunity is afforded him to defend, I am of the
opinion that the courts have not the power to pronounce the proceeding illegal. The
legislature has uniformly acted upon that understanding of the Constitution."
Numerous provisions of the statutes of the State are commented upon, after which he
proceeds:
"Various prudential regulations are made with respect to these remedies; but it may
possibly happen, notwithstanding all these precautions, that a citizen who owes
nothing, and has done none of the acts mentioned in the statute, may be deprived of his
estate without any actual knowledge of the process by which it has been taken from
him. If we hold, as we must in order to sustain this legislation, that the Constitution does
not positively require personal notice in order to constitute a legal proceeding due
process of law, it then belongs to the legislature to determine whether the case calls for
this kind of exceptional legislation, and what manner of constructive notice shall be
sufficient to reasonably apprise the party proceeded against of the legal steps which are
taken against him. "
Page 95 U. S. 743
In Happy v. Mosher, 48 id. 313, the court say:
"An approved definition of due process of law is 'law in its regular administration
through courts of justice.' 2 Kent Com. 13. It need not be a legal proceeding according to
the course of the common law, neither must there be personal notice to the party
whose property is in question. It is sufficient if a kind of notice is provided by which it is
reasonably probable that the party proceeded against will be apprised of what is going
on against him, and an opportunity afforded him to defend."
The same language is used in Westervelt v. Gregg, 12 id. 202, and in Campbell v.
Evans, 45 id. 356. Campbell v. Evans and The Empire City Bank are cases not of
proceedings against property to enforce a lien or claim, but, in each of them, a personal
judgment in damages was rendered against the party complaining.
It is undoubtedly true, that, in many cases where the question respecting due process of
law has arisen, the case in hand was that of a proceeding in rem. It is true also, as is
asserted, that the process of a State cannot be supposed to run beyond its own
territory. It is equally true, however, that, in every instance where the question has
been presented, the validity of substituted service, which is used to subject property
within the State belonging to a nonresident to a judgment obtained by means thereof
has been sustained. I have found no case in which it is adjudged that a statute must
require a preliminary seizure of such property as necessary to the validity of the
proceeding against it, or that there must have been a previous specific lien upon it; that
is, I have found no case where such has been the judgment of the court upon facts
making necessary the decision of the point. On the contrary, in the case of the
attachment laws of New York and of New Jersey, which distribute all of the
nonresident's property, not merely that levied on by the attachment, and in several of
the reported cases already referred to, where the judgment was sustained, neither of
these preliminary facts existed.
The case of Galpin v. Page, reported in 18 Wall. 350 and again in 3 Sawyer 93, is cited in
hostility to the views I have expressed. There may be general expressions which will
justify
Page 95 U. S. 744
this suggestion, but the judgment is in harmony with those principles. In the case as
reported in this Court, it was held that the title of the purchaser under a decree against
a nonresident infant was invalid, for two reasons: 1st, that there was no jurisdiction of
the proceeding under the statute of California, on account of the entire absence of an
affidavit of nonresidence, and of diligent inquiry for the residence of the debtor; 2d, the
absence of any order for publication in Eaton's case -- both of which are conditions
precedent to the jurisdiction of the court to take any action on the subject. The title was
held void, also, for the reason that the decree under which it was obtained had been
reversed in the State court, and the title was not taken at the sale, nor held then by a
purchaser in good faith, the purchase being made by one of the attorneys in the suit,
and the title being transferred to his law partner after the reversal of the decree. The
court held that there was a failure of jurisdiction in the court under which the plaintiff
claimed title, and that he could not recover. The learned justice who delivered the
opinion in the Circuit Court and in this Court expressly affirms the authority of a State
over persons not only, but property as well, within its limits, and this by means of a
substituted service. The judgment so obtained, he insists, can properly be used as a
means of reaching property within the State, which is thus brought under the control of
the court and subjected to its judgment. This is the precise point in controversy in the
present action.
The case of Cooper v. Reynolds, 10 Wall. 308, is cited for the same purpose. There, the
judgment of the court below, refusing to give effect to a judgment obtained upon an
order of publication against a nonresident, was reversed in this Court. The suit was
commenced, or immediately accompanied (it is not clear which), by an attachment
which was levied upon the real estate sold, and for the recovery of which this action was
brought. This Court sustained the title founded upon the suit commenced against the
nonresident by attachment. In the opinion delivered in that case, there may be remarks,
by way of argument or illustration, tending to show that a judgment obtained in a suit
not commenced by the levy of an attachment will not give title to land purchased under
it. They are,
Page 95 U. S. 745
however, extrajudicial, the decision itself sustaining the judgment obtained under the
State statute by publication.
Webster v. Reid, 11 How. 437, is also cited. There, the action involved the title to certain
lands in the State of Iowa, being lands formerly belonging to the half-breeds of the Sac
and Fox tribes; and title was claimed against the Indian right under the statutes of June
2, 1838, and January, 1839. By these statutes, commissioners were appointed who were
authorized to hear claims for accounts against the Indians, and commence actions for
the same, giving a notice thereof of eight weeks in the Iowa "Territorial Gazette," and to
enter up judgments which should be a lien on the lands. It was provided that it should
not be necessary to name the defendants in the suits, but the words "owners of the
half-breed lands lying in Lee County" should be a sufficient designation of the
defendants in such suits; and it provided that the trials should be by the court, and not
by a jury. It will be observed that the lands were not only within the limits of the
territory of Iowa, but that all the Indians who were made defendants under the name
mentioned were also residents of Iowa, and, for aught that appears to the contrary, of
the very county of Lee in which the proceeding was taken. Nonresidence was not a fact
in the case. Moreover, they were Indians, and, presumptively, not citizens of any State,
and the judgments under which the lands were sold were rendered by the
commissioners for their own services under the act.
The court found abundant reasons, six in number, for refusing to sustain the title thus
obtained. The act was apparently an attempt dishonestly to obtain the Indian title, and
not intended to give a substitution for a personal service which would be likely, or was
reasonably designed, to reach the persons to be affected.
The case of Voorhees v. Jackson, 10 Pet. 449, affirmed the title levied under the
attachment laws of Ohio, and laid down the principle of assuming that all had been
rightly done by a court having general jurisdiction of the subject matter.
In Cooper v. Smith, 25 Iowa, 269, it is said that where no process is served on the
defendant, nor property attached, nor garnishee charged, nor appearance entered, a
judgment based
Page 95 U. S. 746
on a publication of the pendency of the suit will be void, and may be impeached,
collaterally or otherwise, and forms no bar to a recovery in opposition to it, nor any
foundation for a title claimed under it. The language is very general, and goes much
beyond the requirement of the case, which was an appeal from a personal judgment
obtained by publication against the defendant, and where, as the court say, the petition
was not properly verified. All that the court decided was that this judgment should be
reversed. This is quite a different question from the one before us. Titles obtained by
purchase at a sale upon an erroneous judgment are generally good, although the
judgment itself be afterwards reversed. McGoon v. Scales, 9 Wall. 311.
In Darrance v. Preston, 18 Iowa, 396, the distinction is pointed out between the validity
of a judgment as to the amount realized from the sale of property within the jurisdiction
of the court and its validity beyond that amount. Picquet v. Swan, 5 Mas. 35; Bissell v.
Briggs, 9 Mass. 462; Ewer v. Coffin, 1 Cush. (Mass.) 23, are cited, but neither of them in
its facts touches the question before us.
In Drake on Attachment, the rule is laid down in very general language; but none of the
cases cited by him will control the present case. They are the following:--
Eaton v. Bridger, 33 N. H. 228, was decided upon the peculiar terms of the New
Hampshire statute, which forbids the entry of a judgment unless the debtor was served
with process, or actually appeared and answered in the suit. The court say the judgment
was "not only unauthorized by law, but rendered in violation of its express provisions."
Johnson v. Dodge was a proceeding in the same action to obtain a reversal on appeal of
the general judgment, and did not arise upon a contest for property sold under the
judgment. Carleton v. Washington Insurance Co., 35 id. 162, and Bruce v.
Cloutman, 45 id. 37, are to the same effect and upon the same statute.
Smith v. McCutchen, 38 Mo. 415, was a motion in the former suit to set aside the
execution by a garnishee, and it was held that the statute was intended to extend to
that class of cases. Abbott v. Shepard, 44 id. 273, is to the same effect, and is based
upon Smith v. McCutchen, supra.
Page 95 U. S. 747
So, in Eastman v. Wadleigh, 65 Me. 251, the question arose in debt on the judgment,
not upon a holding of land purchased under the judgment. It was decided upon the
express language of the statute of Maine, strongly implying the power of the legislature
to make it otherwise, had they so chosen.
It is said that the case where a preliminary seizure has been made, and jurisdiction
thereby conferred, differs from that where the property is seized at the end of the
action, in this: in the first case, the property is supposed to be so near to its owner that,
if seizure is made of it, he will be aware of the fact, and have his opportunity to defend,
and jurisdiction of the person is thus obtained. This, however, is matter of discretion
and of judgment only. Such seizure is not in itself notice to the defendant, and it is not
certain that he will by that means receive notice. Adopted as a means of communicating
it, and although a very good means, it is not the only one, nor necessarily better than a
publication of the pendency of the suit, made with an honest intention to reach the
debtor. Who shall assume to say to the legislature that, if it authorizes a particular mode
of giving notice to a debtor, its action may be sustained, but, if it adopts any or all
others, its action is unconstitutional and void? The rule is universal that modes, means,
questions of expediency or necessity are exclusively within the judgment of the
legislature, and that the judiciary cannot review them. This has been so held in relation
to a bank of the United States, to the legal tender act, and to cases arising under other
provisions of the Constitution.
In Jarvis v. Barrett, 14 Wis. 591, such is the holding. The court say:
"The essential fact on which the publication is made to depend is property of the
defendant in the State, and not whether it has been attached. . . . There is no magic
about the writ [of attachment] which should make it the exclusive remedy. The same
legislative power which devised it can devise some other, and declare that it shall have
the same force and effect. The particular means to be used are always within the
control of the legislature, so that the end be not beyond the scope of legislative power."
If the legislature shall think that publication and deposit in the post office are likely to
give the notice, there seems to be
Page 95 U. S. 748
nothing in the nature of things to prevent their adoption in lieu of the attachment. The
point of power cannot be thus controlled.

That a State can subject land within its limits belonging to nonresident owners to debts
due to its own citizens as it can legislate upon all other local matters -- that it can
prescribe the mode and process by which it is to be reached -- seems to me very plain.

I am not willing to declare that a sovereign State cannot subject the land within its limits
to the payment of debts due to its citizens, or that the power to do so depends upon the
fact whether its statute shall authorize the property to be levied upon at the
commencement of the suit or at its termination. This is a matter of detail, and I am of
opinion that, if reasonable notice be given, with an opportunity to defend when
appearance is made, the question of power will be fully satisfied.
FIRST DIVISION
G.R. No. 128803. September 25, 1998
ASIAVEST LIMITED, Petitioner, v. THE COURT OF APPEALS AND ANTONIO
HERAS, Respondents.
DECISION
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign judgment. The antecedents
are summarized in the 24 August 1990 Decision1 of Branch 107 of the Regional Trial
Court of Quezon City in Civil Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the
defendant Antonio Heras praying that said defendant be ordered to pay to the plaintiff
the amounts awarded by the Hong Kong Court Judgment dated December 28, 1984 and
amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of payment with
legal interest from December 28, 1984 until fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31, 1984 to
December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorneys fees, litigation expenses and cost, with
interest thereon from the date of the judgment until fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court
could resolve the said motion, a fire which partially razed the Quezon City Hall Building
on June 11, 1988 totally destroyed the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the plaintiff, through counsel filed a
Motion for Reconstitution of Case Records. The Court, after allowing the defendant to
react thereto, granted the said Motion and admitted the annexes attached thereto as
the reconstituted records of this case per Order dated September 6, 1988. Thereafter,
the Motion to Dismiss, the resolution of which had been deferred, was denied by the
Court in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial
conference. At the conference, the parties could not arrive at any settlement. However,
they agreed on the following stipulations of facts:
1) The defendant admits the existence of the judgment dated December 28, 1984 as
well as its amendment dated April 13, 1987, but not necessarily the authenticity or
validity thereof;
2) The plaintiff is not doing business and is not licensed to do business in the Philippines;
3) The residence of defendant, Antonio Heras, is New Manila, Quezon City.
The only issue for this Court to determine is, whether or not the judgment of the Hong
Kong Court has been repelled by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud or clear mistake of law or fact, such as to overcome the
presumption established in Section 50, Rule 39 of the Rules of Court in favor of foreign
judgments.
In view of the admission by the defendant of the existence of the aforementioned
judgment (Pls. See Stipulations of Facts in the Order dated January 5, 1989 as amended
by the Order of January 18, 1989), as well as the legal presumption in favor of the
plaintiff as provided for in paragraph (b), Sec. 50, (Ibid.), the plaintiff presented only
documentary evidence to show rendition, existence, and authentication of such
judgment by the proper officials concerned (Pls. See Exhibits A thru B, with their
submarkings). In addition, the plaintiff presented testimonial and documentary evidence
to show its entitlement to attorneys fees and other expenses of litigation.
On the other hand, the defendant presented two witnesses, namely, Fortunata dela
Vega and Russel Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect that no writ of summons or copy of
a statement of claim of Asiavest Limited was ever served in the office of the Navegante
Shipping Agency Limited and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New Manila, Quezon
City. Her knowledge is based on the fact that she was the personal secretary of Mr.
Heras during his JD Transit days up to the latter part of 1972 when he shifted or
diversified to shipping business in Hong Kong; that she was in-charge of all his letters
and correspondence, business commitments, undertakings, conferences and
appointments, until October 1984 when Mr. Heras left Hong Kong for good; that she
was also the Officer-in-Charge or Office Manager of Navegante Shipping Agency LTD, a
Hong Kong registered and based company acting as ships agent, up to and until the
company closed shop sometime in the first quarter of 1985, when shipping business
collapsed worldwide; that the said company held office at 34-35 Connaught Road,
Central Hong Kong and later transferred to Caxton House at Duddel Street, Hong Kong,
until the company closed shop in 1985; and that she was certain of such facts because
she held office at Caxton House up to the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a
representative of the law office of the defendants counsel who made a verification of
the record of the case filed by the plaintiff in Hong Kong against the defendant, as well
as the procedure in serving Court processes in Hong Kong.
In his affidavit (Exh. 2) which constitutes his direct testimony, the said witness stated
that:
The defendant was sued on the basis of his personal guarantee of the obligations of
Compania Hermanos de Navegacion S.A. There is no record that a writ of summons was
served on the person of the defendant in Hong Kong, or that any such attempt at service
was made. Likewise, there is no record that a copy of the judgment of the High Court
was furnished or served on the defendant; anyway, it is not a legal requirement to do so
under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor (lawyer) of the claimant
or plaintiff. In Hong Kong there are no Court personnel who serve writs of summons
and/or most other processes.
b) If the writ of summons or claim (or complaint) is not contested, the claimant or the
plaintiff is not required to present proof of his claim or complaint nor present evidence
under oath of the claim in order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision rendered by the Court
in Hong Kong [to] make a recitation of the facts or the law upon which the claim is
based.
d) There is no necessity to furnish the defendant with a copy of the Judgment or
decision rendered against him.
e) In an action based on a guarantee, there is no established legal requirement or
obligation under Hong Kong laws that the creditor must first bring proceedings against
the principal debtor. The creditor can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was commissioned by the law
firm of the defendants counsel as an expert witness and to verify the records of the
Hong Kong case, he had been acting as counsel for the defendant in a number of
commercial matters; that there was an application for service of summons upon the
defendant outside the jurisdiction of Hong Kong; that there was an order of the Court
authorizing service upon Heras outside of Hong Kong, particularly in Manila or any other
place in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof of
service of summons, otherwise the Hong Kong Court will refuse to render judgment (p.
10, ibid); that the mere fact that the Hong Kong Court rendered judgment, it can be
presumed that there was service of summons; that in this case, it is not just a
presumption because there was an affidavit stating that service was effected in [sic] a
particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez of
the firm Sycip Salazar on the 21st of December 1984, and stated in essence that on
Friday, the 23rd of November 1984 he served the 4th defendant at No. 6 First Street,
Quezon City by leaving it at that address with Mr. Dionisio Lopez, the son-in-law of the
4thdefendant the copy of the writ and Mr. Lopez informed me and I barely believed that
he would bring the said writ to the attention of the 4th defendant (pp. 11-12, ibid.); that
upon filing of that affidavit, the Court was asked and granted judgment against the
4th defendant; and that if the summons or claim is not contested, the claimant of the
plaintiff is not required to present proof of his claim or complaint or present evidence
under oath of the claim in order to obtain judgment; and that such judgment can be
enforced in the same manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had been duly proved, it is
a presumptive evidence of a right as between the parties; hence, the party impugning it
had the burden to prove want of jurisdiction over his person. HERAS failed to discharge
that burden. He did not testify to state categorically and under oath that he never
received summons. Even his own witness Lousich admitted that HERAS was served with
summons in his Quezon City residence. As to De la Vegas testimony regarding non-
service of summons, the same was hearsay and had no probative value.
As to HERAS contention that the Hong Kong court judgment violated the Constitution
and the procedural laws of the Philippines because it contained no statements of the
facts and the law on which it was based, the trial court ruled that since the issue related
to procedural matters, the law of the forum, i.e., Hong Kong laws, should govern. As
testified by the expert witness Lousich, such legalities were not required under Hong
Kong laws. The trial court also debunked HERAS contention that the principle of
excussion under Article 2058 of the Civil Code of the Philippines was violated. It declared
that matters of substance are subject to the law of the place where the transaction
occurred; in this case, Hong Kong laws must govern.
The trial court concluded that the Hong Kong court judgment should be recognized and
given effect in this jurisdiction for failure of HERAS to overcome the legal presumption in
favor of the foreign judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff
the following sums or their equivalents in Philippine currency at the time of payment:
US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annum
from October 31, 1984 to December 28, 1984, and HK$905 as fixed cost, with legal
interests on the aggregate amount from December 28, 1984, and to pay attorneys fees
in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial
costs and an increase in attorneys fees in the amount of US$19,346.45 with interest
until full payment of the said obligations. On the other hand, HERAS no longer opposed
the motion and instead appealed the decision to the Court of Appeals, which docketed
the appeal as CA-G.R. CV No. 29513.
In its order2 November 1990, the trial court granted ASIAVESTs motion for
reconsideration by increasing the award of attorneys fees to US$19,345.65 OR ITS
EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY THE COSTS OF THIS SUIT, provided
that ASIAVEST would pay the corresponding filing fees for the increase. ASIAVEST
appealed the order requiring prior payment of filing fees. However, it later withdrew its
appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision 3 reversing the decision of
the trial court and dismissing ASIAVESTs complaint without prejudice. It underscored
the fact that a foreign judgment does not of itself have any extraterritorial application.
For it to be given effect, the foreign tribunal should have acquired jurisdiction over the
person and the subject matter. If such tribunal has not acquired jurisdiction, its
judgment is void.
The Court of Appeals agreed with the trial court that matters of remedy and procedure
such as those relating to service of summons upon the defendant are governed by
the lex fori, which was, in this case, the law of Hong Kong. Relative thereto, it gave
weight to Lousichs testimony that under the Hong Kong law, the substituted service of
summons upon HERAS effected in the Philippines by the clerk of Sycip Salazar
Hernandez & Gatmaitan firm would be valid provided that it was done in accordance
with Philippine laws. It then stressed that where the action is in personamand the
defendant is in the Philippines, the summons should be personally served on the
defendant pursuant to Section 7, Rule 14 of the Rules of Court. 4 Substituted service may
only be availed of where the defendant cannot be promptly served in person, the fact of
impossibility of personal service should be explained in the proof of service. It also
found as persuasive HERAS argument that instead of directly using the clerk of the Sycip
Salazar Hernandez & Gatmaitan law office, who was not authorized by the judge of the
court issuing the summons, ASIAVEST should have asked for leave of the local courts to
have the foreign summons served by the sheriff or other court officer of the place
where service was to be made, or for special reasons by any person authorized by the
judge.
The Court of Appeals agreed with HERAS that notice sent outside the state to a non-
resident is unavailing to give jurisdiction in an action against him personally for money
recovery. Summons should have been personally served on HERAS in Hong Kong, for, as
claimed by ASIAVEST, HERAS was physically present in Hong Kong for nearly 14 years.
Since there was not even an attempt to serve summons on HERAS in Hong Kong, the
Hong Kong Supreme Court did not acquire jurisdiction over HERAS. Nonetheless, it did
not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious defense against
[ASIAVESTs] claims or that [HERAS] ought to be absolved of any liability, nevertheless, in
view of the foregoing discussion, there is a need to deviate from the findings of the
lower court in the interest of justice and fair play. This, however, is without prejudice to
whatever action [ASIAVEST] might deem proper in order to enforce its claims against
[HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence
supporting the validity of the foreign judgment be submitted, and that our courts are
not bound to give effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in
ruling that
I.
IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE SUPPORTING THE VALIDITY
OF THE JUDGMENT;
II.
THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER PHILIPPINE LAW;
III.
SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONG KONG;
IV.
THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OF PHILIPPINE
COURTS;
V.
THE FOREIGN JUDGMENT CONTRAVENES PHILIPPINE LAWS, THE PRINCIPLES OF SOUND
MORALITY, AND THE PUBLIC POLICY OF THE PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5 which was the
governing law at the time this case was decided by the trial court and respondent Court
of Appeals, a foreign judgment against a person rendered by a court having jurisdiction
to pronounce the judgment is presumptive evidence of a right as between the parties
and their successors in interest by the subsequent title. However, the judgment may be
repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence
of proof to the contrary, a court, or judge acting as such, whether in the Philippines or
elsewhere, is presumed to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the burden to repel it
on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of Court is
on the party challenging the foreign judgment -- HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment.
On the other hand, ASIAVEST presented evidence to prove rendition, existence, and
authentication of the judgment by the proper officials. The judgment is thus presumed
to be valid and binding in the country from which it comes, until the contrary is
shown.6Consequently, the first ground relied upon by ASIAVEST has merit. The
presumption of validity accorded foreign judgment would be rendered meaningless
were the party seeking to enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that the Hong Kong
Supreme Court did not acquire jurisdiction over the person of HERAS. This involves the
issue of whether summons was properly and validly served on HERAS. It is settled that
matters of remedy and procedure such as those relating to the service of process upon
the defendant are governed by the lex fori or the law of the forum,7 i.e., the law of Hong
Kong in this case. HERAS insisted that according to his witness Mr. Lousich, who was
presented as an expert on Hong Kong laws, there was no valid service of summons on
him.
In his counter-affidavit,8 which served as his direct testimony per agreement of the
parties,9 Lousich declared that the record of the Hong Kong case failed to show that a
writ of summons was served upon HERAS in Hong Kong or that any such attempt was
made. Neither did the record show that a copy of the judgment of the court was served
on HERAS. He stated further that under Hong Kong laws (a) a writ of summons could be
served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim
was not contested, the claimant or plaintiff was not required to present proof under
oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich testified that the Hong Kong
court authorized service of summons on HERAS outside of its jurisdiction, particularly in
the Philippines. He admitted also the existence of an affidavit of one Jose R. Fernandez
of the Sycip Salazar Hernandez & Gatmaitan law firm stating that he (Fernandez) served
summons on HERAS on 13 November 1984 at No. 6, 1st St., Quezon City, by leaving a
copy with HERASs son-in-law Dionisio Lopez.10 On redirect examination, Lousich
declared that such service of summons would be valid under Hong Kong laws provided
that it was in accordance with Philippine laws.11cräläwvirtualibräry
We note that there was no objection on the part of ASIAVEST on the qualification of Mr.
Lousich as an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the
New Rules of Evidence, the record of public documents of a sovereign authority,
tribunal, official body, or public officer may be proved by (1) an official publication
thereof or (2) a copy attested by the officer having the legal custody thereof, which
must be accompanied, if the record is not kept in the Philippines, with a certificate that
such officer has the custody. The certificate may be issued by a secretary of the embassy
or legation, consul general, consul, vice consul, or consular agent, or any officer in the
foreign service of the Philippines stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office. The attestation must state, in
substance, that the copy is a correct copy of the original, or a specific part thereof, as
the case may be, and must be under the official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law.
An authority12 on private international law thus noted:
Although it is desirable that foreign law be proved in accordance with the above rule,
however, the Supreme Court held in the case of Willamette Iron and Steel Works v.
Muzzal,13 that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court)
does not exclude the presentation of other competent evidence to prove the existence
of a foreign law. In that case, the Supreme Court considered the testimony under oath
of an attorney-at-law of San Francisco, California, who quoted verbatim a section of
California Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the existence of said law.
Accordingly, in line with this view, the Supreme Court in the Collector of Internal
Revenue v. Fisher et al.,14upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case, the counsel for
respondent testified that as an active member of the California Bar since 1951, he is
familiar with the revenue and taxation laws of the State of California. When asked by
the lower court to state the pertinent California law as regards exemption of intangible
personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California
Internal and Revenue Code as published in Derrings California Code, a publication of
Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited
section was offered in evidence by respondents. Likewise, in several naturalization
cases, it was held by the Court that evidence of the law of a foreign country on
reciprocity regarding the acquisition of citizenship, although not meeting the prescribed
rule of practice, may be allowed and used as basis for favorable action, if, in the light of
all the circumstances, the Court is satisfied of the authenticity of the written proof
offered.15 Thus, in a number of decisions, mere authentication of the Chinese
Naturalization Law by the Chinese Consulate General of Manila was held to be
competent proof of that law.16cräläwvirtualibräry
There is, however, nothing in the testimony of Mr. Lousich that touched on the specific
law of Hong Kong in respect of service of summons either in actions in rem or in
personam, and where the defendant is either a resident or nonresident of Hong Kong. In
view of the absence of proof of the Hong Kong law on this particular issue, the
presumption of identity or similarity or the so-called processual presumption shall come
into play. It will thus be presumed that the Hong Kong law on the matter is similar to the
Philippine law.17cräläwvirtualibräry
As stated in Valmonte vs. Court of Appeals,18 it will be helpful to determine first whether
the action is in personam, in rem, or quasi in rembecause the rules on service of
summons under Rule 14 of the Rules of Court of the Philippines apply according to the
nature of the action.
An action in personam is an action against a person on the basis of his personal liability.
An action in rem is an action against the thing itself instead of against the person. 19 An
action quasi in rem is one wherein an individual is named as defendant and the purpose
of the proceeding is to subject his interest therein to the obligation or lien burdening
the property.20cräläwvirtualibräry
In an action in personam, jurisdiction over the person of the defendant is necessary for
the court to validly try and decide the case. Jurisdiction over the person of
a resident defendant who does not voluntarily appear in court can be acquired by
personal service of summons as provided under Section 7, Rule 14 of the Rules of Court.
If he cannot be personally served with summons within a reasonable time, substituted
service may be made in accordance with Section 8 of said Rule. If he is temporarily out
of the country, any of the following modes of service may be resorted to: (1) substituted
service set forth in Section 8;21 (2) personal service outside the country, with leave of
court; (3) service by publication, also with leave of court;22 or (4) any other manner the
court may deem sufficient.23cräläwvirtualibräry
However, in an action in personam wherein the defendant is a non-resident who does
not voluntarily submit himself to the authority of the court, personal service of
summons within the state is essential to the acquisition of jurisdiction over her
person.24 This method of service is possible if such defendant is physically present in the
country. If he is not found therein, the court cannot acquire jurisdiction over his person
and therefore cannot validly try and decide the case against him.25 An exception was
laid down in Gemperle v. Schenker26 wherein a non-resident was served with summons
through his wife, who was a resident of the Philippines and who was his representative
and attorney-in-fact in a prior civil case filed by him; moreover, the second case was a
mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person
of the defendant is not a prerequisite to confer jurisdiction on the court provided that
the court acquires jurisdiction over the res. Nonetheless, summons must be served upon
the defendant not for the purpose of vesting the court with jurisdiction but merely for
satisfying the due process requirements.27 Thus, where the defendant is a non-resident
who is not found in the Philippines and (1) the action affects the personal status of the
plaintiff; (2) the action relates to, or the subject matter of which is property in the
Philippines in which the defendant has or claims a lien or interest; (3) the action seeks
the exclusion of the defendant from any interest in the property located in the
Philippines; or (4) the property of the defendant has been attached in the Philippines --
service of summons may be effected by (a) personal service out of the country, with
leave of court; (b) publication, also with leave of court; or (c) any other manner the
court may deem sufficient.28cräläwvirtualibräry
In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it
was based on his personal guarantee of the obligation of the principal debtor. Before we
can apply the foregoing rules, we must determine first whether HERAS was a resident of
Hong Kong.
Fortunata de la Vega, HERASs personal secretary in Hong Kong since 1972 until
1985,29 testified that HERAS was the President and part owner of a shipping company in
Hong Kong during all those times that she served as his secretary. He had in his employ
a staff of twelve.30 He had business commitments, undertakings, conferences, and
appointments until October 1984 when [he] left Hong Kong for good. 31 HERASs other
witness, Russel Warren Lousich, testified that he had acted as counsel for HERAS for a
number of commercial matters.32 ASIAVEST then infers that HERAS was a resident of
Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss,33 as well as in his Answer34 to ASIAVESTs
complaint for the enforcement of the Hong Kong court judgment, HERAS maintained
that the Hong Kong court did not have jurisdiction over him because the fundamental
rule is that jurisdiction in personam over non-resident defendants, so as to sustain a
money judgment, must be based upon personal service of summons within the state
which renders the judgment.35cräläwvirtualibräry
For its part, ASIAVEST, in its Opposition to the Motion to Dismiss36contended: The
question of Hong Kong courts want of jurisdiction is therefore a triable issue if it is to be
pleaded by the defendant to repel the foreign judgment. Facts showing jurisdictional
lack (e.g. that the Hong Kong suit was in personam, that defendant was not a resident of
Hong Kong when the suit was filed or that he did not voluntarily submit to the Hong
Kong courts jurisdiction) should be alleged and proved by the
defendant.37chanroblesvirtuallawlibrary
In his Reply (to the Opposition to Motion to Dismiss),38 HERAS argued that the lack of
jurisdiction over his person was corroborated by ASIAVESTs allegation in the complaint
that he has his residence at No. 6, 1st St., New Manila, Quezon City, Philippines. He then
concluded that such judicial admission amounted to evidence that he was and is not a
resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with stipulations of facts,
among which was that the residence of defendant, Antonio Heras, is New Manila,
Quezon City.39cräläwvirtualibräry
We note that the residence of HERAS insofar as the action for the enforcement of the
Hong Kong court judgment is concerned, was never in issue. He never challenged the
service of summons on him through a security guard in his Quezon City residence and
through a lawyer in his office in that city. In his Motion to Dismiss, he did not question
the jurisdiction of the Philippine court over his person on the ground of invalid service of
summons. What was in issue was his residence as far as the Hong Kong suit was
concerned. We therefore conclude that the stipulated fact that HERAS is a resident of
New Manila, Quezon City, Philippines refers to his residence at the time jurisdiction over
his person was being sought by the Hong Kong court. With that stipulation of fact,
ASIAVEST cannot now claim that HERAS was a resident of Hong Kong at the time.
upon obtaining a favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the Philippines.
In Brown v. Brown,41 the defendant was previously a resident of the Philippines. Several
days after a criminal action for concubinage was filed against him, he abandoned the
Philippines. Later, a proceeding quasi in rem was instituted against him. Summons in the
latter case was served on the defendants attorney-in-fact at the latters address. The
Court held that under the facts of the case, it could not be said that the defendant was
still a resident of the Philippines because he ha[d] escaped to his country and [was]
therefore an absentee in the Philippines. As such, he should have been summoned in
the same manner as one who does not reside and is not found in the Philippines.
Similarly, HERAS, who was also an absentee, should have been served with summons in
the same manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the
Rules of Court providing for extraterritorial service will not apply because the suit
against him was in personam. Neither can we apply Section 18, which allows
extraterritorial service on a resident defendant who is temporarily absent from the
country, because even if HERAS be considered as a resident of Hong Kong, the
undisputed fact remains that he left Hong Kong not only temporarily but for good.
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in
this case and AFFIRMING the assailed judgment of the Court of Appeals in CA-G.R. CV
No. 29513.
No costs.
SO ORDERED.
Bellosillo, Vitug, and Panganiban, JJ., concur.

Accordingly, since HERAS was not a resident of Hong Kong and the action against him Quisumbing, J., no part., former partner of a counsel.
was, indisputably, one in personam, summons should have been personally served on
him in Hong Kong. The extraterritorial service in the Philippines was therefore invalid
and did not confer on the Hong Kong court jurisdiction over his person. It follows that
the Hong Kong court judgment cannot be given force and effect here in the Philippines
for having been rendered without jurisdiction.

Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in
November 1984 when the extraterritorial service of summons was attempted to be
made on him. As declared by his secretary, which statement was not disputed by
ASIAVEST, HERAS left Hong Kong in October 1984 for good. 40 His absence in Hong Kong
must have been the reason why summons was not served on him therein; thus,
ASIAVEST was constrained to apply for leave to effect service in the Philippines, and
G.R. Nos. 121576-78 June 16, 2000 Finding that no fraud was committed, the District Collector of Customs, Aurelio M.
Quiray, lifted the warrant of seizure on July 1989. 11 However, in a Second Indorsement
BANCO DO BRASIL, petitioner, dated November 11, 1989, then Customs Commissioner Salvador M. Mison declined to
vs. issue a clearance for Quiray's Decision; instead, he forfeited the vessel and its cargo in
THE COURT OF APPEALS, HON. ARSENIO M. GONONG, and CESAR S. URBINO, accordance with Section 2530 of the Tariff and Customs Code. 12 Accordingly, acting
SR., respondents. District Collector of Customs John S. Sy issued a Decision decreeing the forfeiture and
the sale of the cargo in favor of the government. 13
DE LEON, JR., J.:
To enforce its preferred salvor's lien, herein Private Respondent Duraproof Services filed
Before us is a petition for review on certiorari of the Decision 1 and the Resolution 2 of
with the Regional Trial Court of Manila a Petition for Certiorari, Prohibition
the Court of Appeals 3 dated July 19, 1993 and August 15, 1995, respectively, which
and Mandamus 14 assailing the actions of Commissioner Mison and District Collector Sy.
reinstated the entire Decision 4 dated February 18, 1991 of the Regional Trial Court of
Also impleaded as respondents were PPA Representative Silverio Mangaoang and Med
Manila, Branch 8, holding, among others, petitioner Banco do Brasil liable to private
Line Philippines, Inc.
respondent Cesar Urbino, Sr. for damages amounting to $300,000.00. 5
On January 10, 1989, private respondent amended its Petition 15 to include former
At the outset, let us state that this case should have been consolidated with the recently
District Collector Quiray; PPA Port Manager Adolfo Ll. Amor, Jr.; x Vlason Enterprises as
decided case of Vlason Enterprises Corporation v. Court of Appeals and Duraproof
represented by its president, Vicente Angliongto; Singkong Trading Company as
Services, represented by its General Manager, Cesar Urbino Sr. 6 , for these two (2) cases
represented by Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co.; Thai-
involved the same material antecedents, though the main issue proffered in the present
Nan Enterprises Ltd., and Thai-United Trading Co., Ltd. 16 . . .
petition vary with the Vlason case.
Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med
The material antecedents, as quoted from the Vlason 7 case, are:
Line Philippines: Anglionto (through his secretary, Betty Bebero), Atty. Tamondong and
Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport Commissioner Mison. 17 Upon motion of the private respondent, the trial court allowed
Company of Honduras & Panama, a Panamanian Company (hereafter referred to as summons by publication to be served upon defendants who were not residents and had
Omega), requested permission for its vessel M/V Star Ace, which had engine trouble, to no direct representative in the country. 18
unload its cargo and to store it at the Philippine Ports Authority (PPA) compound in San
On January 29, 1990, private respondent moved to declare respondents in default, but
Fernando, La Union while awaiting transhipment to Hongkong. The request was
the trial court denied the motion in its February 23, 1990 Order 19 , because Mangaoang
approved by the Bureau of Customs. 8 Despite the approval, the customs personnel
and Amor had jointly filed a Motion to Dismiss, while Mison and Med Line had moved
boarded the vessel when it docked on January 7, 1989, on suspicion that it was the
separately for an extension to file a similar motion. 20 Later it rendered an Order dated
hijacked M/V Silver Med owned by Med Line Philippines Co., and that its cargo would be
July 2, 1990, giving due course to the motions to dismiss filed by Mangaoang and Amor
smuggled into the country. 9 The district customs collector seized said vessel and its
on the ground of litis pendentia, and by the commissioner and district collector of
cargo pursuant to Section 2301, Tariff and Customs Code. A notice of hearing of SFLU
customs on the ground of lack of jurisdiction. 21 In another Order, the trial court
Seizure Identification No. 3-89 was served on its consignee, Singkong Trading Co. of
dismissed the action against Med Line Philippines on the ground of litis pendentia. 22
Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand.
On two other occasions, private respondent again moved to declare the following in
While seizure proceedings were ongoing, La Union was hit by three typhoons, and the
default: [Vlason], Quiray, Sy and Mison on March 26, 1990; 23 and Banco [do] Bra[s]il,
vessel ran aground and was abandoned. On June 8, 1989, its authorized representative,
Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd.
Frank Cadacio, entered into salvage agreement with private respondent to secure and
on August 24, 1990. 24 There is no record, however, that the trial court acted upon the
repair the vessel at the agreed consideration of $1 million and "fifty percent (50%) [of]
motions. On September 18, 1990, [private respondent] filed another Motion for leave to
the cargo after all expenses, cost and taxes." 10
amend the petition, 25alleging that its counsel failed to include "necessary and/or
indispensable parties": Omega represented by Cadacio; and M/V Star Ace represented
by Capt. Nahon Rada, relief captain. Aside from impleading these additional
respondents, private respondent also alleged in the Second (actually, third) Amended
Petition 26 that the owners of the vessel intended to transfer and alienate their rights
and interest over the vessel and its cargo, to the detriment of the private respondent.
The trial court granted leave to private respondent to amend its Petition, but only to
exclude the customs commissioner and the district collector. 27 Instead, private
respondent filed the "Second Amended Petition with Supplemental Petition" against
Singkong Trading Company; and Omega and M/V Star Ace, 28 to which Cadacio and Rada
filed a Joint Answer. 29
Declared in default in an Order issued by the trial court on January 23, 1991, were the
following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and
Omega. 30 Private respondent filed, and the trial court granted, an ex parte Motion to
present evidence against the defaulting respondents. 31 Only private respondent, Atty.
Tamondong, Commissioner Mison, Omega and M/V Star Ace appeared in the next
pretrial hearing; thus, the trial court declared the other respondents in default and
allowed private respondent to present evidence against them. 32 Cesar Urbino, general
manager of private respondent, testified and adduced evidence against the other
respondents, . . . 33
On December 29, 1990, private respondent and Rada, representing Omega, entered into
a Memorandum of Agreement stipulating that Rada would write and notify Omega
regarding the demand for salvage fees of private respondent; and that if Rada did not
receive any instruction from his principal, he would assign the vessel in favor of the
salvor. 34
On February 18, 1991, the trial court disposed as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and
evidence adduced, both testimonial and documentary, the Court is convinced, that,
indeed, defendants/respondents are liable to [private respondent] in the amount as
prayed for in the petition for which it renders judgment as follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the
vessel and Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is
ordered to refrain from alienating or [transferring] the vessel M/V Star Ace to any third
parties;
2. Singkong Trading Company to pay the following:
a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00 based on . . . Lloyd's
Standard Form of Salvage Agreement;
c. Preservation, securing and guarding fees on the vessel in the amount of $225,000.00;
d. Maintenance fees in the amount of P2,685,000.00;
e. Salaries of the crew from August 16, 1989 to December 1989 in the amount of
$43,000.00 and unpaid salaries from January 1990 up to the present;
f. Attorney's fees in the amount of P656,000.00;
3. [Vlason] Enterprises to pay [private respondent] in the amount of P3,000,000.00 for
damages;
4. Banco [Du] Brasil to pay [private respondent] in the amount of $300,000.00 in
damages; 35 and finally,
5. Costs of [s]uit.
Subsequently, upon the motion of Omega, Singkong Trading Co., and private
respondent, the trial court approved a Compromise Agreement 36 among the movants,
reducing by 20 percent the amounts adjudged. For their part, respondents-movants
agreed not to appeal the Decision. 37 On March 8, 1991, private respondent moved for
the execution of judgment, claiming that the trial court Decision had already become
final and executory. The Motion was granted and a Writ of Execution was issued. To
satisfy the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio Camañgon were
deputized on March 13, 1991 to levy and to sell on execution the defendants vessel and
personal property.
xxx xxx xxx
On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall the
execution, and to quash the notice of levy and the sale on execution. Despite this
Motion, the auction sale was conducted on March 21, 1991 by Sheriff Camañgon, with
private respondent submitting the winning bid. The trial court ordered the deputy
sheriffs to cease and desist from implementing the Writ of Execution and from levying
on the personal property of the defendants. Nevertheless, Sheriff Camañgon issued the
corresponding Certificate of Sale on March 27, 1991.
On April 10, 1991, petitioner Banco do Brasil filed, by special appearance, an Urgent
Motion to Vacate Judgement and to Dismiss Case 38 on the ground that the February 18,
1991 Decision of the trial court is void with respect to it for having been rendered
without validly acquiring jurisdiction over the person of Banco do Brasil. Petitioner
subsequently amended its petition 39 to specifically aver that its special appearance is
solely for the purpose of questioning the Court's exercise of personal jurisdiction.
On May 20, 1991, the trial court issued an Order 40 acting favorably on petitioner's
motion and set aside as against petitioner the decision dated February 18, 1991 for
having been rendered without jurisdiction over Banco do Brasil's person. Private
respondent sought reconsideration 41 of the Order dated May 20, 1991. However, the
trial court in an Order 42 dated June 21, 1991 denied said motion.
Meanwhile, a certiorari petition 43 was filed by private respondent before public
respondent Court of Appeals seeking to nullify the cease and desist Order dated April 5,
1991 issued by Judge Arsenio M. Gonong. Two (2) more separate petitions
for certiorari were subsequently filed by private respondent. The second
petition 44 sought to nullify the Order 45 dated June 26, 1992 setting aside the Deputy
Sheriff's return dated April 1, 1991 as well as the certificate of sale issued by Deputy
Sheriff Camañgon. The third petition 46 sought to nullify the Order dated October 5,
1992 of the Court of Tax Appeals directing the Commissioner of Customs to place
Bureau of Customs and PNP officers and guards to secure the M/V Star Ace and its
cargoes, make inventory of the goods stored in the premises as indicated to belong to
the private respondent. Likewise challenged was the Order dated August 17, 1992
authorizing the sale of M/V Star Ace and its cargoes.
These three (3) petitions were consolidated and on July 19, 1993, the appellate court
rendered its Decision 47granting private respondent's petitions, thereby nullifying and
setting aside the disputed orders and effectively "giving way to the entire decision dated
February 18, 1991 of the . . . Regional Trial Court of Manila, Branch 8, in Civil Case No.
89-51451 which remains valid, final and executory, if not yet wholly executed." 48
Private respondent Urbino, Vlason Enterprises and petitioner Banco do Brasil filed
separate motions for reconsideration. For its part, petitioner Banco do Brasil sought
reconsideration, insofar as its liability for damages, on the ground that there was no
valid service of summons as service was on the wrong party — the ambassador of Brazil.
Hence, it argued, the trial court did not acquire jurisdiction over petitioner Banco do
Brasil. 49 Nonetheless, the appellate court denied the motions for reconsideration in its
Resolution 50 dated August 15, 1995.
Hence, the instant petition.
Petitioner Banco do Brasil takes exception to the appellate court's declaration that the
suit below is in rem, not in personam, 51 thus, service of summons by publication was
sufficient for the court to acquire jurisdiction over the person of petitioner Banco do
Brasil, and thereby liable to private respondent Cesar Urbino for damages claimed,
amounting to $300,000.00. Petitioner further challenges the finding that the February
18, 1991 decision of the trial court was already final and thus, cannot be modified or
assailed. 52
Petitioner avers that the action filed against it is an action for damages, as such it is an
action in personam which requires personal service of summons be made upon it for the
court to acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil is a
non-resident foreign corporation, not engaged in business in the Philippines, unless it
has property located in the Philippines which may be attached to convert the action into
an action in rem, the court cannot acquire jurisdiction over it in respect of an action in
personam.
The petition bears merit, thus the same should be as it is hereby granted.
First. When the defendant is a nonresident and he is not found in the country, summons
may be served extraterritorially in accordance with Rule 14, Section 17 53 of the Rules of
Court. Under this provision, there are only four (4) instances when extraterritorial
service of summons is proper, namely: "(1) when the action affects the personal status
of the plaintiffs; (2) when the action relates to, or the subject of which is property,
within the Philippines, in which the defendant claims a lien or interest, actual or
contingent; (3) when the relief demanded in such action consists, wholly or in part, in
excluding the defendant from any interest in property located in the Philippines; and (4)
when the defendant non-resident's property has been attached within the
Philippines." 54 In these instances, service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court;
or (c) any other manner the court may deem sufficient. 55
Clear from the foregoing, extrajudicial service of summons apply only where the action
is in rem, an action against the thing itself instead of against the person, or in an
action quasi in rem, where an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or loan burdening the
property. This is so inasmuch as, in in rem and quasi in rem actions, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction on the court
provided that the court acquires jurisdiction over the res. 56
However, where the action is in personam, one brought against a person on the basis of
his personal liability, jurisdiction over the person of the defendant is necessary for the
court to validly try and decide the case. When the defendant is a non-resident, personal
service of summons within the state is essential to the acquisition of jurisdiction over
the person. 57 This cannot be done, however, if the defendant is not physically present in
the country, and thus, the court cannot acquire jurisdiction over his person and
therefore cannot validly try and decide the case against him. 58
In the instant case, private respondent's suit against petitioner is premised on SO ORDERED.1âwphi1.nêt
petitioner's being one of the claimants of the subject vessel M/V Star Ace. 59 Thus, it can
be said that private respondent initially sought only to exclude petitioner from claiming Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.
interest over the subject vessel M/V Star Ace. However, private respondent testified
during the presentation of evidence that, for being a nuisance defendant, petitioner
caused irreparable damage to private respondent in the amount of
$300,000.00. 60 Therefore, while the action is in rem, by claiming damages, the relief
demanded went beyond the res and sought a relief totally alien to the action.

It must be stressed that any relief granted in rem or quasi in rem actions must be
confined to the res, and the court cannot lawfully render a personal judgment against
the defendant. 61 Clearly, the publication of summons effected by private respondent is
invalid and ineffective for the trial court to acquire jurisdiction over the person of
petitioner, since by seeking to recover damages from petitioner for the alleged
commission of an injury to his person or property 62 caused by petitioner's being a
nuisance defendant, private respondent's action became in personam. Bearing in mind
the in personam nature of the action, personal or, if not possible, substituted service of
summons on petitioner, and not extraterritorial service, is necessary to confer
jurisdiction over the person of petitioner and validly hold it liable to private respondent
for damages. Thus, the trial court had no jurisdiction to award damages amounting to
$300,000.00 in favor of private respondent and as against herein petitioner.1awphil

Second. We settled the issue of finality of the trial court's decision dated February 18,
1991 in the Vlason case, wherein we stated that, considering the admiralty case
involved multiple defendants, "each defendant had a different period within which to
appeal, depending on the date of receipt of decision." 63 Only upon the lapse of the
reglementary period to appeal, with no appeal perfected within such period, does the
decision become final and executory. 64

In the case of petitioner, its Motion to Vacate Judgment and to Dismiss Case was filed
on April 10, 1991, only six (6) days after it learned of the existence of the case upon
being informed by the Embassy of the Federative Republic of Brazil in the Philippines, on
April 4, 1991, of the February 18, 1991 decision. 65 Thus, in the absence of any evidence
on the date of receipt of decision, other than the alleged April 4, 1991 date when
petitioner learned of the decision, the February 18, 1991 decision of the trial court
cannot be said to have attained finality as regards the petitioner.

WHEREFORE, the subject petition is hereby GRANTED. The Decision and the Resolution
of the Court of Appeals dated July 19, 1993 and August 15, 1995, respectively, in CA-G.R.
SP Nos. 24669, 28387 and 29317 are hereby REVERSED and SET ASIDE insofar as they
affect petitioner Banco do Brasil. The Order dated May 20, 1991 of the Regional Trial
Court of Manila, Branch 8 in Civil Case No. 89-51451 is REINSTATED.
[G.R. NO. 168747 : October 19, 2007]
VICTORIA REGNER, Petitioner, v. CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU
COUNTRY CLUB, Inc., Respondents.
DECISION
CHICO-NAZARIO, J.:
1
This Petition for Review on Certiorari seeks to reverse the Decision dated 6 May 2005
of the Court of Appeals in CA-G.R. CV No. 71028 entitled, "Victoria Regner v. Cynthia
Logarta, Teresa R. Tormis and Cebu Country Club, Inc.," which affirmed the Order dated
9 November 2000 of the Regional Trial Court (RTC) of Cebu, granting herein
respondents' motion to dismiss Civil Case No. CEB 23927. The Order dated 9 November
2000 of the RTC dismissed herein petitioner's complaint for declaration of nullity of a
deed of donation, for failure to serve summons on Cynthia Logarta, an indispensable
party therein.
Civil Case No. CEB. 23927 arose from the following factual antecedents:
Luis Regner (Luis) had three daughters with his first wife, Anicita C. Regner, namely,
Cynthia Logarta (Cynthia) and Teresa Tormis (Teresa), the respondents herein, and
Melinda Regner-Borja (Melinda).
Herein petitioner Victoria Regner (Victoria) is the second wife of Luis.
During the lifetime of Luis, he acquired several properties, among which is a share at
Cebu Country Club Inc., evidenced by Proprietary Ownership Certificate No. 0272. On 15
May 1998, Luis executed a Deed2of Donation in favor of respondents Cynthia and Teresa
covering Proprietary Ownership Certificate No. 0272 of the Cebu Country Club, Inc.
Luis passed away on 11 February 1999.
On 15 June 1999, Victoria filed a Complaint3 for Declaration of Nullity of the Deed of
Donation with Prayer for Issuance of a Writ of Preliminary Injunction and Temporary
Restraining Order against Cynthia and Teresa with the RTC, docketed as Civil Case No.
CEB. 23927. Victoria alleged in her complaint that: on 17 March 1997, Luis made a
written declaration wherein he stated that due to his illness and forgetfulness, he would
not sign any document without the knowledge of his lawyer, Atty. Francis Zosa; on 15
May 1998, when Luis was already very ill and no longer of sound and disposing mind,
Cynthia and Teresa, conspiring and confederating with each other, fraudulently made or
caused to be fraudulently made a Deed of Donation whereby they made it appear that
Luis donated to them Proprietary Ownership Certificate No. 0272; since Luis no longer
had the ability to write or affix his signature, Melinda, acting under the influence of her
sisters, Cynthia and Teresa, fraudulently manipulated the hand of Luis so that he could
affix his thumbmark on the assailed Deed of Donation; on 8 February 1998, or three
days before the death of Luis, and when he was already in comatose condition at the
Cebu Doctors' Hospital, Melinda, Teresa, and Cynthia caused the preparation of an
affidavit to the effect that Luis affirmed the Deed of Donation he allegedly executed
earlier by lifting his hand to affix his thumbmark on the said affidavit.
Sheriff Melchor A. Solon served the summonses on Cynthia and Teresa at the Borja
Family Clinic in Tagbilaran City wherein Melinda worked as a doctor, but Melinda
refused to receive the summonses for her sisters and informed the sheriff that their
lawyer, Atty. Francis Zosa, would be the one to receive the same.
Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally served the
summons at Room 304, Regency Crest Condominium, Banilad, Cebu City. She filed her
Answer4 with counterclaim with the RTC on 6 June 2000.
Subsequently, on 12 September 2002, Teresa filed a motion to dismiss Civil Case No.
CEB 23927 because of petitioner's failure to prosecute her action for an unreasonable
length of time.
Petitioner opposed5 the motion and filed her own motion to set the case for pre-trial, to
which Teresa filed her rejoinder on the ground that their sister, Cynthia, an
indispensable party, had not yet been served a summons. Thus, Teresa prayed for the
dismissal of petitioner's complaint, as the case would not proceed without Cynthia's
presence.
On 9 November 2000, the RTC issued an Order6 granting respondent Teresa's motion to
dismiss, pertinent portions of which read:
Considering that the donees in the Deed of Donation are Cynthia R. Logarta and Teresa
R. Tormis, they are therefore an (sic) indispensable party (sic). In the case of Quisumbing
v. Court of Appeals, 189 SCRA 325, indispensable parties are those with such an interest
in the controversy that a final decree would necessarily affect their rights so that the
court could not proceed without their presence
Wherefore, in view of the foregoing, the instant case is hereby dismissed without
prejudice.
A motion for reconsideration was filed by petitioner, but the same was denied in an
Order dated 14 February 2001.
Aggrieved, petitioner appealed to the Court of Appeals. On 6 May 2005, the Court of
Appeals rendered a Decision denying the appeal and affirming in toto the order of
dismissal of the complaint by the RTC and the denial of the motion for reconsideration
thereof. The Court of Appeals ratiocinated that petitioner's failure to move for an
extraterritorial service of summons constitutes failure to prosecute for an unreasonable
length of time, thus:
[T]he plaintiff-appellant [Victoria Regner] should have moved for the extraterritorial
service of summons for both defendants-appellees Teresa R. Tormis and Cynthia R.
Logarta as they were not residing and were not found in the Philippines when plaintiff-
appellant [Victoria Regner] filed this case below. Although defendant-appellant Teresa
Tormis was personally served with summons on June 1, 2000 when she came to the
Philippines but the same was only effected after a long wait or after the lapse of almost
one year from the date the complaint was filed on June 15, 1999. To allow this practice
would be to make the continuation of like proceedings before the courts dependent on
when the defendants would be personally served with summons by the time they would
come to the Philippines, which would only unnecessarily delay the proceedings and clog
the court dockets as well. The afore-cited rule was precisely crafted to meet situations
similar to the present case to avoid unnecessary delays.
It has to be emphasized that it is incumbent upon the plaintiff [Victoria Regner] to move
with leave of court for the extraterritorial service of summons. Taking into account the
considerable time that had elapsed from the filing of the complaint on June 15, 1999
until defendant-appellee Teresa R. Tormis, through counsel, filed a motion to dismiss on
September 12, 2000, or approximately fifteen (15) months, without any act on the part
of plaintiff-appellant [Victoria Regner] to move for extraterritorial service of summons
upon the person of defendant-appellee Cynthia Logarta renders plaintiff-appellant's
[Victoria Regner] complaint dismissible for failure to prosecute her action for
unreasonable length of time under Section 3, Rule 17, Revised Rules of Court, x x x. 7
Hence, this appeal via petition8 for review on certiorari filed by petitioner raising the
following assignment of errors:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DELAY IN SERVING SUMMONS
ON ONE OF THE DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE
NOTWITHSTANDING THAT THE REST OF THE CO-DEFENDANTS WERE DULY SERVED
WITH SUMMONSES
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE ANSWER FILED BY ONE
INDIVIDUAL DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER DEFENDANT WHO
HAS NOT BEEN SERVED WITH SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY
COMMON AMONG ALL DEFENDANTS.9
From the foregoing, this Court identifies the issues to be resolved in this petition as: (1)
Whether a co-donee is an indispensable party in an action to declare the nullity of the
deed of donation, and (2) whether delay in the service of summons upon one of the
defendants constitutes failure to prosecute that would warrant dismissal of the
complaint.
A Court must acquire jurisdiction over the persons of indispensable parties before it can
validly pronounce judgments personal to the parties. Courts acquire jurisdiction over a
party plaintiff upon the filing of the complaint. On the other hand, jurisdiction over the
person of a party defendant is assured upon the service of summons in the manner
required by law or otherwise by his voluntary appearance. As a rule, if a defendant has
not been summoned, the court acquires no jurisdiction over his person, and a personal
judgment rendered against such defendant is null and void.10 A decision that is null and
void for want of jurisdiction on the part of the trial court is not a decision in the
contemplation of law and, hence, it can never become final and executory. 11
Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-
interest without whom there can be no final determination of an action. As such, they
must be joined either as plaintiffs or as defendants. The general rule with reference to
the making of parties in a civil action requires, of course, the joinder of all necessary
parties where possible, and the joinder of all indispensable parties under any and all
conditions, their presence being a sine qua non for the exercise of judicial power. 12 It is
precisely "when an indispensable party is not before the court [that] the action should
be dismissed."13 The absence of an indispensable party renders all subsequent actions of
the court null and void for want of authority to act, not only as to the absent parties but
even as to those present.14
As we ruled in Alberto v. Mananghala15 :
In an action for recovery of property against a person who purchased it from another
who in turn acquired it from others by the same means or by donation or otherwise, the
predecessors of defendants are indispensable parties if the transfers, if not voided, may
bind plaintiff. (Garcia v. Reyes, 17 Phil. 127.) In the latter case, this Court held:
In order to bring this suit duly to a close, it is imperative to determine the only question
raised in connection with the pending appeal, to wit, whether all the persons who
intervened in the matter of the transfers and donation herein referred to, are or are not
necessary parties to this suit, since it is asked in the complaint that the said transfers
and donation be declared null and void - an indispensable declaration for the purpose,
in a proper case, of concluding the plaintiff to be the sole owner of the house in dispute.
If such a declaration of annulment can directly affect the persons who made and who
were concerned in the said transfers, nothing could be more proper and just than to
hear them in the litigation, as parties interested in maintaining the validity of those
transactions, and therefore, whatever be the nature of the judgment rendered,
Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael Sierra,
besides the said minors, must be included in the case as defendants." (Garcia v. Reyes,
17 Phil., 130-131.)
It takes no great degree of legal sophistication to realize that Cynthia and Teresa are
indispensable parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly derived
their rights to the subject property by way of donation from their father Luis. The
central thrust of the petitioner's complaint in Civil Case No. CEB 23927 was that Luis
could not have donated Proprietary Ownership Certificate No. 0272 to his daughters
Cynthia and Teresa, as Luis was already very ill and no longer of sound and disposing
mind at the time of donation on 15 May 1997. Accordingly, the prayer in petitioner's
complaint was for the trial court to declare null and void the Deed of Donation and to
restrain the Cebu Country Club, Inc. from transferring title and ownership of Proprietary
Ownership Certificate No. 0272 to Cynthia and Teresa.
Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of Proprietary
Membership Certificate No. 0272 of Cebu Country Club, Inc. The country club
membership certificate is undivided and it is impossible to pinpoint which specific
portion of the property belongs to either Teresa or Cynthia. Indeed, both Teresa and
Cynthia are indispensable parties in Civil Case No. CEB 23927.
An indispensable party has been defined as follows:
An indispensable party is a party who has such an interest in the controversy or subject
matter that a final adjudication cannot be made, in his absence, without injuring or
affecting that interest, a party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final decree cannot be made
without affecting his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also
been considered that an indispensable party is a person in whose absence there cannot
be a determination between the parties already before the court which is effective,
complete, or equitable. Further, an indispensable party is one who must be included in
an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not
necessarily be directly or injuriously affected by a decree which does complete justice
between them. Also, a person is not an indispensable party if his presence would merely
permit complete relief between him and those already parties to the action, or if he has
no interest in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple litigation. 16
In Servicewide Specialists, Incorporated v. Court of Appeals,17 this Court held that no
final determination of a case could be made if an indispensable party is not legally
present therein:
An indispensable party is one whose interest will be affected by the court's action in the
litigation, and without whom no final determination of the case can be had. The party's
interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party to the proceeding is
an absolute necessity. In his absence there cannot be a resolution of the dispute of the
parties before the court which is effective, complete, or equitable.
The rationale for treating all the co-owners of a property as indispensable parties in a
suit involving the co-owned property is explained in Arcelona v. Court of Appeals 18 :
As held by the Supreme Court, were the courts to permit an action in ejectment to be
maintained by a person having merely an undivided interest in any given tract of land, a
judgment in favor of the defendants would not be conclusive as against the other co-
owners not parties to the suit, and thus the defendant in possession of the property
might be harassed by as many succeeding actions of ejectment, as there might be co-
owners of the title asserted against him. The purpose of this provision was to prevent
multiplicity of suits by requiring the person asserting a right against the defendant to
include with him, either as co-plaintiffs or as co-defendants, all persons standing in the
same position, so that the whole matter in dispute may be determined once and for all
in one litigation.
Applying the foregoing definitions and principles to the present case, this Court finds
that any decision in Civil Case No. CEB 23927 cannot bind Cynthia, and the Court cannot
nullify the donation of the property she now co-owns with Teresa, even if limited only to
the portion belonging to Teresa, to whom summons was properly served, since
ownership of the property is still pro indiviso. Obviously, Cynthia is an indispensable
party in Civil Case No. CEB 23927 without whom the lower court is barred from making a
final adjudication as to the validity of the entire donation. Without the presence of
indispensable parties to a suit or proceeding, a judgment therein cannot attain finality. 19
Being an indispensable party in Civil Case No. CEB 23927, the trial court must also
acquire jurisdiction over Cynthia's person through the proper service of summons.
Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa
should benefit Cynthia who was not served summons need not be discussed.
As to determine whether Cynthia was properly served a summons, it will be helpful to
determine first the nature of the action filed against Cynthia and Teresa by petitioner
Victoria, whether it is an action in personam, in rem or quasi in rem. This is because the
rules on service of summons embodied in Rule 14 apply according to whether an action
is one or the other of these actions.
In a personal action, the plaintiff seeks the recovery of personal property, the
enforcement of a contract or the recovery of damages. 20 In contrast, in a real action, the
plaintiff seeks the recovery of real property; or, as indicated in Section 2(a), Rule 4 of the
then Rules of Court, a real action is an action affecting title to real property or for the
recovery of possession, or for partition or condemnation of, or foreclosure of mortgage
on, real property. An action in personam is an action against a person on the basis of his
personal liability, while an action in rem is an action against the thing itself, instead of
against the person.21
In an action in personam, personal service of summons or, if this is not possible and he
cannot be personally served, substituted service, as provided in Section 7, Rule 14 of the
Rules of Court,22 is essential for the acquisition by the court of jurisdiction over the
person of a defendant who does not voluntarily submit himself to the authority of the
court.23 If defendant cannot be served a summons because he is temporarily abroad,
but is otherwise a Philippine resident, service of summons may, by leave of court, be
made by publication.24 Otherwise stated, a resident defendant in an action in personam,
who cannot be personally served a summons, may be summoned either by means of
substituted service in accordance with Section 7, Rule 14 of the Rules of Court, or by
publication as provided in Sections 15 and 16 of the same Rule.
In all of these cases, it should be noted, defendant must be a resident of the Philippines;
otherwise an action in personam cannot be brought because jurisdiction over his person
is essential to make a binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of
the defendant is not essential for giving the court jurisdiction so long as the court
acquires jurisdiction over the res. If the defendant is a nonresident and he is not found
in the country, summons may be served extraterritorially in accordance with Section 15,
Rule 14 of the Rules of Court, which provides:
Section 15. Extraterritorial service. - When the defendant does not reside and is not
found in the Philippines, and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest
therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as
under Section 6; or by publication in a newspaper of general circulation in such places
and for such time as the court may order, in which case a copy of the summons and
order of the court shall be sent by registered mail to the last known address of the
defendant, or in any other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.
As stated above, there are only four instances wherein a defendant who is a non-
resident and is not found in the country may be served a summons by extraterritorial
service, to wit: (1) when the action affects the personal status of the plaintiff; (2) when
the action relates to, or the subject of which is property within the Philippines, on which
the defendant claims a lien or an interest, actual or contingent; (3) when the relief
demanded in such action consists, wholly or in part, in excluding the defendant from
any interest in property located in the Philippines; and (4) when the defendant non-
resident's property has been attached within the Philippines. In these instances, service
of summons may be effected by (a) personal service out of the country, with leave of
court; (b) publication, also with leave of court; or (c) any other manner the court may
deem sufficient.25
In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that
it has jurisdiction over the res, i.e., the personal status of the plaintiff who is domiciled
in the Philippines or the property litigated or attached. Service of summons in the
manner provided in Section 15, Rule 14 of the Rules of Court is not for the purpose of
vesting the court with jurisdiction, but for complying with the requirements of fair play
or due process, so that the defendant will be informed of the pendency of the action
against him; and the possibility that property in the Philippines belonging to him, or in
which he has an interest, might be subjected to a judgment in favor of the plaintiff and
he can thereby take steps to protect his interest if he is so minded.26
In petitioner's Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is
residing at 462 West Vine No. 201, Glendale, California, 912041, U.S.A.; while Teresa is
residing at 2408 South Hacienda Boulevard, Hacienda Heights, California, but they
usually visit here in the Philippines and can be served summonses and other processes
at the Borja Family Clinic, Bohol. Pertinent portions of the Complaint read:
2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta,
resident (sic) 463 West Vine No.201, Glendale, California, 912041, USA. She however
usually visits in the Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol;
3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio
Tormis, and a resident of 2408 South Hacienda Heights, California, 19745, U.S.A. She
however usually visits in the Philippines and can be served with summons and other
processes of this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol. 27
Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu
Country Club, Inc. from transferring title and ownership of Proprietary Ownership
Certificate No. 0272 to Cynthia and Teresa, and for moral and exemplary damages. Civil
Case No. CEB 23927 is evidently an action against Cynthia and Teresa on the basis of
their personal liability for the alleged fraudulent transfer of the subject Country Club
membership from Luis to their name. In this sense, petitioner questions the
participation and shares of Cynthia and Teresa in the transferred Country Club
membership. Moreover, the membership certificate from the Cebu Country Club, Inc. is
a personal property. Thus, the action instituted by petitioner before the RTC is in
personam.
Being an action in personam, the general rule requires the personal service of summons
on Cynthia within the Philippines, but this is not possible in the present case because
Cynthia is a non-resident and is not found within the Philippines.
As Cynthia is a nonresident who is not found in the Philippines, service of summons on
her must be in accordance with Section 15, Rule 14 of the Rules of Court. Such service,
to be effective outside the Philippines, must be made either (1) by personal service; (2)
by publication in a newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order of the court should
be sent by registered mail to the last known address of the defendant; or (3) in any
other manner which the court may deem sufficient. The third mode, like the first two,
must be made outside the Philippines, such as through the Philippine Embassy in the
foreign country where Cynthia resides.
Since in the case at bar, the service of summons upon Cynthia was not done by any of
the authorized modes, the trial court was correct in dismissing petitioner's complaint.
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states'
SEC. 3. Dismissal due to fault of plaintiff. - If, for no justifiable cause, the plaintiff fails to
appear on the date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply with these Rules
or any order of the court, the complaint may be dismissed upon motion of the
defendant or upon the court's own motion, without prejudice to the right of the
defendant to prosecute his counterclaim in the same or in a separate action. This
dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.
As can be gleaned from the rule, there are three instances when the complaint may be
dismissed due to the plaintiff's fault: (1) if he fails to appear during a scheduled trial,
especially on the date for the presentation of his evidence in chief; (2) if he fails to
prosecute his action for an unreasonable length of time; and (3) if he fails to comply
with the rules or any order of the court.28
Considering the circumstances of the case, it can be concluded that the petitioner failed
to prosecute the case for an unreasonable length of time. There is failure to prosecute
when the plaintiff, being present, is not ready or is unwilling to proceed with the
scheduled trial or when postponements in the past were due to the plaintiff's own
making, intended to be dilatory or caused substantial prejudice on the part of the
defendant.29
While a court can dismiss a case on the ground of failure to prosecute, the true test for
the exercise of such power is whether, under the prevailing circumstances, the plaintiff
is culpable for want of due diligence in failing to proceed with reasonable
promptitude.30 As to what constitutes an "unreasonable length of time," within the
purview of the above-quoted provision, the Court has ruled that it "depends upon the
circumstances of each particular case," and that "the sound discretion of the court" in
the determination of said question "will not be disturbed, in the absence of patent
abuse"; and that "the burden of showing abuse of judicial discretion is upon the
appellant since every presumption is in favor of the correctness of the court's
action."31 Likewise, the concept of promptness is a relative term and must not
unnecessarily be an inflexible one. It connotes an action without hesitation and loss of
time. As to what constitutes the term is addressed to the consideration of the trial
court, bearing in mind that while actions must be disposed of with dispatch, the
essential ingredient is the administration of justice and not mere speed. 32
It is well to quote the doctrine laid in Padua v. Ericta,33 as accentuated in the subsequent
case Marahay v. Melicor34 :
Courts should not brook undue delays in the ventilation and determination of causes. It
should be their constant effort to assure that litigations are prosecuted and resolved
with dispatch. Postponements of trials and hearings should not be allowed except on
meritorious grounds; and the grant or refusal thereof rests entirely in the sound
discretion of the Judge. It goes without saying, however, that discretion must be
reasonably and wisely exercised, in the light of the attendant circumstances. Some
reasonable deferment of the proceedings may be allowed or tolerated to the end that
cases may be adjudged only after full and free presentation of evidence by all the
parties, especially where the deferment would cause no substantial prejudice to any
part. The desideratum of a speedy disposition of cases should not, if at all possible,
result in the precipitate loss of a party's right to present evidence and either in plaintiff's
being non-suited or the defendant's being pronounced liable under an ex parte
judgment.
"[T]rial courts have x x x the duty to dispose of controversies after trial on the merits
whenever possible. It is deemed an abuse of discretion for them, on their own motion,
'to enter a dismissal which is not warranted by the circumstances of the case'
(Municipality of Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the
dismissal of an action on grounds specified under Section 3, Rule 17 of the Revised Rules
of Court is addressed to their discretion (Flores v. Phil. Alien Property Administrator, 107
Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio,
105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October 19,
1966, 18 SCRA 390), such discretion must be exercised soundly with a view to the
circumstances surrounding each particular case (Vernus-Sanciangco v. Sanciangco, L-
12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as mitigating
circumstances for the delay, the same should be considered and dismissal denied or set
aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v. Greenwood, 147 Colo. 190, 362 P.2d
1050 [1961]), especially where the suit appears to be meritorious and the plaintiff was
not culpably negligent and no injury results to defendant (27 C.J.S. 235-36; 15 ALR 3rd
680)." (Abinales v. Court of First Instance of Zamboanga City, Br. I, 70 SCRA 590, 595).
"It is true that the allowance or denial of petitions for postponement and the setting
aside of orders previously issued, rest principally upon the sound discretion of the judge
to whom they are addressed, but always predicated on the consideration that more
than the mere convenience of the courts or of the parties of the case, the ends of justice
and fairness would be served thereby (Camara Vda. de Zubiri v. Zubiri, et al., L-16745,
December 17, 1966). When no substantial rights are affected and the intention to delay
is not manifest, the corresponding motion to transfer the hearing having been filed
accordingly, it is sound judicial discretion to allow them (Rexwell Corp. v. Canlas, L-
16746, December 30, 1961)." x x x.
This Court recalls that the complaint herein was filed on 15 June 1999. The summonses
for Cynthia and Teresa were served on their sister Melinda at the Borja Family Clinic in
Tagbilaran City, but the latter refused to receive the same. It was only on 1 June 2000
that summons was served on Teresa at Room 304, Regency Crest Condominium,
Banilad, Cebu City, when she was in the Philippines for a visit. However, the summons
for Cynthia was never served upon her.
Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court the duty to
serve summons, this does not relieve the petitioner of her own duty as the plaintiff in a
civil case to prosecute the case diligently. If the clerk had been negligent, it was
petitioner's duty to call the court's attention to that fact. It must be noted that it was
not even petitioner who called the court's attention that summons had not been served
on Cynthia, but Teresa. This despite the fact that petitioner was aware, as early as 15
June 1999, when she filed her complaint, that the summonses could not be served on
Teresa and Cynthia, as she admitted therein that Teresa and Cynthia were residing
abroad. Petitioner as plaintiff should have asked that Cynthia and Teresa be summoned
by publication at the earliest possible time. She cannot idly sit by and wait till this is
done. She cannot afterwards wash her hands and say that the delay was not her fault.
She cannot simply "fold [her] hands" and say that it is the duty of the clerk of court to
have the summonses served on Cynthia and Teresa for the prompt disposition of her
case. If there were no means of summoning any of the defendants, petitioner should
have so informed the court within a reasonable period of time, so that the case could be
disposed of one way or another and the administration of justice would not suffer delay.
The non-performance of that duty by petitioner as plaintiff is an express ground for
dismissing an action. For, indeed, this duty imposed upon her was precisely to spur on
the slothful.
For failure to diligently pursue the complaint, petitioner trifled with the right of the
respondents to speedy trial. It also sorely tried the patience of the court and wasted its
precious time and attention. To allow petitioner to wait until such time that summonses
were served on respondents would frustrate the protection against unreasonable delay
in the prosecution of cases and violate the constitutional mandate of speedy
dispensation of justice which would in time erode the people's confidence in the
judiciary. We take a dim view of petitioner's complacent attitude. Ex nihilo nihil fit. 35
Likewise, petitioner's counsel inexplicably failed to diligently pursue the service of
summonses on respondents. These were acts of negligence, laxity and truancy which
the court could have very easily avoided or timely remedied. Petitioner and her counsel
could not avail themselves of this Court's sympathy, considering their apparent
complacency, if not delinquency, in the conduct of their litigation.
Considering the foregoing, we sustain the dismissal by the trial court of the petitioner's
complaint for failure to prosecute for a period of more than one year (from the time of
filing thereof on 15 June 1997 until Teresa's filing of a motion to dismiss).
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit and
the assailed Decision dated 6 May 2005 of the Court of Appeals in CA-G.R. CV No. 71028
is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 175799 November 28, 2011
NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, Petitioner,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari assailing the Decision 1 of the Court of Appeals
dated September 8, 2006 in CA-G.R. SP No. 94382 and its Resolution2 dated December
12, 2006, denying the Motion for Reconsideration.
On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the
Regional Trial Court (RTC) of Makati City a Complaint3 against petitioner NM Rothschild
& Sons (Australia) Limited praying for a judgment declaring the loan and hedging
contracts between the parties void for being contrary to Article 20184 of the Civil Code
of the Philippines and for damages. The Complaint was docketed as Civil Case No. 05-
782, and was raffled to Branch 150. Upon respondent’s (plaintiff’s) motion, the trial
court authorized respondent’s counsel to personally bring the summons and Complaint
to the Philippine Consulate General in Sydney, Australia for the latter office to effect
service of summons on petitioner (defendant).
On October 20, 2005, petitioner filed a Special Appearance With Motion to
Dismiss5 praying for the dismissal of the Complaint on the following grounds: (a) the
court has not acquired jurisdiction over the person of petitioner due to the defective
and improper service of summons; (b) the Complaint failed to state a cause of action
and respondent does not have any against petitioner; (c) the action is barred by
estoppel; and (d) respondent did not come to court with clean hands.
On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to take the
deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before the
Philippine Consul General; and (2) a Motion for Leave to Serve Interrogatories on
respondent.
On December 9, 2005, the trial court issued an Order6 denying the Motion to Dismiss.
According to the trial court, there was a proper service of summons through the
Department of Foreign Affairs (DFA) on account of the fact that the defendant has
neither applied for a license to do business in the Philippines, nor filed with the
Securities and Exchange Commission (SEC) a Written Power of Attorney designating
some person on whom summons and other legal processes maybe served. The trial
court also held that the Complaint sufficiently stated a cause of action. The other
allegations in the Motion to Dismiss were brushed aside as matters of defense which
can best be ventilated during the trial.
On December 27, 2005, petitioner filed a Motion for Reconsideration. 7 On March 6,
2006, the trial court issued an Order denying the December 27, 2005 Motion for
Reconsideration and disallowed the twin Motions for Leave to take deposition and serve
written interrogatories.8
On April 3, 2006, petitioner sought redress via a Petition for Certiorari9 with the Court of
Appeals, alleging that the trial court committed grave abuse of discretion in denying its
Motion to Dismiss. The Petition was docketed as CA-G.R. SP No. 94382.
On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing
the Petition for Certiorari. The Court of Appeals ruled that since the denial of a Motion
to Dismiss is an interlocutory order, it cannot be the subject of a Petition for Certiorari,
and may only be reviewed in the ordinary course of law by an appeal from the judgment
after trial. On December 12, 2006, the Court of Appeals rendered the assailed
Resolution denying the petitioner’s Motion for Reconsideration.
Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent
to answer some of the questions in petitioner’s Interrogatories to Plaintiff dated
September 7, 2006.
Notwithstanding the foregoing, petitioner filed the present petition assailing the
September 8, 2006 Decision and the December 12, 2006 Resolution of the Court of
Appeals. Arguing against the ruling of the appellate court, petitioner insists that (a) an
order denying a motion to dismiss may be the proper subject of a petition for certiorari;
and (b) the trial court committed grave abuse of discretion in not finding that it had not
validly acquired jurisdiction over petitioner and that the plaintiff had no cause of action.
Respondent, on the other hand, posits that: (a) the present Petition should be dismissed
for not being filed by a real party in interest and for lack of a proper verification and
certificate of non-forum shopping; (b) the Court of Appeals correctly ruled that certiorari
was not the proper remedy; and (c) the trial court correctly denied petitioner’s motion
to dismiss.
Our discussion of the issues raised by the parties follows:
Whether petitioner is a real party in interest
Respondent argues that the present Petition should be dismissed on the ground that
petitioner no longer existed as a corporation at the time said Petition was filed on
February 1, 2007. Respondent points out that as of the date of the filing of the Petition,
there is no such corporation that goes by the name NM Rothschild and Sons (Australia)
Limited. Thus, according to respondent, the present Petition was not filed by a real party
in interest, citing our ruling in Philips Export B.V. v. Court of Appeals, 10 wherein we held:
A name is peculiarly important as necessary to the very existence of a corporation
(American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman
vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co., 40
W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and
essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to
corporations is that each corporation must have a name by which it is to sue and be
sued and do all legal acts. The name of a corporation in this respect designates the
corporation in the same manner as the name of an individual designates the person
(Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co.
vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the
corporate franchise as any other privilege granted (Federal Secur. Co. vs. Federal Secur.
Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial
Association, 18 RI 165, 26 A 36).11
In its Memorandum12 before this Court, petitioner started to refer to itself as Investec
Australia Limited (formerly "NM Rothschild & Sons [Australia] Limited") and captioned
said Memorandum accordingly. Petitioner claims that NM Rothschild and Sons
(Australia) Limited still exists as a corporation under the laws of Australia under said
new name. It presented before us documents evidencing the process in the Australian
Securities & Investment Commission on the change of petitioner’s company name from
NM Rothschild and Sons (Australia) Limited to Investec Australia Limited. 13
We find the submissions of petitioner on the change of its corporate name satisfactory
and resolve not to dismiss the present Petition for Review on the ground of not being
prosecuted under the name of the real party in interest. While we stand by our
pronouncement in Philips Export on the importance of the corporate name to the very
existence of corporations and the significance thereof in the corporation’s right to sue,
we shall not go so far as to dismiss a case filed by the proper party using its former
name when adequate identification is presented. A real party in interest is the party
who stands to be benefited or injured by the judgment in the suit, or the party entitled
to the avails of the suit.14 There is no doubt in our minds that the party who filed the
present Petition, having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case sought to be
dismissed, is the entity that will be benefited if this Court grants the dismissal prayed
for.
Since the main objection of respondent to the verification and certification against
forum shopping likewise depends on the supposed inexistence of the corporation
named therein, we give no credit to said objection in light of the foregoing discussion.
Propriety of the Resort to a Petition for Certiorari with the Court of Appeals
We have held time and again that an order denying a Motion to Dismiss is an
interlocutory order which neither terminates nor finally disposes of a case as it leaves
something to be done by the court before the case is finally decided on the merits. The
general rule, therefore, is that the denial of a Motion to Dismiss cannot be questioned in
a special civil action for Certiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment.15 However, we have likewise held that when the
denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant of
the extraordinary remedy of Certiorari may be justified. By "grave abuse of discretion" is
meant:
[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of
jurisdiction. The abuse of discretion must be grave as where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be so
patent and gross as to amount to an evasion of positive duty or to a virtual refusal to
perform the duty enjoined by or to act all in contemplation of law. 16
The resolution of the present Petition therefore entails an inquiry into whether the
Court of Appeals correctly ruled that the trial court did not commit grave abuse of
discretion in its denial of petitioner’s Motion to Dismiss. A mere error in judgment on
the part of the trial court would undeniably be inadequate for us to reverse the
disposition by the Court of Appeals.
Issues more properly ventilated during the trial of the case
As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the
following grounds: (a) lack of jurisdiction over the person of petitioner due to the
defective and improper service of summons; (b) failure of the Complaint to state a cause
of action and absence of a cause of action; (c) the action is barred by estoppel; and (d)
respondent did not come to court with clean hands.
As correctly ruled by both the trial court and the Court of Appeals, the alleged absence
of a cause of action (as opposed to the failure to state a cause of action), the alleged
estoppel on the part of petitioner, and the argument that respondent is in pari delicto in
the execution of the challenged contracts, are not grounds in a Motion to Dismiss as
enumerated in Section 1, Rule 1617 of the Rules of Court. Rather, such defenses raise
evidentiary issues closely related to the validity and/or existence of respondent’s
alleged cause of action and should therefore be threshed out during the trial.
As regards the allegation of failure to state a cause of action, while the same is usually
available as a ground in a Motion to Dismiss, said ground cannot be ruled upon in the
present Petition without going into the very merits of the main case.
It is basic that "[a] cause of action is the act or omission by which a party violates a right
of another."18 Its elements are the following: (1) a right existing in favor of the plaintiff,
(2) a duty on the part of the defendant to respect the plaintiff's right, and (3) an act or
omission of the defendant in violation of such right.19 We have held that to sustain a
Motion to Dismiss for lack of cause of action, the complaint must show that the claim
for relief does not exist and not only that the claim was defectively stated or is
ambiguous, indefinite or uncertain.20
The trial court held that the Complaint in the case at bar contains all the three elements
of a cause of action, i.e., it alleges that: (1) plaintiff has the right to ask for the
declaration of nullity of the Hedging Contracts for being null and void and contrary to
Article 2018 of the Civil Code of the Philippines; (2) defendant has the corresponding
obligation not to enforce the Hedging Contracts because they are in the nature of
wagering or gambling agreements and therefore the transactions implementing those
contracts are null and void under Philippine laws; and (3) defendant ignored the advice
and intends to enforce the Hedging Contracts by demanding financial payments due
therefrom.21
The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of
the material allegations of the ultimate facts contained in the plaintiff's
complaint.22 However, this principle of hypothetical admission admits of exceptions.
Thus, in Tan v. Court of Appeals, 23 we held:
The flaw in this conclusion is that, while conveniently echoing the general rule that
averments in the complaint are deemed hypothetically admitted upon the filing of a
motion to dismiss grounded on the failure to state a cause of action, it did not take into
account the equally established limitations to such rule, i.e., that a motion to dismiss
does not admit the truth of mere epithets of fraud; nor allegations of legal conclusions;
nor an erroneous statement of law; nor mere inferences or conclusions from facts not
stated; nor mere conclusions of law; nor allegations of fact the falsity of which is subject
to judicial notice; nor matters of evidence; nor surplusage and irrelevant matter; nor
scandalous matter inserted merely to insult the opposing party; nor to legally impossible
facts; nor to facts which appear unfounded by a record incorporated in the pleading, or
by a document referred to; and, nor to general averments contradicted by more specific
averments. A more judicious resolution of a motion to dismiss, therefore, necessitates
that the court be not restricted to the consideration of the facts alleged in the complaint
and inferences fairly deducible therefrom. Courts may consider other facts within the
range of judicial notice as well as relevant laws and jurisprudence which the courts are
bound to take into account, and they are also fairly entitled to examine
records/documents duly incorporated into the complaint by the pleader himself in
ruling on the demurrer to the complaint.24 (Emphases supplied.)
In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are
void for being contrary to Article 201825 of the Civil Code. Respondent claims that under
the Hedging Contracts, despite the express stipulation for deliveries of gold, the
intention of the parties was allegedly merely to compel each other to pay the difference
between the value of the gold at the forward price stated in the contract and its market
price at the supposed time of delivery.
Whether such an agreement is void is a mere allegation of a conclusion of law, which
therefore cannot be hypothetically admitted. Quite properly, the relevant portions of
the contracts sought to be nullified, as well as a copy of the contract itself, are
incorporated in the Complaint. The determination of whether or not the Complaint
stated a cause of action would therefore involve an inquiry into whether or not the
assailed contracts are void under Philippine laws. This is, precisely, the very issue to be
determined in Civil Case No. 05-782. Indeed, petitioner’s defense against the charge of
nullity of the Hedging Contracts is the purported intent of the parties that actual
deliveries of gold be made pursuant thereto. Such a defense requires the presentation
of evidence on the merits of the case. An issue that "requires the contravention of the
allegations of the complaint, as well as the full ventilation, in effect, of the main merits
of the case, should not be within the province of a mere Motion to Dismiss." 26 The trial
court, therefore, correctly denied the Motion to Dismiss on this ground.
It is also settled in jurisprudence that allegations of estoppel and bad faith require proof.
Thus, in Parañaque Kings Enterprises, Inc. v. Court of Appeals, 27 we ruled:
Having come to the conclusion that the complaint states a valid cause of action for
breach of the right of first refusal and that the trial court should thus not have dismissed
the complaint, we find no more need to pass upon the question of whether the
complaint states a cause of action for damages or whether the complaint is barred by
estoppel or laches. As these matters require presentation and/or determination of
facts, they can be best resolved after trial on the merits.28 (Emphases supplied.)
On the proposition in the Motion to Dismiss that respondent has come to court with
unclean hands, suffice it to state that the determination of whether one acted in bad
faith and whether damages may be awarded is evidentiary in nature. Thus, we have
previously held that "[a]s a matter of defense, it can be best passed upon after a full-
blown trial on the merits."29
Jurisdiction over the person of petitioner
Petitioner alleges that the RTC has not acquired jurisdiction over its person on account
of the improper service of summons. Summons was served on petitioner through the
DFA, with respondent’s counsel personally bringing the summons and Complaint to the
Philippine Consulate General in Sydney, Australia.
In the pleadings filed by the parties before this Court, the parties entered into a lengthy
debate as to whether or not petitioner is doing business in the Philippines. However,
such discussion is completely irrelevant in the case at bar, for two reasons. Firstly, since
the Complaint was filed on August 30, 2005, the provisions of the 1997 Rules of Civil
Procedure govern the service of summons. Section 12, Rule 14 of said rules provides:
Sec. 12. Service upon foreign private juridical entity. – When the defendant is a foreign
private juridical entity which has transacted business in the Philippines, service may be
made on its resident agent designated in accordance with law for that purpose, or, if
there be no such agent, on the government official designated by law to that effect, or
on any of its officers or agents within the Philippines. (Emphasis supplied.)
This is a significant amendment of the former Section 14 of said rule which previously
provided:
Sec. 14. Service upon private foreign corporations. — If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing business in the
Philippines, service may be made on its resident agent designated in accordance with
law for that purpose, or if there be no such agent, on the government official designated
by law to that effect, or on any of its officers or agents within the Philippines. (Emphasis
supplied.)
The coverage of the present rule is thus broader.30 Secondly, the service of summons to
petitioner through the DFA by the conveyance of the summons to the Philippine
Consulate General in Sydney, Australia was clearly made not through the above-quoted
Section 12, but pursuant to Section 15 of the same rule which provides:
Sec. 15. Extraterritorial service. – When the defendant does not reside and is not found
in the Philippines, and the action affects the personal status of the plaintiff or relates to,
or the subject of which is property within the Philippines, in which the defendant has or
claims a lien or interest, actual or contingent, or in which the relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein, or the property
of the defendant has been attached within the Philippines, service may, by leave of
court, be effected out of the Philippines by personal service as under section 6; or by
publication in a newspaper of general circulation in such places and for such time as the
court may order, in which case a copy of the summons and order of the court shall be
sent by registered mail to the last known address of the defendant, or in any other
manner the court may deem sufficient. Any order granting such leave shall specify a
reasonable time, which shall not be less than sixty (60) days after notice, within which
the defendant must answer.
Respondent argues31 that extraterritorial service of summons upon foreign private
juridical entities is not proscribed under the Rules of Court, and is in fact within the
authority of the trial court to adopt, in accordance with Section 6, Rule 135:
Sec. 6. Means to carry jurisdiction into effect. – When by law jurisdiction is conferred on
a court or judicial officer, all auxiliary writs, processes and other means necessary to
carry it into effect may be employed by such court or officer; and if the procedure to be
followed in the exercise of such jurisdiction is not specifically pointed out by law or by
these rules, any suitable process or mode of proceeding may be adopted which appears
comformable to the spirit of said law or rules.
Section 15, Rule 14, however, is the specific provision dealing precisely with the service
of summons on a defendant which does not reside and is not found in the Philippines,
while Rule 135 (which is in Part V of the Rules of Court entitled Legal Ethics) concerns
the general powers and duties of courts and judicial officers.
Breaking down Section 15, Rule 14, it is apparent that there are only four instances
wherein a defendant who is a non-resident and is not found in the country may be
served with summons by extraterritorial service, to wit: (1) when the action affects the
personal status of the plaintiffs; (2) when the action relates to, or the subject of which is
property, within the Philippines, in which the defendant claims a lien or an interest,
actual or contingent; (3) when the relief demanded in such action consists, wholly or in
part, in excluding the defendant from any interest in property located in the Philippines;
and (4) when the defendant non-resident's property has been attached within the
Philippines. In these instances, service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court;
or (c) any other manner the court may deem sufficient.32
Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila
Trading Corporation33 that:
Undoubtedly, extraterritorial service of summons applies only where the action is in
rem or quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine courts already
have jurisdiction to hear and decide the case because, in actions in rem and quasi in
rem, jurisdiction over the person of the defendant is not a prerequisite to confer
jurisdiction on the court, provided that the court acquires jurisdiction over the res. Thus,
in such instance, extraterritorial service of summons can be made upon the defendant.
The said extraterritorial service of summons is not for the purpose of vesting the court
with jurisdiction, but for complying with the requirements of fair play or due process, so
that the defendant will be informed of the pendency of the action against him and the
possibility that property in the Philippines belonging to him or in which he has an
interest may be subjected to a judgment in favor of the plaintiff, and he can thereby
take steps to protect his interest if he is so minded. On the other hand, when the
defendant or respondent does not reside and is not found in the Philippines, and the
action involved is in personam, Philippine courts cannot try any case against him
because of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.34 (Emphases supplied.)
In Domagas v. Jensen,35 we held that:
[T]he aim and object of an action determine its character. Whether a proceeding is in
rem, or in personam, or quasi in rem for that matter, is determined by its nature and
purpose, and by these only. A proceeding in personam is a proceeding to enforce
personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is
to impose, through the judgment of a court, some responsibility or liability directly upon
the person of the defendant. Of this character are suits to compel a defendant to
specifically perform some act or actions to fasten a pecuniary liability on him.36
It is likewise settled that "[a]n action in personam is lodged against a person based on
personal liability; an action in rem is directed against the thing itself instead of the
person; while an action quasi in rem names a person as defendant, but its object is to
subject that person’s interest in a property to a corresponding lien or obligation." 37
The Complaint in the case at bar is an action to declare the loan and Hedging Contracts
between the parties void with a prayer for damages. It is a suit in which the plaintiff
seeks to be freed from its obligations to the defendant under a contract and to hold said
defendant pecuniarily liable to the plaintiff for entering into such contract. It is
therefore an action in personam, unless and until the plaintiff attaches a property within
the Philippines belonging to the defendant, in which case the action will be converted to
one quasi in rem.
Since the action involved in the case at bar is in personam and since the defendant,
petitioner Rothschild/Investec, does not reside and is not found in the Philippines, the
Philippine courts cannot try any case against it because of the impossibility of acquiring
jurisdiction over its person unless it voluntarily appears in court. 38
In this regard, respondent vigorously argues that petitioner should be held to have
voluntarily appeared before the trial court when it prayed for, and was actually
afforded, specific reliefs from the trial court.39 Respondent points out that while
petitioner’s Motion to Dismiss was still pending, petitioner prayed for and was able to
avail of modes of discovery against respondent, such as written interrogatories,
requests for admission, deposition, and motions for production of documents. 40
Petitioner counters that under this Court’s ruling in the leading case of La Naval Drug
Corporation v. Court of Appeals,41 a party may file a Motion to Dismiss on the ground of
lack of jurisdiction over its person, and at the same time raise affirmative defenses and
pray for affirmative relief, without waiving its objection to the acquisition of jurisdiction
over its person.42
It appears, however, that petitioner misunderstood our ruling in La Naval. A close
reading of La Naval reveals that the Court intended a distinction between the raising of
affirmative defenses in an Answer (which would not amount to acceptance of the
jurisdiction of the court) and the prayer for affirmative reliefs (which would be
considered acquiescence to the jurisdiction of the court):
In the same manner that a plaintiff may assert two or more causes of action in a court
suit, a defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of
Court, to put up his own defenses alternatively or even hypothetically. Indeed, under
Section 2, Rule 9, of the Rules of Court, defenses and objections not pleaded either in a
motion to dismiss or in an answer, except for the failure to state a cause of action, are
deemed waived. We take this to mean that a defendant may, in fact, feel enjoined to set
up, along with his objection to the court's jurisdiction over his person, all other possible
defenses. It thus appears that it is not the invocation of any of such defenses, but the
failure to so raise them, that can result in waiver or estoppel. By defenses, of course,
we refer to the grounds provided for in Rule 16 of the Rules of Court that must be
asserted in a motion to dismiss or by way of affirmative defenses in an answer.
Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf
Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:
"This is not to say, however, that the petitioner's right to question the jurisdiction of
the court over its person is now to be deemed a foreclosed matter. If it is true, as
Signetics claims, that its only involvement in the Philippines was through a passive
investment in Sigfil, which it even later disposed of, and that TEAM Pacific is not its
agent, then it cannot really be said to be doing business in the Philippines. It is a
defense, however, that requires the contravention of the allegations of the complaint,
as well as a full ventilation, in effect, of the main merits of the case, which should not
thus be within the province of a mere motion to dismiss. So, also, the issue posed by the
petitioner as to whether a foreign corporation which has done business in the country,
but which has ceased to do business at the time of the filing of a complaint, can still be
made to answer for a cause of action which accrued while it was doing business, is
another matter that would yet have to await the reception and admission of
evidence. Since these points have seasonably been raised by the petitioner, there
should be no real cause for what may understandably be its apprehension, i.e., that by
its participation during the trial on the merits, it may, absent an invocation of separate
or independent reliefs of its own, be considered to have voluntarily submitted itself to
the court's jurisdiction."43 (Emphases supplied.)
In order to conform to the ruling in La Naval, which was decided by this Court in 1994,
the former Section 23, Rule 1444 concerning voluntary appearance was amended to
include a second sentence in its equivalent provision in the 1997 Rules of Civil
Procedure:
court. A party cannot invoke the jurisdiction of a court to secure affirmative relief
against his opponent and after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction.48 Consequently, the trial court cannot be considered to
have committed grave abuse of discretion amounting to lack or excess of jurisdiction in
the denial of the Motion to Dismiss on account of failure to acquire jurisdiction over the
person of the defendant.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court
of Appeals dated September 8, 2006 and its Resolution dated December 12, 2006 in CA-
G.R. SP No. 94382 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

SEC. 20. Voluntary appearance. – The defendant's voluntary appearance in the action
shall be equivalent to service of summons. The inclusion in a motion to dismiss of other
grounds aside from lack of jurisdiction over the person of the defendant shall not be
deemed a voluntary appearance. (Emphasis supplied.)

The new second sentence, it can be observed, merely mentions other grounds in a
Motion to Dismiss aside from lack of jurisdiction over the person of the defendant. This
clearly refers to affirmative defenses, rather than affirmative reliefs.

Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this Court,
in several cases, ruled that seeking affirmative relief in a court is tantamount to
voluntary appearance therein.45 Thus, in Philippine Commercial International Bank v. Dy
Hong Pi,46 wherein defendants filed a "Motion for Inhibition without submitting
themselves to the jurisdiction of this Honorable Court" subsequent to their filing of a
"Motion to Dismiss (for Lack of Jurisdiction)," we held:

Besides, any lingering doubts on the issue of voluntary appearance dissipate when the
respondents' motion for inhibition is considered. This motion seeks a sole relief:
inhibition of Judge Napoleon Inoturan from further hearing the case. Evidently, by
seeking affirmative relief other than dismissal of the case, respondents manifested
their voluntary submission to the court's jurisdiction. It is well-settled that the active
participation of a party in the proceedings is tantamount to an invocation of the court's
jurisdiction and a willingness to abide by the resolution of the case, and will bar said
party from later on impugning the court's jurisdiction. 47 (Emphasis supplied.)1âwphi1

In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs
from the trial court, is deemed to have voluntarily submitted to the jurisdiction of said
U.S. Supreme Court
International Shoe v. State of Washington, 326 U.S. 310 (1945)
International Shoe v. State of Washington
No. 107
Argued November 14, 1945
Decided December 3, 1945
326 U.S. 310
APPEAL FROM THE SUPREME COURT OF WASHINGTON
MR. CHIEF JUSTICE STONE delivered the opinion of the Court.
The questions for decision are (1) whether, within the limitations of the due process
clause of the Fourteenth Amendment, appellant, a Delaware corporation, has, by its
activities in the State of Washington, rendered itself amenable to proceedings in the
courts of that state to recover unpaid contributions to the state unemployment
compensation fund exacted by state statutes, Washington Unemployment
Compensation Act, Washington Revised Statutes, § 9998-103a through § 9998-123a,
1941 Supp., and (2) whether the state can exact those contributions consistently with
the due process clause of the Fourteenth Amendment.
The statutes in question set up a comprehensive scheme of unemployment
compensation, the costs of which are defrayed by contributions required to be made by
employers to a state unemployment compensation fund.
Page 326 U. S. 312
The contributions are a specified percentage of the wages payable annually by each
employer for his employees' services in the state. The assessment and collection of the
contributions and the fund are administered by appellees. Section 14(c) of the Act
(Wash.Rev.Stat., 1941 Supp., § 9998-114c) authorizes appellee Commissioner to issue
an order and notice of assessment of delinquent contributions upon prescribed personal
service of the notice upon the employer if found within the state, or, if not so found, by
mailing the notice to the employer by registered mail at his last known address. That
section also authorizes the Commissioner to collect the assessment by distraint if it is
not paid within ten days after service of the notice. By §§ 14e and 6b, the order of
assessment may be administratively reviewed by an appeal tribunal within the office of
unemployment upon petition of the employer, and this determination is, by § 6i, made
subject to judicial review on questions of law by the state Superior Court, with further
right of appeal in the state Supreme Court, as in other civil cases.
In this case, notice of assessment for the years in question was personally served upon a
sales solicitor employed by appellant in the State of Washington, and a copy of the
notice was mailed by registered mail to appellant at its address in St. Louis, Missouri.
Appellant appeared specially before the office of unemployment, and moved to set
aside the order and notice of assessment on the ground that the service upon
appellant's salesman was not proper service upon appellant; that appellant was not a
corporation of the State of Washington, and was not doing business within the state;
that it had no agent within the state upon whom service could be made; and that
appellant is not an employer, and does not furnish employment within the meaning of
the statute.
The motion was heard on evidence and a stipulation of facts by the appeal tribunal,
which denied the motion
Page 326 U. S. 313
and ruled that appellee Commissioner was entitled to recover the unpaid contributions.
That action was affirmed by the Commissioner; both the Superior Court and the
Supreme Court affirmed. 22 Wash.2d 146, 154 P.2d 801. Appellant in each of these
courts assailed the statute as applied, as a violation of the due process clause of the
Fourteenth Amendment, and as imposing a constitutionally prohibited burden on
interstate commerce. The cause comes here on appeal under § 237(a) of the Judicial
Code, 28 U.S.C. § 344(a), appellant assigning as error that the challenged statutes, as
applied, infringe the due process clause of the Fourteenth Amendment and the
commerce clause.
The facts, as found by the appeal tribunal and accepted by the state Superior Court and
Supreme Court, are not in dispute. Appellant is a Delaware corporation, having its
principal place of business in St. Louis, Missouri, and is engaged in the manufacture and
sale of shoes and other footwear. It maintains places of business in several states other
than Washington, at which its manufacturing is carried on and from which its
merchandise is distributed interstate through several sales units or branches located
outside the State of Washington.
Appellant has no office in Washington, and makes no contracts either for sale or
purchase of merchandise there. It maintains no stock of merchandise in that state, and
makes there no deliveries of goods in intrastate commerce. During the years from 1937
to 1940, now in question, appellant employed eleven to thirteen salesmen under direct
supervision and control of sales managers located in St. Louis. These salesmen resided in
Washington; their principal activities were confined to that state, and they were
compensated by commissions based upon the amount of their sales. The commissions
for each year totaled more than $31,000. Appellant supplies its salesmen with a line of
samples, each consisting of one shoe of a pair, which
Page 326 U. S. 314
they display to prospective purchasers. On occasion, they rent permanent sample
rooms, for exhibiting samples, in business buildings, or rent rooms in hotels or business
buildings temporarily for that purpose. The cost of such rentals is reimbursed by
appellant.
The authority of the salesmen is limited to exhibiting their samples and soliciting orders
from prospective buyers, at prices and on terms fixed by appellant. The salesmen
transmit the orders to appellant's office in St. Louis for acceptance or rejection, and,
when accepted, the merchandise for filling the orders is shipped f.o.b. from points
outside Washington to the purchasers within the state. All the merchandise shipped into
Washington is invoiced at the place of shipment, from which collections are made. No
salesman has authority to enter into contracts or to make collections.
The Supreme Court of Washington was of opinion that the regular and systematic
solicitation of orders in the state by appellant's salesmen, resulting in a continuous flow
of appellant's product into the state, was sufficient to constitute doing business in the
state so as to make appellant amenable to suit in its courts. But it was also of opinion
that there were sufficient additional activities shown to bring the case within the rule,
frequently stated, that solicitation within a state by the agents of a foreign corporation
plus some additional activities there are sufficient to render the corporation amenable
to suit brought in the courts of the state to enforce an obligation arising out of its
activities there. International Harvester Co. v. Kentucky, 234 U. S. 579,234 U. S.
587; People's Tobacco Co. v. American Tobacco Co., 246 U. S. 79, 246 U. S. 87; Frene v.
Louisville Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516. The court found such
additional activities in the salesmen's display of samples sometimes in permanent
display rooms, and the salesmen's residence within the state, continued over a period of
years, all resulting in a
Page 326 U. S. 315
substantial volume of merchandise regularly shipped by appellant to purchasers within
the state. The court also held that the statute, as applied, did not invade the
constitutional power of Congress to regulate interstate commerce, and did not impose a
prohibited burden on such commerce.
Appellant's argument, renewed here, that the statute imposes an unconstitutional
burden on interstate commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. §
1606(a) provides that
"No person required under a State law to make payments to an unemployment fund
shall be relieved from compliance therewith on the ground that he is engaged in
interstate or foreign commerce, or that the State law does not distinguish between
employees engaged in interstate or foreign commerce and those engaged in intrastate
commerce."
It is no longer debatable that Congress, in the exercise of the commerce power, may
authorize the states, in specified ways, to regulate interstate commerce or impose
burdens upon it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S.
334; Perkins v. Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy,319 U. S.
306, 319 U. S. 308; Hooven & Allison Co. v. Evatt, 324 U. S. 652, 324 U. S. 679; Southern
Pacific Co. v. Arizona, 325 U. S. 761, 325 U. S. 769.
Appellant also insists that its activities within the state were not sufficient to manifest its
"presence" there, and that, in its absence, the state courts were without jurisdiction,
that, consequently, it was a denial of due process for the state to subject appellant to
suit. It refers to those cases in which it was said that the mere solicitation of orders for
the purchase of goods within a state, to be accepted without the state and filled by
shipment of the purchased goods interstate, does not render the corporation seller
amenable to suit within the state. See Green v. Chicago, B. & Q. R. Co., 205 U. S.
530, 205 U. S. 533; International Harvester Co. v. Kentucky, supra, 234 U. S. 586-
587; Philadelphia
Page 326 U. S. 316
& Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268; People's Tobacco Co. v.
American Tobacco Co., supra,246 U. S. 87. And appellant further argues that, since it
was not present within the state, it is a denial of due process to subject it to taxation or
other money exaction. It thus denies the power of the state to lay the tax or to subject
appellant to a suit for its collection.
Historically, the jurisdiction of courts to render judgment in personam is grounded on
their de facto power over the defendant's person. Hence, his presence within the
territorial jurisdiction of a court was prerequisite to its rendition of a judgment
personally binding him. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 733. But now that
the capias ad respondendum has given way to personal service of summons or other
form of notice, 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." Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463. See Holmes, J., in McDonald v. Mabee, 243 U. S. 90, 243 U. S.
91. Compare Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, 318 U. S.
319. See Blackmer v. United States, 284 U. S. 421; Hess v. Pawloski, 274 U. S. 352; Young
v. Masci, 289 U. S. 253. ,
Since the corporate personality is a fiction, although a fiction intended to be acted upon
as though it were a fact, Klein v. Board of Supervisors, 282 U. S. 19, 282 U. S. 24, it is
clear that, unlike an individual, its "presence" without, as well as within, the state of its
origin can be manifested only by activities carried on in its behalf by those who are
authorized to act for it. To say that the corporation is so far "present" there as to satisfy
due process requirements, for purposes of taxation or the maintenance of suits against
it in the courts of the state, is to beg the question to be decided. For the terms
"present" or "presence" are
Page 326 U. S. 317
used merely to symbolize those activities of the corporation's agent within the state
which courts will deem to be sufficient to satisfy the demands of due process. L. Hand,
J., in Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by
such contacts of the corporation with the state of the forum as make it reasonable, in
the context of our federal system of government, to require the corporation to defend
the particular suit which is brought there. An "estimate of the inconveniences" which
would result to the corporation from a trial away from its "home" or principal place of
business is relevant in this connection. Hutchinson v. Chase & Gilbert, supra, 141.
"Presence" in the state in this sense has never been doubted when the activities of the
corporation there have not only been continuous and systematic, but also give rise to
the liabilities sued on, even though no consent to be sued or authorization to an agent
to accept service of process has been given. St. Clair v. Cox,106 U. S. 350, 106 U. S.
355; Connecticut Mutual Co. v. Spratley, 172 U. S. 602, 172 U. S. 610-611; Pennsylvania
Lumbermen's Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S. 414-415; Commercial Mutual Co.
v. Davis, 213 U. S. 245,213 U. S. 255-256; International Harvester Co. v. Kentucky, supra;
cf. St. Louis S.W. R. Co. v. Alexander, 227 U. S. 218. Conversely, it has been generally
recognized that the casual presence of the corporate agent, or even his conduct of
single or isolated items of activities in a state in the corporation's behalf, are not enough
to subject it to suit on causes of action unconnected with the activities there. St. Clair v.
Cox, supra, 106 U. S. 359,106 U. S. 360; Old Wayne Life Assn. v. McDonough, 204 U. S.
8, 204 U. S. 21; Frene v. Louisville Cement Co., supra,515, and cases cited. To require the
corporation in such circumstances to defend the suit away from its home or other
jurisdiction where it carries on more substantial activities has been thought to lay too
great and unreasonable a burden on the corporation to comport with due process.
Page 326 U. S. 318
While it has been held, in cases on which appellant relies, that continuous activity of
some sorts within a state is not enough to support the demand that the corporation be
amenable to suits unrelated to that activity, Old Wayne Life Assn. v. McDonough, supra;
Green v. Chicago, B. & Q. R. Co., supra; Simon v. Southern R. Co., 236 U. S. 115; People's
Tobacco Co. v. American Tobacco Co., supra; cf. Davis v. Farmers Co-operative Co., 262
U. S. 312, 262 U. S. 317, there have been instances in which the continuous corporate
operations within a state were thought so substantial and of such a nature as to justify
suit against it on causes of action arising from dealings entirely distinct from those
activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S. 565; Tauza v. Susquehanna
Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R. Co. v. Alexander, supra.
Finally, although the commission of some single or occasional acts of the corporate
agent in a state sufficient to impose an obligation or liability on the corporation has not
been thought to confer upon the state authority to enforce it, Rosenberg Bros. & Co. v.
Curtis Brown Co., 260 U. S. 516, other such acts, because of their nature and quality and
the circumstances of their commission, may be deemed sufficient to render the
corporation liable to suit. Cf. Kane v. New Jersey, 242 U. S. 160; Hess v. Pawloski, supra;
Young v. Masci, supra. True, some of the decisions holding the corporation amenable to
suit have been supported by resort to the legal fiction that it has given its consent to
service and suit, consent being implied from its presence in the state through the acts of
its authorized agents. Lafayette Insurance Co. v. French, 18 How. 404, 59 U. S. 407; St.
Clair v. Cox, supra, 106 U. S. 356; Commercial Mutual Co. v. Davis, supra, 213 U. S.
254; Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365. But, more
realistically, it may be said that those authorized acts were of such a nature as to justify
the fiction. Smolik v. Philadelphia &
Page 326 U. S. 319
Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in
American Constitutional Law, 94-95.
It is evident that the criteria by which we mark the boundary line between those
activities which justify the subjection of a corporation to suit and those which do not
cannot be simply mechanical or quantitative. The test is not merely, as has sometimes
been suggested, whether the activity, which the corporation has seen fit to procure
through its agents in another state, is a little more or a little less. St. Louis S.W. R. Co. v.
Alexander, supra, 227 U. S. 228; International Harvester Co. v. Kentucky, supra, 234 U. S.
587. Whether due process is satisfied must depend, rather, upon the quality and nature
of the activity in relation to the fair and orderly administration of the laws which it was
the purpose of the due process clause to insure. That clause does not contemplate that
a state may make binding a judgment in personam against an individual or corporate
defendant with which the state has no contacts, ties, or relations. Cf. Pennoyer v. Neff,
supra; Minnesota Commercial Assn. v. Benn, 261 U. S. 140.
But, to the extent that a corporation exercises the privilege of conducting activities
within a state, it enjoys the benefits and protection of the laws of that state. The
exercise of that privilege may give rise to obligations, and, so far as those obligations
arise out of or are connected with the activities within the state, a procedure which
requires the corporation to respond to a suit brought to enforce them can, in most
instances, hardly be said to be undue. Compare International Harvester Co. v. Kentucky,
supra, with Green v. Chicago, B. & Q. R. Co., supra, and People's Tobacco Co. v. American
Tobacco Co., supra. Compare Connecticut Mutual Co. v. Spratley, supra, 172 U. S.
619, 172 U. S. 620, and Commercial Mutual Co. v. Davis, supra, with Old Wayne Life
Assn. v. McDonough, supra. See 29 Columbia Law Review, 187-195.
Page 326 U. S. 320
Applying these standards, the activities carried on in behalf of appellant in the State of
Washington were neither irregular nor casual. They were systematic and continuous
throughout the years in question. They resulted in a large volume of interstate business,
in the course of which appellant received the benefits and protection of the laws of the
state, including the right to resort to the courts for the enforcement of its rights. The
obligation which is here sued upon arose out of those very activities. It is evident that
these operations establish sufficient contacts or ties with the state of the forum to make
it reasonable and just, according to our traditional conception of fair play and
substantial justice, to permit the state to enforce the obligations which appellant has
incurred there. Hence, we cannot say that the maintenance of the present suit in the
State of Washington involves an unreasonable or undue procedure.
We are likewise unable to conclude that the service of the process within the state upon
an agent whose activities establish appellant's "presence" there was not sufficient
notice of the suit, or that the suit was so unrelated to those activities as to make the
agent an inappropriate vehicle for communicating the notice. It is enough that appellant
has established such contacts with the state that the particular form of substituted
service adopted there gives reasonable assurance that the notice will be
actual. Connecticut Mutual Co. v. Spratley, supra, 172 U. S. 618, 172 U. S. 619; Board of
Trade v. Hammond Elevator Co., 198 U. S. 424, 198 U. S. 437-438; Commercial Mutual
Co. v. Davis, supra, 213 U. S. 254-255. Cf. Riverside Mills v. Menefee, 237 U. S. 189,237
U. S. 194, 237 U. S. 195; See Knowles v. Gaslight & Coke Co., 19 Wall. 58, 86 U. S.
61; McDonald v. Mabee, supra; Milliken v. Meyer, supra. Nor can we say that the mailing
of the notice of suit to appellant by registered mail at its home office was not
reasonably calculated to apprise appellant of the suit. Compare Hess v. Pawloski, supra,
with McDonald v. Mabee, supra,
Page 326 U. S. 321
243 U. S. 92, and Wuchter v. Pizzutti, 276 U. S. 13, 276 U. S. 19, 276 U. S. 24; cf. Becquet
v. MacCarthy, 2 B. & Ad. 951; Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See Washington
v. Superior Court, supra, 289 U. S. 365.
Only a word need be said of appellant's liability for the demanded contributions to the
state unemployment fund. The Supreme Court of Washington, construing and applying
the statute, has held that it imposes a tax on the privilege of employing appellant's
salesmen within the state measured by a percentage of the wages, here, the
commissions payable to the salesmen. This construction we accept for purposes of
determining the constitutional validity of the statute. The right to employ labor has
been deemed an appropriate subject of taxation in this country and England, both
before and since the adoption of the Constitution. Steward Machine Co. v. Davis, 301 U.
S. 548, 301 U. S. 579, et seq. And such a tax imposed upon the employer for
unemployment benefits is within the constitutional power of the states. Carmichael v.
Southern Coal Co., 301 U. S. 495, 301 U. S. 508, et seq.
Appellant having rendered itself amenable to suit upon obligations arising out of the
activities of its salesmen in Washington, the state may maintain the present suit in
personam to collect the tax laid upon the exercise of the privilege of employing
appellant's salesmen within the state. For Washington has made one of those activities
which, taken together, establish appellant's "presence" there for purposes of suit the
taxable event by which the state brings appellant within the reach of its taxing power.
The state thus has constitutional power to lay the tax and to subject appellant to a suit
to recover it. The activities which establish its "presence" subject it alike to taxation by
the state and to suit to recover the tax. Equitable Life Society v. Pennsylvania, 238 U. S.
143, 238 U. S. 146; cf. International Harvester Co. v. Department of Taxation,322 U. S.
435, 322 U. S. 442, et seq.; Hoopeston Canning Co. v. Cullen,
Page 326 U. S. 322
supra, 318 U. S. 316-319; see General Trading Co. v. Tax Comm'n, 322 U. S. 335.
Affirmed.
MR. JUSTICE JACKSON took no part in the consideration or decision of this case.
MR. JUSTICE BLACK delivered the following opinion.
Congress, pursuant to its constitutional power to regulate commerce, has expressly
provided that a State shall not be prohibited from levying the kind of unemployment
compensation tax here challenged. 26 U.S.C. 1600. We have twice decided that this
Congressional consent is an adequate answer to a claim that imposition of the tax
violates the Commerce Clause. Perkins v. Pennsylvania, 314 U.S. 586, affirming 342 Pa.
529; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308. Two
determinations by this Court of an issue so palpably without merit are sufficient.
Consequently, that part of this appeal which again seeks to raise the question seems so
patently frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer,217 U.
S. 455. Nor is the further ground advanced on this appeal, that the State of Washington
has denied appellant due process of law, any less devoid of substance. It is my view,
therefore, that we should dismiss the appeal as unsubstantial, [Footnote 1] Seaboard Air
Line R. Co. v. Watson, 287 U. S. 86, 287 U. S. 90, 287 U. S. 92, and decline the invitation
to formulate broad rules as to the meaning of due process, which here would amount to
deciding a constitutional question "in advance of the necessity for its
decision." Federation of Labor v. McAdory, 325 U. S. 450, 325 U. S. 461.
Page 326 U. S. 323
Certainly appellant cannot, in the light of our past decisions, meritoriously claim that
notice by registered mail and by personal service on its sales solicitors in Washington did
not meet the requirements of procedural due process. And the due process clause is not
brought in issue any more by appellant's further conceptualistic contention that
Washington could not levy a tax or bring suit against the corporation because it did not
honor that State with its mystical "presence." For it is unthinkable that the vague due
process clause was ever intended to prohibit a State from regulating or taxing a business
carried on within its boundaries simply because this is done by agents of a corporation
organized and having its headquarters elsewhere. To read this into the due process
clause would, in fact, result in depriving a State's citizens of due process by taking from
the State the power to protect them in their business dealings within its boundaries
with representatives of a foreign corporation. Nothing could be more irrational, or more
designed to defeat the function of our federative system of government. Certainly a
State, at the very least, has power to tax and sue those dealing with its citizens within its
boundaries, as we have held before.Hoopeston Canning Co. v. Cullen, 318 U. S. 313.
Were the Court to follow this principle, it would provide a workable standard for cases
where, as here, no other questions are involved. The Court has not chosen to do so, but
instead has engaged in an unnecessary discussion, in the course of which it has
announced vague Constitutional criteria applied for the first time to the issue before us.
It has thus introduced uncertain elements confusing the simple pattern and tending to
curtail the exercise of State powers to an extent not justified by the Constitution.
The criteria adopted, insofar as they can be identified, read as follows: Due Process does
permit State courts to "enforce the obligations which appellant has incurred" if
Page 326 U. S. 324
it be found "reasonable and just according to our traditional conception of fair play and
substantial justice." And this, in turn, means that we will "permit" the State to act if,
upon
"an 'estimate of the inconveniences' which would result to the corporation from a trial
away from its 'home' or principal place of business,"
we conclude that it is "reasonable" to subject it to suit in a State where it is doing
business.
It is true that this Court did use the terms "fair play" and "substantial justice" in
explaining the philosophy underlying the holding that it could not be "due process of
law" to render a personal judgment against a defendant without notice and an
opportunity to be heard. Milliken v. Meyer, 311 U. S. 457. In McDonald v. Mabee, 243 U.
S. 90, 243 U. S. 91, cited in the Milliken, case, Mr. Justice Holmes, speaking for the Court,
warned against judicial curtailment of this opportunity to be heard, and referred to such
a curtailment as a denial of "fair play," which even the common law would have deemed
"contrary to natural justice." And previous cases had indicated that the ancient rule
against judgments without notice had stemmed from "natural justice" concepts. These
cases, while giving additional reasons why notice under particular circumstances is
inadequate, did not mean thereby that all legislative enactments which this Court might
deem to be contrary to natural justice ought to be held invalid under the due process
clause. None of the cases purport to support or could support a holding that a State can
tax and sue corporations only if its action comports with this Court's notions of "natural
justice." I should have thought the Tenth Amendment settled that.
I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a
power to tax and to open the doors of its courts for its citizens to sue corporations
whose agents do business in those States. Believing that the Constitution gave the
States that power, I think it a judicial deprivation to condition its exercise upon this
Page 326 U. S. 325
Court's notion of "fair play," however appealing that term may be. Nor can I stretch the
meaning of due process so far as to authorize this Court to deprive a State of the right to
afford judicial protection to its citizens on the ground that it would be more
"convenient" for the corporation to be sued somewhere else.
There is a strong emotional appeal in the words "fair play," "justice," and
"reasonableness." But they were not chosen by those who wrote the original
Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in
invalidating State or Federal laws passed by elected legislative representatives. No one,
not even those who most feared a democratic government, ever formally proposed that
courts should be given power to invalidate legislation under any such elastic standards.
Express prohibitions against certain types of legislation are found in the Constitution,
and, under the long-settled practice, courts invalidate laws found to conflict with them.
This requires interpretation, and interpretation, it is true, may result in extension of the
Constitution's purpose. But that is no reason for reading the due process clause so as to
restrict a State's power to tax and sue those whose activities affect persons and
businesses within the State, provided proper service can be had. Superimposing the
natural justice concept on the Constitution's specific prohibitions could operate as a
drastic abridgment of democratic safeguards they embody, such as freedom of speech,
press and religion, [Footnote 2] and the right to counsel. This

Page 326 U. S. 326

has already happened. Betts v. Brady, 316 U. S. 455. Compare Feldman v. United
States, 322 U. S. 487, 322 U. S. 494-503. For application of this natural law concept,
whether under the terms "reasonableness," "justice," or "fair play," makes judges the
supreme arbiters of the country's laws and practices. Polk Co. v. Glover, 305 U. S. 5, 305
U. S. 17-18; Federal Power Commission v. Natural Gas Pipeline Co., 315 U. S. 575, 315 U.
S. 600, n. 4. This result, I believe, alters the form of government our Constitution
provides. I cannot agree.

True, the State's power is here upheld. But the rule announced means that tomorrow's
judgment may strike down a State or Federal enactment on the ground that it does not
conform to this Court's idea of natural justice. I therefore find myself moved by the
same fears that caused Mr. Justice Holmes to say in 1930:

"I have not yet adequately expressed the more than anxiety that I feel at the ever-
increasing scope given to the Fourteenth Amendment in cutting down what I believe to
be the constitutional rights of the States. As the decisions now stand, I see hardly any
limit but the sky to the invalidating of those rights if they happen to strike a majority of
this Court as for any reason undesirable."

Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 595.

U.S. Supreme Court
Kulko v. Superior Ct., 436 U.S. 84 (1978)
Kulko v. Superior Court of California
No. 77-293
Argued March 29, 1978
Decided May 15, 1978
436 U.S. 84
APPEAL FROM THE SUPREME COURT OF CALIFORNIA
MR. JUSTICE MARSHALL delivered the opinion of the Court.
The issue before us is whether, in this action for child support, the California state courts
may exercise in personam jurisdiction over a nonresident, nondomiciliary parent of
minor children domiciled within the State. For reasons set forth below, we hold that the
exercise of such jurisdiction would violate the Due Process Clause of the Fourteenth
Amendment.
I action against appellant in the California Superior Court. She sought to establish the
Appellant Ezra Kulko married appellee Sharon Kulko Horn in 1959, during appellant's
three-day stopover in California en route from a military base in Texas to a tour of duty
in Korea. At the time of this marriage, both parties were domiciled in and residents of
New York State. Immediately following
Page 436 U. S. 87
the marriage, Sharon Kulko returned to New York, as did appellant after his tour of duty.
Their first child, Darwin, was born to the Kulkos in New York in 1961, and, a year later
their second child, Ilsa, was born, also in New York. The Kulkos and their two children
resided together as a family in New York City continuously until March, 1972, when the
Kulkos separated.
Following the separation, Sharon Kulko moved to San Francisco, Cal. A written
separation agreement was drawn up in New York; in September, 1972, Sharon Kulko
flew to New York City in order to sign this agreement. The agreement provided, inter
alia, that the children would remain with their father during the school year but would
spend their Christmas, Easter, and summer vacations with their mother. While Sharon
Kulko waived any claim for her own support or maintenance, Ezra Kulko agreed to pay
his wife $3,000 per year in child support for the periods when the children were in her
care, custody, and control. Immediately after execution of the separation agreement,
Sharon Kulko flew to Haiti and procured a divorce there; [Footnote 1] the divorce
decree incorporated the terms of the agreement. She then returned to California, where
she remarried and took the name Horn.
The children resided with appellant during the school year and with their mother on
vacations, as provided by the separation agreement, until December, 1973. At this time,
just before Ilsa was to leave New York to spend Christmas vacation with her mother, she
told her father that she wanted to remain in California after her vacation. Appellant
bought his daughter a one-way plane ticket, and Ilsa left, taking her
Page 436 U. S. 88
clothing with her. Ilsa then commenced living in California with her mother during the
school year and spending vacations with her father. In January, 1976, appellant's other
child, Darwin, called his mother from New York and advised her that he wanted to live
with her in California. Unbeknownst to appellant, appellee Horn sent a plane ticket to
her son, which he used to fly to California where he took up residence with his mother
and sister.
Less than one month after Darwin's arrival in California, appellee Horn commenced this
Haitian divorce decree as a California judgment; to modify the judgment so as to award
her full custody of the children; and to increase appellant's child support obligations.
[Footnote 2] Appellant appeared specially and moved to quash service of the summons
on the ground that he was not a resident of California and lacked sufficient "minimum
contacts" with the State under International Shoe Co. v. Washington, 326 U. S. 310, 326
U. S. 316 (1945), to warrant the State's assertion of personal jurisdiction over him.
The trial court summarily denied the motion to quash, and appellant sought review in
the California Court of Appeal by petition for a writ of mandate. Appellant did not
contest the court's jurisdiction for purposes of the custody determination, but, with
respect to the claim for increased support, he renewed his argument that the California
courts lacked personal jurisdiction over him. The appellate court affirmed the denial of
appellant's motion to quash, reasoning that, by consenting to his children's living in
California, appellant had "caused
Page 436 U. S. 89
an effect in th[e] state" warranting the exercise of jurisdiction over him. 133 Cal.Rptr.
627, 628 (1976).
The California Supreme Court granted appellant's petition for review, and, in a 4-2
decision, sustained the rulings of the lower state courts. 19 Cal.3d 514, 564 P.2d 353
(1977). It noted first that the California Code of Civil Procedure demonstrated an intent
that the courts of California utilize all bases of in personamjurisdiction "not inconsistent
with the Constitution." [Footnote 3] Agreeing with the court below, the Supreme Court
stated that, where a nonresident defendant has caused an effect in the State by an act
or omission outside the State, personal jurisdiction over the defendant in causes arising
from that effect may be exercised whenever "reasonable." Id. at 521, 564 P.2d at 356. It
went on to hold that such an exercise was "reasonable" in this case because appellant
had "purposely availed himself of the benefits and protections of the laws of California"
by sending Ilsa to live with her mother in California. Id. at 521-522, 524, 564 P.2d at 356,
358. While noting that appellant had not, "with respect to his other child, Darwin,
caused an effect in [California]" -- since it was appellee Horn who had arranged for
Darwin to fly to California in January, 1976 -- the court concluded that it was "fair and
reasonable for defendant to be subject to personal jurisdiction for the support of both
children, where he has committed acts with respect to one child which confers [sic]
personal jurisdiction and has consented to the permanent residence of the other child in
California." Id. at 525, 564 P.2d at 358-359.
In the view of the two dissenting justices, permitting a minor child to move to California
could not be regarded as a
Page 436 U. S. 90
purposeful act by which appellant had invoked the benefits and protection of state law.
Since appellant had been in the State of California on only two brief occasions many
years before on military stopovers, and lacked any other contact with the State, the
dissenting opinion argued that appellant could not reasonably be subjected to the in
personam jurisdiction of the California state courts. Id. at 526-529, 564 P.2d at 359-360.
On Ezra Kulko's appeal to this Court, probable jurisdiction was postponed. 434 U.S. 983
(1977). We have concluded that jurisdiction by appeal does not lie, [Footnote 4] but,
treating the papers as a petition for a writ of certiorari, we hereby grant the petition and
reverse the judgment below. [Footnote 5]
Page 436 U. S. 91
II
The Due Process Clause of the Fourteenth Amendment operates as a limitation on the
jurisdiction of state courts to enter judgments affecting rights or interests of
nonresident defendants. See Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 198-200 (1977).
It has long been the rule that a valid judgment imposing a personal obligation or duty in
favor of the plaintiff may be entered only by a court having jurisdiction over the person
of the defendant. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 732-733 (1878); International
Shoe Co. v. Washington,326 U.S. at 326 U. S. 316. The existence of personal jurisdiction,
in turn, depends upon the presence of reasonable notice to the defendant that an
action has been brought, Mullane v. Central Hanover Trust Co., 339 U. S. 306, 339 U. S.
313-314 (1950), and a sufficient connection between the defendant and the forum State
to make it fair to require defense of the action in the forum. Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463-464 (1940). In this case, appellant does not dispute the adequacy of
the notice that he received, but contends that his connection with the State of California
is too attenuated, under the standards implicit in the Due Process Clause of the
Constitution, to justify imposing upon him the burden and inconvenience of defense in
California.
Page 436 U. S. 92
The parties are in agreement that the constitutional standard for determining whether
the State may enter a binding Judgment against appellant here is that set forth in this
Court's opinion in International Shoe Co. v. Washington, supra: that a defendant
"have certain minimum contacts with [the forum State] such that the maintenance of
the suit does not offend 'traditional notions of fair play and substantial justice.'"
326 U.S. at 326 U. S. 316, quoting Milliken v. Meyer, supra at 311 U. S. 463. While the
interests of the forum State and of the plaintiff in proceeding with the cause in the
plaintiff's forum of choice are, of course, to be considered, see McGee v. International
Life Ins. Co., 355 U. S. 220, 355 U. S. 223 (1957), an essential criterion in all cases is
whether the "quality and nature" of the defendant's activity is such that it is
"reasonable" and "fair" to require him to conduct his defense in that State. International
Shoe Co. v. Washington, supra at 326 U. S. 316-317, 326 U. S. 319. Accord, Shaffer v.
Heitner, supra at 433 U. S. 207-212; Perkins v. Benguet Mining Co.,342 U. S. 437, 342 U.
S. 445 (1952).
Like any standard that requires a determination of "reasonableness," the "minimum
contacts" test of International Shoe is not susceptible of mechanical application; rather,
the facts of each case must be weighed to determine whether the requisite "affiliating
circumstances" are present. Hanson v. Denckla, 357 U. S. 235, 357 U. S. 246 (1958). We
recognize that this determination is one in which few answers will be written "in black
and white. The greys are dominant, and, even among them, the shades are
innumerable."Estin v. Estin, 334 U. S. 541, 334 U. S. 545 (1948). But we believe that the
California Supreme Court's application of the minimum contacts test in this case
represents an unwarranted extension of International Shoe and would, if sustained,
sanction a result that is neither fair, just, nor reasonable.
A The "purposeful act" that the California Supreme Court believed did warrant the
In reaching its result, the California Supreme Court did not rely on appellant's glancing
presence in the State some 13
Page 436 U. S. 93
years before the events that led to this controversy, nor could it have. Appellant has
been in California on only two occasions, once in 1959 for a three-day military stopover
on his way to Korea, see supra at 436 U. S. 86-87, and again in 1960 for a 24-hour
stopover on his return from Korean service. To hold such temporary visits to a State a
basis for the assertion of in personam jurisdiction over unrelated actions arising in the
future would make a mockery of the limitations on state jurisdiction imposed by the
Fourteenth Amendment. Nor did the California court rely on the fact that appellant was
actually married in California on one of his two brief visits. We agree that where two
New York domiciliaries, for reasons of convenience, marry in the State of California and
thereafter spend their entire married life in New York, the fact of their California
marriage, by itself, cannot support a California court's exercise of jurisdiction over a
spouse who remains a New York resident in an action relating to child support.
Finally, in holding that personal jurisdiction existed, the court below carefully disclaimed
reliance on the fact that appellant had agreed at the time of separation to allow his
children to live with their mother three months a year, and that he had sent them to
California each year pursuant to this agreement. As was noted below, 19 Cal.3d at 523-
524, 564 P.2d at 357, to find personal jurisdiction in a State on this basis, merely
because the mother was residing there, would discourage parents from entering into
reasonable visitation agreements. Moreover, it could arbitrarily subject one parent to
suit in any State of the Union where the other parent chose to spend time while having
custody of their offspring pursuant to a separation agreement. As we have emphasized:
[Footnote 6]
"The unilateral activity of those who claim some relationship
Page 436 U. S. 94
with a nonresident defendant cannot satisfy the requirement of contact with the forum
State. . . . [I]t is essential in each case that there be some act by which the defendant
purposefully avails [him]self of the privilege of conducting activities within the forum
State. . . ."
Hanson v. Denckla, supra at 357 U. S. 253.
exercise of personal jurisdiction over appellant in California was his "actively and fully
consent[ing] to Ilsa living in California for the school year . . . and . . . sen[ding] her to
California for that purpose." 19 Cal.3d at 524, 564 P.2d at 358. We cannot accept the
proposition that appellant's acquiescence in Ilsa's desire to live with her mother
conferred jurisdiction over appellant in the California courts in this action. A father who
agrees, in the interests of family harmony and his children's preferences, to allow them
to spend more time in California than was required under a separation agreement can
hardly be said to have "purposefully availed himself" of the "benefits and protections"
of California's laws. See Shaffer v. Heitner, 433 U.S. at 433 U. S. 216. [Footnote 7]
Nor can we agree with the assertion of the court below that the exercise of in
personam jurisdiction here was warranted by the financial benefit appellant derived
from his daughter's presence in California for nine months of the year. 19 Cal.3d at 524-
525, 564 P.2d at 358. This argument rests on the premise that, while appellant's liability
for support payments
Page 436 U. S. 95
remained unchanged, his yearly expenses for supporting the child in New York
decreased. But this circumstance, even if true, does not support California's assertion of
jurisdiction here. Any diminution in appellant's household costs resulted not from the
child's presence in California, but rather from her absence from appellant's home.
Moreover, an action by appellee Horn to increase support payments could now be
brought, and could have been brought when Ilsa first moved to California, in the State of
New York; [Footnote 8] a New York court would clearly have personal jurisdiction over
appellant, and, if a judgment were entered by a New York court increasing appellant's
child support obligations, it could properly be enforced against him in both New York
and California. [Footnote 9] Any ultimate financial advantage to appellant thus results
not from the child's presence in California, but from appellee's failure earlier to seek an
increase in payments under the separation agreement. [Footnote 10] The argument
below to the contrary, in our
Page 436 U. S. 96
view, confuses the question of appellant's liability with that of the proper forum in
which to determine that liability.
B
In light of our conclusion that appellant did not purposefully derive benefit from any
activities relating to the State of California, it is apparent that the California Supreme
Court's reliance on appellant's having caused an "effect" in California was misplaced. See
supra at 436 U. S. 89. This "effects" test is derived from the American Law Institute's
Restatement (Second) of Conflict of Laws § 37 (1971), which provides:
"A state has power to exercise judicial jurisdiction over an individual who causes effects
in the state by an act done elsewhere with respect to any cause of action arising from
these effects unless the nature of the effects and of the individual's relationship to the
state make the exercise of such jurisdiction unreasonable. [Footnote 11]"
While this provision is not binding on this Court, it does not in any event support the
decision below. As is apparent from the examples accompanying § 37 in the
Restatement, this section was intended to reach wrongful activity outside of the State
causing injury within the State, see, e.g., Comment a, p. 157 (shooting bullet from one
State into another), or commercial activity affecting state residents, ibid. Even in such
situations, moreover, the Restatement recognizes that there might be circumstances
that would render "unreasonable" the assertion of jurisdiction over the nonresident
defendant.
The circumstances in this case clearly render "unreasonable" California's assertion of
personal jurisdiction. There is no claim that appellant has visited physical injury on
either
Page 436 U. S. 97
property or persons within the State of California. Cf. Hess v. Pawloski, 274 U. S.
352 (1927). The cause of action herein asserted arises, not from the defendant's
commercial transactions in interstate commerce, but rather from his personal, domestic
relations. It thus cannot be said that appellant has sought a commercial benefit from
solicitation of business from a resident of California that could reasonably render him
liable to suit in state court; appellant's activities cannot fairly be analogized to an
insurer's sending an insurance contract and premium notices into the State to an
insured resident of the State. Cf. McGee v. International Life Insurance Co., 355 U. S.
220 (1957). Furthermore, the controversy between the parties arises from a separation
that occurred in the State of New York; appellee Horn seeks modification of a contract
that was negotiated in New York and that she flew to New York to sign. As in Hanson v.
Denckla, 357 U.S. at357 U. S. 252, the instant action involves an agreement that was
entered into with virtually no connection with the forum State. See also n 6, supra.
Finally, basic considerations of fairness point decisively in favor of appellant's State of
domicile as the proper forum for adjudication of this case, whatever the merits of
appellee's underlying claim. It is appellant who has remained in the State of the marital
domicile, whereas it is appellee who has moved across the continent. Cf. May v.
Anderson, 345 U. S. 528, 345 U. S. 534-535, n. 8 (1953). Appellant has at all times
resided in New York State, and, until the separation and appellee's move to California,
his entire family resided there as well. As noted above, appellant did no more than
acquiesce in the stated preference of one of his children to live with her mother in
California. This single act is surely not one that a reasonable parent would expect to
result in the substantial financial burden and personal strain of litigating a child support
suit in a forum 3,000 miles away, and we therefore see no basis on which it can be said
that appellant could reasonably have
Page 436 U. S. 98
anticipated being "haled before a [California] court," Shaffer v. Heitner, 433 U.S. at 433
U. S. 216. [Footnote 12] To make jurisdiction in a case such as this turn on whether
appellant bought his daughter her ticket or instead unsuccessfully sought to prevent her
departure would impose an unreasonable burden on family relations, and one wholly
unjustified by the "quality and nature" of appellant's activities in or relating to the State
of California. International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 319.
III
In seeking to justify the burden that would be imposed on appellant were the exercise
of in personamjurisdiction in California sustained, appellee argues that California has
substantial interests in protecting the welfare of its minor residents and in promoting to
the fullest extent possible a healthy and supportive family environment in which the
children of the State are to be raised. These interests are unquestionably important. But
while the presence of the children and one parent in California arguably might favor
application of California law in a lawsuit in New York, the fact that California may be the
"center of gravity'" for choice of law purposes does not mean that California has
personal jurisdiction over the defendant. Hanson v. Denckla, supra at 357 U. S. 254. And
California has not attempted to assert any particularized interest in trying such cases in
its courts by, e.g., enacting a special jurisdictional statute. Cf. McGee v. International Life
Ins. Co., supra, at 355 U. S. 221, 355 U. S. 224.
California's legitimate interest in ensuring the support of children resident in California
without unduly disrupting the children's lives, moreover, is already being served by the
State's participation in the Revised Uniform Reciprocal Enforcement of Support Act of
1968. This statute provides a mechanism
Page 436 U. S. 99
for communication between court systems in different States, in order to facilitate the
procurement and enforcement of child support decrees where the dependent children
reside in a State that cannot obtain personal jurisdiction over the defendant. California's
version of the Act essentially permits a California resident claiming support from a
nonresident to file a petition in California and have its merits adjudicated in the State of
the alleged obligor's residence, without either party's having to leave his or her own
State. Cal.Civ.Proc.Code Ann. § 1650 et seq. (West 1972 and Supp. 1978). [Footnote 13]
New York State is a signatory to a similar Act. [Footnote 14] Thus, not only may
Page 436 U. S. 100
plaintiff-appellee here vindicate her claimed right to additional child support from her
former husband in a New York court, see supra at 436 U. S. 95, but also the Uniform Act
will facilitate both her prosecution of a claim for additional support and collection of any
support payments found to be owed by appellant. [Footnote 15]
It cannot be disputed that California has substantial interests in protecting resident
children and in facilitating child support actions on behalf of those children. But these
interests simply do not make California a "fair forum," Shaffer v. Heitner, supra at 433 U.
S. 215, in which to require appellant, who derives no personal or commercial benefit
from his child's presence in California and who lacks any other
Page 436 U. S. 101
relevant contact with the State, either to defend a child support suit or to suffer liability
by default.
IV
We therefore believe that the state courts in the instant case failed to heed our
admonition that "the flexible standard of International Shoe" does not "heral[d] the
eventual demise of all restrictions on the personal jurisdiction of state courts." Hanson
v. Denckla, 357 U.S. at 357 U. S. 251. In McGee v. International life Ins. Co.,we
commented on the extension of in personam jurisdiction under evolving standards of
due process, explaining that this trend was in large part
"attributable to the . . . increasing nationalization of commerce . . . [accompanied by]
modern transportation and communication [that] have made it much less burdensome
for a party sued to defend himself in a State where he engages in economic activity."
355 U.S. at 355 U. S. 222-223. But the mere act of sending a child to California to live
with her mother is not a commercial act, and connotes no intent to obtain or
expectancy of receiving a corresponding benefit in the State that would make fair the
assertion of that State's judicial jurisdiction.
Accordingly, we conclude that the appellant's motion to quash service, on the ground of
lack of personal jurisdiction, was erroneously denied by the California courts. The
judgment of the California Supreme Court is, therefore,
Reversed.
Justice WHITE, concurring in part and concurring in the judgment.
I join Part I and Parts II-A, II-B, and II-C of Justice SCALIA's opinion and concur in the
judgment of affirmance. The rule allowing jurisdiction to be obtained over a nonresident
by personal service in the forum state, without more, has been and is so widely
accepted throughout this country that I could not possibly strike it down, either on its
face or as applied in this case, on the ground that it denies due process of law
guaranteed by the Fourteenth Amendment. Although the Court has the authority under
the Amendment to examine even traditionally accepted procedures and declare them
invalid, e.g., Shaffer v. Heitner, 433 U. S. 186 (1977), there has been no showing here or
elsewhere that, as a general proposition, the rule is so arbitrary and lacking in common
sense in so many instances that it should be held violative of Due Process in every case.
Furthermore, until such a showing is made, which would be difficult indeed, claims in
individual cases that the rule would operate unfairly as applied to the particular
nonresident involved need not be entertained. At least this would be the case where
presence in the forum state is intentional, which would almost always be the fact.
Otherwise, there would be endless, fact-specific litigation in the trial and appellate
courts, including this one. Here, personal service in California, without more, is enough,
and I agree that the judgment should be affirmed.
Justice BRENNAN, with whom Justice MARSHALL, Justice BLACKMUN, and Justice
O'CONNOR join, concurring in the judgment.
I agree with Justice SCALIA that the Due Process Clause of the Fourteenth Amendment
generally permits a state
Page 495 U. S. 629
court to exercise jurisdiction over a defendant if he is served with process while
voluntarily present in the forum State. [Footnote 2/1] I do not perceive the need,
however, to decide that a jurisdictional rule that "has been immemorially the actual law
of the land,'" ante at 495 U. S. 619, quoting Hurtado v. California, 110 U. S. 516,110 U. S.
528 (1884), automatically comports with due process simply by virtue of its "pedigree."
Although I agree that history is an important factor in establishing whether a
jurisdictional rule satisfies due process requirements, I cannot agree that it is
the only factor such that all traditional rules of jurisdiction are, ipso facto, forever
constitutional. Unlike Justice SCALIA, I would undertake an "independent inquiry into the
. . . fairness of the prevailing in-state service rule." Ante at 495 U. S. 621. I therefore
concur only in the judgment.
I Id. at 433 U. S. 219 (citation omitted) (BRENNAN, J., concurring in part and dissenting in
I believe that the approach adopted by Justice SCALIA's opinion today -- reliance solely
on historical pedigree -- is foreclosed by our decisions in International Shoe Co. v.
Washington, 326 U. S. 310 (1945), and Shaffer v. Heitner, 433 U. S. 186 (1977).
In International Shoe, we held that a state court's assertion of personal jurisdiction does
not violate the Due Process Clause if it is consistent with "traditional notions of fair play
and substantial justice.'" 326 U.S. at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463 (1940). [Footnote 2/2] In Shaffer, we stated that
"all assertions of state court jurisdiction must be evaluated according to the standards
set forth in International Shoe and its progeny."
433 U.S. at 433 U. S. 212
Page 495 U. S. 630
(emphasis added). The critical insight of Shaffer is that all rules of jurisdiction, even
ancient ones, must satisfy contemporary notions of due process. No longer were we
content to limit our jurisdictional analysis to pronouncements that "[t]he foundation of
jurisdiction is physical power," McDonald v. Mabee, 243 U. S. 90,243 U. S. 91 (1917), and
that "every State possesses exclusive jurisdiction and sovereignty over persons and
property within its territory." Pennoyer v. Neff, 95 U. S. 714 (1878). While
acknowledging that
"history must be considered as supporting the proposition that jurisdiction based solely
on the presence of property satisfie[d] the demands of due process,"
we found that this factor could not be "decisive." 433 U.S. at 433 U. S. 211-212. We
recognized that
"'[t]raditional notions of fair play and substantial justice' can be as readily offended by
the perpetuation of ancient forms that are no longer justified as by the adoption of new
procedures that are inconsistent with the basic values of our constitutional heritage."
Id. at 433 U. S. 212 (citations omitted). I agree with this approach, and continue to
believe that
"the minimum contacts analysis developed in International Shoe . . . represents a far
more sensible construct for the exercise of state court jurisdiction than the patchwork
of legal and factual fictions that has been generated from the decision in Pennoyer v.
Neff."
part).
While our holding in Shaffer may have been limited to quasi in rem jurisdiction, our
mode of analysis was not. Indeed, that we were willing in Shaffer to examine anew the
appropriateness of the quasi in rem rule -- until that time dutifully accepted by
American courts for at least a century -- demonstrates that we did not believe that the
"pedigree" of a jurisdictional practice was dispositive in deciding whether it was
consistent with due process. We later characterized Shaffer as
"abandon[ing] the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the interest
of a creditor in a debt
Page 495 U. S. 631
could be extinguished or otherwise affected by any State having transitory jurisdiction
over the debtor."
World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S. 296 (1980); see also
Rush v. Savchuk, 444 U. S. 320, 444 U. S. 325-326 (1980). If we could discard an "ancient
form without substantial modern justification" in Shaffer, supra, 433 U.S. at 433 U. S.
212, we can do so again. [Footnote 2/3] Lower courts, [Footnote 2/4] commentators,
[Footnote 2/5] and the American Law
Page 495 U. S. 632
Institute [Footnote 2/6] all have interpreted International Shoe and Shaffer to mean that
every assertion of state court jurisdiction, even one pursuant to a "traditional" rule such
as transient jurisdiction, must comport with contemporary notions of due process.
Notwithstanding the nimble gymnastics of Justice
Page 495 U. S. 633
SCALIA's opinion today, it is not faithful to our decision in Shaffer.
II
Tradition, though alone not dispositive, is of course relevant to the question whether
the rule of transient jurisdiction is consistent with due process. [Footnote 2/7] Tradition
is salient not in the sense that practices of the past are automatically reasonable today;
indeed, under such a standard, the legitimacy of transient jurisdiction would be called
into question because the rule's historical "pedigree" is a matter of intense debate. The
rule was a stranger to the common law [Footnote 2/8] and was rather
Page 495 U. S. 634
weakly implanted in American jurisprudence "at the crucial time for present purposes:
1868, when the Fourteenth Amendment was adopted." Ante at 495 U. S. 611. For much
of the 19th century, American courts did not uniformly recognize the concept of
transient jurisdiction, [Footnote 2/9] and it appears that the
Page 495 U. S. 635
transient rule did not receive wide currency until well after our decision in Pennoyer v.
Neff, 95 U. S. 714(1878). [Footnote 2/10]
Rather, I find the historical background relevant because, however murky the
jurisprudential origins of transient jurisdiction,
Page 495 U. S. 636
the fact that American courts have announced the rule for perhaps a century (first in
dicta, more recently in holdings) provides a defendant voluntarily present in a particular
State today "clear notice that [he] is subject to suit" in
Page 495 U. S. 637
the forum. World-Wide Volkswagen Corp. v. Woodson, 444 U. S. 286, 444 U. S.
297 (1980). Regardless of whether Justice Story's account of the rule's genesis is
mythical, our common understanding now, fortified by a century of judicial practice, is
that jurisdiction is often a function of geography. The transient rule is consistent with
reasonable expectations, and is entitled to a strong presumption that it comports with
due process.
"If I visit another State, . . . I knowingly assume some risk that the State will exercise its
power over my property or my person while there. My contact with the State, though
minimal, gives rise to predictable risks."
Shaffer, 433 U.S. at 433 U. S. 218 (STEVENS, J., concurring in judgment); see also Burger
King Corp. v. Rudzewicz,471 U. S. 462, 471 U. S. 476 (1985) ("[t]erritorial presence
frequently will enhance a potential defendant's affiliation with a State and reinforce the
reasonable foreseeability of suit there"); Glen, An Analysis of "Mere Presence" and
Other Traditional Bases of Jurisdiction, 45 Brooklyn L. Rev. 607, 611-612 (1979). Thus,
proposed revisions to the Restatement (Second) of Conflict of Laws § 28, p. 39 (1986),
provide that
"[a] state has power to exercise judicial jurisdiction over an individual who is present
within its territory unless the individual's relationship to the state is so attenuated as to
make the exercise of such jurisdiction unreasonable. [Footnote 2/11]"
By visiting the forum State, a transient defendant actually "avail[s]" himself, Burger King,
supra, at 471 U. S. 476, of significant benefits provided by the State. His health and
safety are guaranteed by the State's police, fire, and emergency medical services; he is
free to travel on the State's roads and waterways;
Page 495 U. S. 638
he likely enjoys the fruits of the State's economy as well. Moreover, the Privileges and
Immunities Clause of Article IV prevents a state government from discriminating against
a transient defendant by denying him the protections of its law or the right of access to
its courts. [Footnote 2/12] See Supreme Court of New Hampshire v. Piper, 470 U. S.
274, 470 U. S. 281, n. 10 (1985); Baldwin v. Fish and Game Comm'n of Montana, 436 U.
S. 371,436 U. S. 387 (1978); see also Supreme Court of Virginia v. Friedman, 487 U. S.
59, 487 U. S. 64-65 (1988). Subject only to the doctrine of forum non conveniens, an out-
of-state plaintiff may use state courts in all circumstances in which those courts would
be available to state citizens. Without transient jurisdiction, an asymmetry would arise:
a transient would have the full benefit of the power of the forum State's courts as a
plaintiff while retaining immunity from their authority as a defendant. See Maltz,
Sovereign Authority, Fairness, and Personal Jurisdiction: The Case for the Doctrine of
Transient Jurisdiction, 66 Wash.U.L.Q. 671, 698-699 (1988).
The potential burdens on a transient defendant are slight. "[M]odern transportation and
communications have made it much less burdensome for a party sued to defend
himself'" in a State outside his place of residence.Burger King, 471 U.S. at 471 U. S. 474,
quoting McGee v. International Life Insurance Co., 355 U. S. 220, 355 U. S. 223 (1957).
That the defendant has already journeyed
Page 495 U. S. 639
at least once before to the forum -- as evidenced by the fact that he was served with
process there -- is an indication that suit in the forum likely would not be prohibitively
inconvenient. Finally, any burdens that do arise can be ameliorated by a variety of
procedural devices. [Footnote 2/13] For these reasons, as a rule the exercise of personal
jurisdiction over a defendant based on his voluntary presence in the forum will satisfy
the requirements of due process. [Footnote 2/14] See n. 11, supra.
Page 495 U. S. 640
In this case, it is undisputed that petitioner was served with process while voluntarily
and knowingly in the State of California. I therefore concur in the judgment.

Justice STEVENS, concurring in the judgment.

As I explained in my separate writing, I did not join the Court's opinion in Shaffer v.
Heitner, 433 U. S. 186(1977), because I was concerned by its unnecessarily broad
reach. Id. at 433 U. S. 217-219 (opinion concurring in judgment). The same concern
prevents me from joining either Justice SCALIA's or Justice BRENNAN's opinion in this
case. For me, it is sufficient to note that the historical evidence and consensus identified
by Justice SCALIA, the considerations of fairness identified by Justice BRENNAN, and the
common sense displayed by Justice WHITE, all combine to demonstrate that this is,
indeed, a very easy case. *Accordingly, I agree that the judgment should be affirmed.
U.S. Supreme Court
World-Wide Volkwagen Corp. v. Woodson, 444 U.S. 286 (1980)
World-Wide Volkwagen Corp. v. Woodson
No. 78-1078
Argued October 3, 1979
Decided January 21, 1980
444 U.S. 286
CERTIORARI TO THE SUPREME COURT OF OKLAHOMA
WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART,
POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting
opinion, post, p. 444 U. S. 299. MARSHALL, J., filed a dissenting opinion, in which
BLACKMUN, J., joined, post, p. 444 U. S. 313. BLACKMUN, J., filed a dissenting
opinion, post, p. 444 U. S. 317.
MR. JUSTICE WHITE delivered the opinion of the Court.
The issue before us is whether, consistently with the Due Process Clause of the
Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over
a nonresident automobile retailer and its wholesale distributor in a products liability
action, when the defendants' only connection with Oklahoma is the fact that an
automobile sold in New York to New York residents became involved in an accident in
Oklahoma.
Page 444 U. S. 288
I Due Process Clause.
Respondents Harry and Kay Robinson purchased a new Audi automobile from petitioner
Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y. in 1976. The following year, the
Robinson family, who resided in New York, left that State for a new home in Arizona. As
they passed through the State of Oklahoma, another car struck their Audi in the rear,
causing a fire which severely burned Kay Robinson and her two children. [Footnote 1]
The Robinsons [Footnote 2] subsequently brought a products liability action in the
District Court for Creek County, Okla., claiming that their injuries resulted from defective
design and placement of the Audi's gas tank and fuel system. They joined as defendants
the automobile's manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its
importer, Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner
World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway.
Seaway and World-Wide entered special appearances, [Footnote 3] claiming that
Oklahoma's exercise of jurisdiction over them would offend the limitations on the
State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment.
[Footnote 4]
The facts presented to the District Court showed that World-Wide is incorporated and
has its business office in New
Page 444 U. S. 289
York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to
retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail
dealers, is incorporated and has its place of business in New York. Insofar as the record
reveals, Seaway and World-Wide are fully independent corporations whose relations
with each other and with Volkswagen and Audi are contractual only. Respondents
adduced no evidence that either World-Wide or Seaway does any business in Oklahoma,
ships or sells any products to or in that State, has an agent to receive process there, or
purchases advertisements in any media calculated to reach Oklahoma. In fact, as
respondents' counsel conceded at oral argument, Tr. of Oral Arg 32, there was no
showing that any automobile sold by World-Wide or Seaway has ever entered
Oklahoma, with the single exception of the vehicle involved in the present case.
Despite the apparent paucity of contacts between petitioners and Oklahoma, the
District Court rejected their constitutional claim and reaffirmed that ruling in denying
petitioners' motion for reconsideration. [Footnote 5] Petitioners then sought a writ of
prohibition in the Supreme Court of Oklahoma to restrain the District Judge, respondent
Charles S. Woodson, from exercising in personam jurisdiction over them. They renewed
their contention that, because they had no "minimal contacts," App. 32, with the State
of Oklahoma, the actions of the District Judge were in violation of their rights under the
The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), [Footnote 6]
holding that personal jurisdiction over petitioners was authorized by Oklahoma's "long-
arm" statute,
Page 444 U. S. 290
Okla.Stat., Tit. 12, § 1701.03(a)(4) (1971). [Footnote 7] Although the court noted that
the proper approach was to test jurisdiction against both statutory and constitutional
standards, its analysis did not distinguish these questions, probably because §
1701.03(a)(4) has been interpreted as conferring jurisdiction to the limits permitted by
the United States Constitution. [Footnote 8] The court's rationale was contained in the
following paragraph, 585 P.2d at 354:
"In the case before us, the product being sold and distributed by the petitioners is, by its
very design and purpose, so mobile that petitioners can foresee its possible use in
Oklahoma. This is especially true of the distributor, who has the exclusive right to
distribute such automobile in New York, New Jersey and Connecticut. The evidence
presented below demonstrated that goods sold and distributed by the petitioners were
used in the State of Oklahoma, and, under the facts, we believe it reasonable to infer,
given the retail value of the automobile, that the petitioners derive substantial income
from automobiles which from time to time are used in the State of Oklahoma. This
being the case, we hold that, under the facts presented, the trial court was justified in
concluding
Page 444 U. S. 291
that the petitioners derive substantial revenue from goods used or consumed in this
State."
We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional
question with respect to state court jurisdiction and to resolve a conflict between the
Supreme Court of Oklahoma and the highest courts of at least four other States.
[Footnote 9] We reverse.
II
The Due Process Clause of the Fourteenth Amendment limits the power of a state court
to render a valid personal judgment against a nonresident defendant. Kulko v. California
Superior Court, 436 U. S. 84, 436 U. S. 91 (1978). A judgment rendered in violation of
due process is void in the rendering State and is not entitled to full faith and credit
elsewhere. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 732-733 (1878). Due process requires
that the defendant be given adequate notice of the suit, Mullane v. Central Hanover
Trust Co., 339 U. S. 306,339 U. S. 313-314 (1950), and be subject to the personal
jurisdiction of the court, International Shoe Co. v. Washington, 326 U. S. 310 (1945). In
the present case, it is not contended that notice was inadequate; the only question is
whether these particular petitioners were subject to the jurisdiction of the Oklahoma
courts.
As has long been settled, and as we reaffirm today, a state court may exercise personal
jurisdiction over a nonresident defendant only so long as there exist "minimum
contacts" between the defendant and the forum State. International Shoe Co. v.
Washington, supra at 326 U. S. 316. The concept of minimum contacts, in turn, can be
seen to perform two related, but
Page 444 U. S. 292
distinguishable, functions. It protects the defendant against the burdens of litigating in a
distant or inconvenient forum. And it acts to ensure that the States, through their
courts, do not reach out beyond the limits imposed on them by their status as coequal
sovereigns in a federal system.
The protection against inconvenient litigation is typically described in terms of
"reasonableness" or "fairness." We have said that the defendant's contacts with the
forum State must be such that maintenance of the suit "does not offend traditional
notions of fair play and substantial justice.'" International Shoe Co. v. Washington,
supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940).
The relationship between the defendant and the forum must be such that it is
"reasonable . . . to require the corporation to defend the particular suit which is brought
there." 326 U.S. at 326 U. S. 317. Implicit in this emphasis on reasonableness is the
understanding that the burden on the defendant, while always a primary concern, will in
an appropriate case be considered in light of other relevant factors, including the forum
State's interest in adjudicating the dispute, see McGee v. International Life Ins. Co., 355
U. S. 220, 355 U. S. 223 (1957); the plaintiff's interest in obtaining convenient and
effective relief, see Kulko v. California Superior Court, supra at 436 U. S. 92, at least when
that interest is not adequately protected by the plaintiff's power to choose the forum, cf.
Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 211, n. 37 (1977); the interstate judicial
system's interest in obtaining the most efficient resolution of controversies; and the
shared interest of the several States in furthering fundamental substantive social
policies, see Kulko v. California Superior Court, supra at 436 U. S. 93, 436 U. S. 98.
The limits imposed on state jurisdiction by the Due Process Clause, in its role as a
guarantor against inconvenient litigation, have been substantially relaxed over the
years. As we noted in McGee v. International Life Ins. Co., supra at 355 U. S. 222-223,
Page 444 U. S. 293
this trend is largely attributable to a fundamental transformation in the American
economy:
"Today many commercial transactions 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."
The historical developments noted in McGee, of course, have only accelerated in the
generation since that case was decided.
Nevertheless, we have never accepted the proposition that state lines are irrelevant for
jurisdictional purposes, nor could we and remain faithful to the principles of interstate
federalism embodied in the Constitution. The economic interdependence of the States
was foreseen and desired by the Framers. In the Commerce Clause, they provided that
the Nation was to be a common market, a "free trade unit" in which the States are
debarred from acting as separable economic entities. H. P. Hood Sons, Inc. v. Du
Mond, 336 U. S. 525, 336 U. S. 538 (1949). But the Framers also intended that the States
retain many essential attributes of sovereignty, including, in particular, the sovereign
power to try causes in their courts. The sovereignty of each State, in turn, implied a
limitation on the sovereignty of all of its sister States -- a limitation express or implicit in
both the original scheme of the Constitution and the Fourteenth Amendment.
Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is
necessarily restricted by the territorial limits of the State in which it is
established," Pennoyer v. Neff, supra, at 95 U. S. 720, we emphasized that the
reasonableness of asserting jurisdiction over the defendant must be assessed "in the
context of our federal system of government,"
Page 444 U. S. 294
International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 317, and stressed that the
Due Process Clause ensures not only fairness, but also the "orderly administration of the
laws," id. at 326 U. S. 319. As we noted in Hanson v. Denckla, 357 U. S. 235, 357 U. S.
250-251 (1958):
"As technological progress has increased the flow of commerce between the States, the
need for jurisdiction over nonresidents has undergone a similar increase. At the same
time, progress in communications and transportation has made the defense of a suit in
a foreign tribunal less burdensome. In response to these changes, the requirements for
personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v.
Neff, 95 U. S. 714, to the flexible standard of International Shoe Co. v. Washington, 326
U. S. 310. But it is a mistake to assume that this trend heralds the eventual demise of all
restrictions on the personal jurisdiction of state courts. [Citation omitted.] Those
restrictions are more than a guarantee of immunity from inconvenient or distant
litigation. They are a consequence of territorial limitations on the power of the
respective States."
Thus, the Due Process Clause
"does not contemplate that a state may make binding a judgment in personam against
an individual or corporate defendant with which the state has no contacts, ties, or
relations."
International Shoe Co. v. Washington, supra at 326 U. S. 319. Even if the defendant
would suffer minimal or no inconvenience from being forced to litigate before the
tribunals of another State; even if the forum State has a strong interest in applying its
law to the controversy; even if the forum State is the most convenient location for
litigation, the Due Process Clause, acting as an instrument of interstate federalism, may
sometimes act to divest the State of its power to render a valid judgment. Hanson v.
Denckla, supra at 357 U. S. 251, 357 U. S. 254.
Page 444 U. S. 295
III
Applying these principles to the case at hand, [Footnote 10] we find in the record before
us a total absence of those affiliating circumstances that are a necessary predicate to
any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in
Oklahoma. They close no sales and perform no services there. They avail themselves of
none of the privileges and benefits of Oklahoma law. They solicit no business there
either through salespersons or through advertising reasonably calculated to reach the
State. Nor does the record show that they regularly sell cars at wholesale or retail to
Oklahoma customers or residents, or that they indirectly, through others, serve or seek
to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one,
isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous
circumstance that a single Audi automobile, sold in New York to New York residents,
happened to suffer an accident while passing through Oklahoma.
It is argued, however, that, because an automobile is mobile by its very design and
purpose, it was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma.
Yet "foreseeability" alone has never been a sufficient benchmark for personal
jurisdiction under the Due Process Clause. In Hanson v. Denckla, supra, it was no doubt
foreseeable that the settlor of a Delaware trust would subsequently move to Florida and
seek to exercise a power of appointment there; yet we held that Florida courts could
not constitutionally
Page 444 U. S. 296
exercise jurisdiction over a Delaware trustee that had no other contacts with the forum
State. In Kulko v. California Superior Court, 436 U. S. 84 (1978), it was surely
"foreseeable" that a divorced wife would move to California from New York, the
domicile of the marriage, and that a minor daughter would live with the mother. Yet we
held that California could not exercise jurisdiction in a child support action over the
former husband, who had remained in New York.
If foreseeability were the criterion, a local California tire retailer could be forced to
defend in Pennsylvania when a blowout occurs there, see Erlanger Mills, Inc. v. Cohoes
Fibre Mills, Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective
automobile jack could be haled before a distant court for damage caused in New
Jersey, Reilly v. Phil Tolkan Pontiac, Inc., 372 F.Supp. 1205 (NJ 1974); or a Florida soft-
drink concessionaire could be summoned to Alaska to account for injuries happening
there, see Uppgren v. Executive Aviation Services, Inc., 304 F.Supp. 165, 170-171
(Minn.1969). Every seller of chattels would, in effect, appoint the chattel his agent for
service of process. His amenability to suit would travel with the chattel. We recently
abandoned the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the interest of a
creditor in a debt could be extinguished or otherwise affected by any State having
transitory jurisdiction over the debtor.Shaffer v. Heitner, 433 U. S. 186 (1977). Having
interred the mechanical rule that a creditor's amenability to a quasi in rem action travels
with his debtor, we are unwilling to endorse an analogous principle in the present case.
[Footnote 11]
Page 444 U. S. 297
This is not to say, of course, that foreseeability is wholly irrelevant. But the
foreseeability that is critical to due process analysis is not the mere likelihood that a
product will find its way into the forum State. Rather, it is that the defendant's conduct
and connection with the forum State are such that he should reasonably anticipate
being haled into court there. See Kulko v. California Superior Court, supra at 436 U. S.
97-98; Shaffer v. Heitner, 433 U.S. at 433 U. S. 216; and see id. at 433 U. S. 217-219
(STEVENS, J., concurring in judgment). The Due Process Clause, by ensuring the "orderly
administration of the laws," International Shoe Co. v. Washington, 326 U.S. at 326 U. S.
319, gives a degree of predictability to the legal system that allows potential defendants
to structure their primary conduct with some minimum assurance as to where that
conduct will and will not render them liable to suit.
When a corporation "purposefully avails itself of the privilege of conducting activities
within the forum State," Hanson v. Denckla, 357 U.S. at 357 U. S. 253, it has clear notice
that it is subject to suit there, and can act to alleviate the risk of burdensome litigation
by procuring insurance, passing the expected costs on to customers, or, if the risks are
too great, severing its connection with the State. Hence if the sale of a product of a
manufacturer or distributor such as Audi or Volkswagen is not simply an isolated
occurrence, but arises from the efforts of the manufacturer or distributor to serve,
directly or indirectly, the market for its product in other States, it is not unreasonable to
subject it to suit in one of those States if its allegedly defective merchandise has there
been the source of injury to its owner or to others. The forum State does not
Page 444 U. S. 298
exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a
corporation that delivers its products into the stream of commerce with the expectation
that they will be purchased by consumers in the forum State. Cf. Gray v. American
Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961).
But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or
Seaway in this case. Seaway's sales are made in Massena, N. Y. World-Wide's market,
although substantially larger, is limited to dealers in New York, New Jersey, and
Connecticut. There is no evidence of record that any automobiles distributed by World-
Wide are sold to retail customers outside this tristate area. It is foreseeable that the
purchasers of automobiles sold by World-Wide and Seaway may take them to
Oklahoma. But the mere "unilateral activity of those who claim some relationship with a
nonresident defendant cannot satisfy the requirement of contact with the forum
State." Hanson v. Denckla, supra, at 357 U. S. 253.
In a variant on the previous argument, it is contended that jurisdiction can be supported
by the fact that petitioners earn substantial revenue from goods used in Oklahoma. The
Oklahoma Supreme Court so found, 585 P.2d at 354-355, drawing the inference that,
because one automobile sold by petitioners had been used in Oklahoma, others might
have been used there also. While this inference seems less than compelling on the facts
of the instant case, we need not question the court's factual findings in order to reject
its reasoning.
This argument seems to make the point that the purchase of automobiles in New York,
from which the petitioners earn substantial revenue, would not occur but for the fact
that the automobiles are capable of use in distant States like Oklahoma. Respondents
observe that the very purpose of an automobile is to travel, and that travel of
automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen
service centers throughout the country, including some in Oklahoma. [Footnote 12]
Page 444 U. S. 299
However, financial benefits accruing to the defendant from a collateral relation to the
forum State will not support jurisdiction if they do not stem from a constitutionally
cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S. at 436
U. S. 94-95. In our view, whatever marginal revenues petitioners may receive by virtue
of the fact that their products are capable of use in Oklahoma is far too attenuated a
contact to justify that State's exercise of in personam jurisdiction over them.
Because we find that petitioners have no "contacts, ties, or relations" with the State of
Oklahoma, International Shoe Co. v. Washington, supra, at 326 U. S. 319, the judgment
of the Supreme Court of Oklahoma is
Reversed.
MR. JUSTICE BRENNAN, dissenting. *
The Court holds that the Due Process Clause of the Fourteenth Amendment bars the
States from asserting jurisdiction over the defendants in these two cases. In each case,
the Court so decides because it fails to find the "minimum contacts" that have been
required since International Shoe Co. v. Washington, 326 U. S. 310,326 U. S. 316 (1945).
Because I believe that the Court reads International Shoe and its progeny too narrowly,
and because I believe that the standards enunciated by those cases may already be
obsolete as constitutional boundaries, I dissent.
I
The Court's opinions focus tightly on the existence of contacts between the forum and
the defendant. In so doing, they accord too little weight to the strength of the forum
State's interest in the case, and fail to explore whether there
Page 444 U. S. 300
would be any actual inconvenience to the defendant. The essential inquiry in locating
the constitutional limits on state court jurisdiction over absent defendants is whether
the particular exercise of jurisdiction offends "traditional notions of fair play and
substantial justice.'" International Shoe, supra at 326 U. S. 316, quoting Milliken v.
Meyer, 311 U. S. 457, 311 U. S. 463 (1940). The clear focus in International Shoe was on
fairness and reasonableness. Kulko v. California Superior Court, 436 U. S. 84, 436 U. S.
92 (1978). The Court specifically declined to establish a mechanical test based on the
quantum of contacts between a State and the defendant:
"Whether due process is satisfied must depend, rather, upon the quality and nature of
the activity in relation to the fair and orderly administration of the laws which it was the
purpose of the due process clause to insure.That clause does not contemplate that a
state may make binding a judgment in personam against an individual or corporate
defendant with which the state has no contacts, ties, or relations."
326 U.S. at 326 U. S. 319 (emphasis added). The existence of contacts, so long as there
were some, was merely one way of giving content to the determination of fairness and
reasonableness.
Surely International Shoe contemplated that the significance of the contacts necessary
to support jurisdiction would diminish if some other consideration helped establish that
jurisdiction would be fair and reasonable. The interests of the State and other parties in
proceeding with the case in a particular forum are such considerations. McGee v.
International Life Ins. Co., 355 U. S. 220, 355 U. S. 223 (1957), for instance, accorded
great importance to a State's "manifest interest in providing effective means of redress"
for its citizens. See also Kulko v. California Superior Court, supra at 436 U. S. 92; Shaffer
v. Heitner, 433 U. S. 186, 433 U. S. 208(1977); Mullane v. Central Hanover Trust Co., 339
U. S. 306, 339 U. S. 313 (1950).
Another consideration is the actual burden a defendant
Page 444 U. S. 301
must bear in defending the suit in the forum. McGee, supra. Because lesser burdens
reduce the unfairness to the defendant, jurisdiction may be justified despite less
significant contacts. The burden, of course, must be of constitutional dimension. Due
process limits on jurisdiction do not protect a defendant from all inconvenience of
travel, McGee, supra at 355 U. S. 224, and it would not be sensible to make the
constitutional rule turn solely on the number of miles the defendant must travel to the
courtroom. [Footnote 2/1] Instead, the constitutionally significant "burden" to be
analyzed relates to the mobility of the defendant's defense. For instance, if having to
travel to a foreign forum would hamper the defense because witnesses or evidence or
the defendant himself were immobile, or if there were a disproportionately large
number of witnesses or amount of evidence that would have to be transported at the
defendant's expense, or if being away from home for the duration of the trial would
work some special hardship on the defendant, then the Constitution would require
special consideration for the defendant's interests.
That considerations other than contacts between the forum and the defendant are
relevant necessarily means that the Constitution does not require that trial be held in
the State which has the "best contacts" with the defendant. See Shaffer v. Heitner,
supra at 433 U. S. 228 (BRENNAN, J., dissenting). The defendant has no constitutional
entitlement to the best forum or, for that matter, to any particular forum. Under even
the most restrictive view of International Shoe, several States could have jurisdiction
over a particular cause of action. We need only determine whether the forum States in
these cases satisfy the constitutional minimum. [Footnote 2/2]
Page 444 U. S. 302
II
In each of these cases, I would find that the forum State has an interest in permitting
the litigation to go forward, the litigation is connected to the forum, the defendant is
linked to the forum, and the burden of defending is not unreasonable. Accordingly, I
would hold that it is neither unfair nor unreasonable to require these defendants to
defend in the forum State.
A
In No. 78-952, a number of considerations suggest that Minnesota is an interested and
convenient forum. The action was filed by a bona fide resident of the forum. [Footnote
2/3] Consequently, Minnesota's interests are similar to, even if lesser than, the interests
of California in McGee, supra, "in providing a forum for its residents and in regulating
the activities of insurance companies" doing business in the State. [Footnote
2/4] Post at 444 U. S. 332. Moreover, Minnesota has "attempted to assert [its]
particularized interest in trying such cases in its courts by . . . enacting a special
jurisdictional statute." Kulko, supra at 436 U. S. 98; McGee, supra at 355 U. S. 221, 355
U. S. 224. As in McGee, a resident forced to travel to a distant State to prosecute an
action
Page 444 U. S. 303
against someone who has injured him could, for lack of funds, be entirely unable to
bring the cause of action. The plaintiff's residence in the State makes the State one of a
very few convenient fora for a personal injury case (the others usually being the
defendant's home State and the State where the accident occurred). [Footnote 2/5]
In addition, the burden on the defendant is slight. As Judge Friendly has
recognized, Shaffer emphasizes the importance of identifying the real impact of the
lawsuit. O'Connor v. Lee-Hy Paving Corp., 579 F.2d 194, 00 (CA2 1978) (upholding the
constitutionality of jurisdiction in a very similar case under New York's law after Shaffer).
Here the real impact is on the defendant's insurer, which is concededly amenable to suit
in the forum State. The defendant is carefully protected from financial liability because
the action limits the prayer for damages to the insurance policy's liability limit.
[Footnote 2/6] The insurer will handle the case for the defendant. The defendant is only
a nominal party who need be no more active in the case than the cooperation clause of
his policy requires. Because of the ease of airline transportation, he need not lose
significantly more time than if the case were at home. Consequently, if the suit went
forward
Page 444 U. S. 304
in Minnesota, the defendant would bear almost no burden or expense beyond what he
would face if the suit were in his home State. The real impact on the named defendant
is the same as it is in a direct action against the insurer, which would be constitutionally
permissible. Watson v. Employers Liability Assurance Corp., 348 U. S.
66 (1954); Minichiello v. Rosenberg, 410 F.2d 106, 109-110 (CA2 1968). The only
distinction is the formal, "analytica[l] prerequisite," post at 444 U. S. 331, of making the
insured a named party. Surely the mere addition of appellant's name to the complaint
does not suffice to create a due process violation. [Footnote 2/7]
Finally, even were the relevant inquiry whether there are sufficient contacts between
the forum and the named defendant, I would find that such contacts exist. The insurer's
presence in Minnesota is an advantage to the defendant that may well have been a
consideration in his selecting the policy he did. An insurer with offices in many States
makes it easier for the insured to make claims or conduct other business that may
become necessary while traveling. It is simply not true that "State Farm's decision to do
business in Minnesota was completely adventitious as far as Rush was
concerned." Post at 444 U. S. 328-329. By buying a State Farm policy, the defendant
availed himself of the benefits he might derive from having an insurance agent in
Minnesota who could, among other things, facilitate a suit for appellant against a
Minnesota resident. It seems unreasonable to read the Constitution as permitting one
to take advantage of his nationwide insurance network but not to be burdened by it.
In sum, I would hold that appellant is not deprived of due process by being required to
submit to trial in Minnesota, first because Minnesota has a sufficient interest in and
connection
Page 444 U. S. 305
to this litigation and to the real and nominal defendants, and second because the
burden on the nominal defendant is sufficiently slight.
B
In No. 78-1078, the interest of the forum State and its connection to the litigation is
strong. The automobile accident underlying the litigation occurred in Oklahoma. The
plaintiffs were hospitalized in Oklahoma when they brought suit. Essential witnesses
and evidence were in Oklahoma. See Shaffer v. Heitner, 433 U.S. at 433 U. S. 208. The
State has a legitimate interest in enforcing its laws designed to keep its highway system
safe, and the trial can proceed at least as efficiently in Oklahoma as anywhere else.
The petitioners are not unconnected with the forum. Although both sell automobiles
within limited sales territories, each sold the automobile which, in fact, was driven to
Oklahoma, where it was involved in an accident. [Footnote 2/8] It may be true, as the
Court suggests, that each sincerely intended to limit its commercial impact to the
limited territory, and that each intended to accept the benefits and protection of the
laws only of those States within the territory. But obviously these were unrealistic hopes
that cannot be treated as an automatic constitutional shield. [Footnote 2/9]
Page 444 U. S. 306
An automobile simply is not a stationary item or one designed to be used in one place.
An automobile is intended to be moved around. Someone in the business of selling large
numbers of automobiles can hardly plead ignorance of their mobility, or pretend that
the automobiles stay put after they are sold. It is not merely that a dealer in
automobiles foresees that they will move. Ante at 444 U. S. 295. The dealer actually
intends that the purchasers will use the automobiles to travel to distant States where
the dealer does not directly "do business." The sale of an automobile
does purposefully inject the vehicle into the stream of interstate commerce so that it
can travel to distant States. See Kulko, 436 U.S. at 436 U. S. 94; Hanson v. Denckla, 357
U. S. 235, 357 U. S. 253 (1958).
This case is similar to Ohio v. Wyandotte Chemicals Corp., 401 U. S. 493 (1971). There we
indicated, in the course of denying leave to file an original jurisdiction case, that
corporations having no direct contact with Ohio could constitutionally be brought to
trial in Ohio because they dumped pollutants into streams outside Ohio's limits which
ultimately, through the action of the water, reached Lake Erie and affected Ohio. No
corporate acts, only their consequences, occurred in Ohio. The stream of commerce is
just as natural a force as a stream of water, and it was equally predictable that the cars
petitioners released would reach distant states. [Footnote 2/10]
The Court accepts that a State may exercise jurisdiction over a distributor which
"serves" that State "indirectly" by "deliver[ing] its products into the stream of commerce
with the expectation that they will be purchased by consumers in the forum
State." Ante at 444 U. S. 297-298. It is difficult to see why the Constitution should
distinguish between a case involving
Page 444 U. S. 307
goods which reach a distant State through a chain of distribution and a case involving
goods which reach the same State because a consumer, using them as the dealer knew
the customer would, took them there. [Footnote 2/11] In each case, the seller
purposefully injects the goods into the stream of commerce, and those goods
predictably are used in the forum State. [Footnote 2/12]
Furthermore, an automobile seller derives substantial benefits from States other than
its own. A large part of the value of automobiles is the extensive, nationwide network of
highways. Significant portions of that network have been constructed by, and are
maintained by, the individual States, including Oklahoma. The States, through their
highway programs, contribute in a very direct and important way to the value of
petitioners' businesses. Additionally, a network of other related dealerships with their
service departments operates throughout the country under the protection of the laws
of the various States, including Oklahoma, and enhances the value of petitioners'
businesses by facilitating their customers' traveling.
Thus, the Court errs in its conclusion, ante at 444 U. S. 299 (emphasis added), that
"petitioners have nocontacts, ties, or relations'" with Oklahoma. There obviously are
contacts, and, given Oklahoma's connection to the litigation, the contacts are sufficiently
significant to make it fair and reasonable for the petitioners to submit to Oklahoma's
jurisdiction.
III
It may be that affirmance of the judgments in these cases would approach the outer
limits of International Shoe's jurisdictional
Page 444 U. S. 308
principle. But that principle, with its almost exclusive focus on the rights of defendants,
may be outdated. As MR. JUSTICE MARSHALL wrote in Shaffer v. Heitner, 433 U.S. at 433
U. S. 212:
"'[T]raditional notions of fair play and substantial justice' can be as readily offended by
the perpetuation of ancient forms that are no longer justified as by the adoption of new
procedures. . . ."
International Shoe inherited its defendant focus from Pennoyer v. Neff, 95 U. S.
714 (1878), and represented the last major step this Court has taken in the long process
of liberalizing the doctrine of personal jurisdiction. Though its flexible approach
represented a major advance, the structure of our society has changed in many
significant ways since International Shoe was decided in 1945. Mr. Justice Black, writing
for the Court in McGee v. International Life Ins. Co., 355 U. S. 220, 355 U. S. 222 (1957),
recognized that "a trend is clearly discernible toward expanding the permissible scope
of state jurisdiction over foreign corporations and other nonresidents." He explained the
trend as follows:
"In part, this is attributable to the fundamental transformation of our national economy
over the years. Today, many commercial transactions 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."
Id. at 355 U. S. 222-223. As the Court acknowledges, ante at 444 U. S. 292-293, both the
nationalization of commerce and the ease of transportation and communication have
accelerated in the generation since 1957. [Footnote 2/13]
Page 444 U. S. 309
The model of society on which the International Shoe Court based its opinion is no
longer accurate. Business people, no matter how local their businesses, cannot assume
that goods remain in the business' locality. Customers and goods can be anywhere else
in the country, usually in a matter of hours and always in a matter of a very few days.
In answering the question whether or not it is fair and reasonable to allow a particular
forum to hold a trial binding on a particular defendant, the interests of the forum State
and other parties loom large in today's world, and surely are entitled to as much weight
as are the interests of the defendant. The "orderly administration of the laws" provides
a firm basis for according some protection to the interests of plaintiffs and States as well
as of defendants. [Footnote 2/14] Certainly, I cannot see how a defendant's right to due
process is violated if the defendant suffers no inconvenience. See ante at 444 U. S. 294.
The conclusion I draw is that constitutional concepts of fairness no longer require the
extreme concern for defendants that was once necessary. Rather, as I wrote in dissent
from Shaffer v. Heitner, supra, at 433 U. S. 220 (emphasis added), minimum
Page 444 U. S. 310
contacts must exist "among the parties, the contested transaction, and the forum
State." [Footnote 2/15] The contacts between any two of these should not be
determinative.
"[W]hen a suitor seeks to lodge a suit in a State with a substantial interest in seeing its
own law applied to the transaction in question, we could wisely act to minimize
conflicts, confusion, and uncertainty by adopting a liberal view of jurisdiction, unless
considerations of fairness or efficiency strongly point in the opposite direction.
[Footnote 2/16]"
433 U.S. at 433 U. S. 225-226. Mr. Justice Black, dissenting in Hanson v. Denckla, 357
U.S. at 357 U. S. 258-250, expressed similar concerns by suggesting that a State should
have jurisdiction over a case growing out of a transaction significantly related to that
State
"unless litigation there would impose such a heavy and disproportionate burden on a
nonresident defendant that it would offend what this Court has referred to as
'traditional notions of fair play and substantial justice.' [Footnote 2/17]"
Assuming
Page 444 U. S. 311
that a State gives a nonresident defendant adequate notice and opportunity to defend, I
do not think the Due Process Clause is offended merely because the defendant has to
board a plane to get to the site of the trial.
The Court's opinion in No. 78-1078 suggests that the defendant ought to be subject to a
State's jurisdiction only if he has contacts with the State "such that he should reasonably
anticipate being haled into court there." [Footnote 2/18] Ante at 444 U. S. 297. There is
nothing unreasonable or unfair, however, about recognizing commercial reality. Given
the tremendous mobility of goods and people, and the inability of businessmen to
control where goods are taken by customers (or retailers), I do not think that the
defendant should be in complete control of the geographical stretch of his amenability
to suit. Jurisdiction is no longer premised on the notion that nonresident defendants
have somehow impliedly consented to suit. People should understand that they are held
responsible for the consequences of their actions, and that, in our society, most actions
have consequences affecting many States. When an action in fact causes injury in
another State, the actor should be prepared to answer for it there unless defending in
that State would be unfair for some reason other than that a state boundary must be
crossed. [Footnote 2/19]
In effect, the Court is allowing defendants to assert the sovereign
Page 444 U. S. 312
rights of their home States. The expressed fear is that, otherwise, all limits on personal
jurisdiction would disappear. But the argument's premise is wrong. I would not abolish
limits on jurisdiction or strip state boundaries of all significance, see Hanson,
supra at 357 U. S. 260 (Black, J., dissenting); I would still require the plaintiff to
demonstrate sufficient contacts among the parties, the forum, and the litigation to
make the forum a reasonable State in which to hold the trial. [Footnote 2/20]
I would also, however, strip the defendant of an unjustified veto power over certain
very appropriate fora -- a power the defendant justifiably enjoyed long ago when
communication and travel over long distances were slow and unpredictable and when
notions of state sovereignty were impractical and exaggerated. But I repeat that that is
not today's world. If a plaintiff can show that his chosen forum State has a sufficient
interest in the litigation (or sufficient contacts with the defendant), then the defendant
who cannot show some real injury to a constitutionally protected interest, see O'Connor
v. Lee-Hy Paving Corp., 579 F.2d at 201, should have no constitutional excuse not to
appear. [Footnote 2/21]
The plaintiffs in each of these cases brought suit in a forum with which they had
significant contacts and which had significant contacts with the litigation. I am not
convinced that the defendants would suffer any "heavy and disproportionate burden" in
defending the suits. Accordingly, I would hold
Page 444 U. S. 313
that the Constitution should not shield the defendants from appearing and defending in
the plaintiffs' chosen fora.
* [This opinion applies also to No. 7952, Rush et al. v. Savchuk, post, p. 444 U. S. 320]
MR. JUSTICE MARSHALL, with whom MR. JUSTICE BLACKMUN joins, dissenting.
For over 30 years, the standard by which to measure the constitutionally permissible
reach of state court jurisdiction has been well established:
"[D]ue 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.'"
International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945),
quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940).
The corollary, that the Due Process Clause forbids the assertion of jurisdiction over a
defendant "with which the state has no contacts, ties, or relations," 326 U.S. at 326 U. S.
319, is equally clear. The concepts of fairness and substantial justice as applied to an
evaluation of "the quality and nature of the [defendant's] activity," ibid., are not readily
susceptible of further definition, however, and it is not surprising that the constitutional
standard is easier to state than to apply.
This is a difficult case, and reasonable minds may differ as to whether respondents have
alleged a sufficient "relationship among the defendant[s], the forum, and the
litigation," Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 204 (1977), to satisfy the
requirements of International Shoe. I am concerned, however, that the majority has
reached its result by taking an unnecessarily narrow view of petitioners' forum-related
conduct. The majority asserts that
"respondents seek to base jurisdiction on one, isolated occurrence and whatever
inferences can be drawn therefrom: the fortuitous circumstance that a single Audi
automobile, sold in New York to New York
Page 444 U. S. 314
residents, happened to suffer an accident while passing through Oklahoma."
Ante at 444 U. S. 295. If that were the case, I would readily agree that the minimum
contacts necessary to sustain jurisdiction are not present. But the basis for the assertion
of jurisdiction is not the happenstance that an individual over whom petitioners had no
control made a unilateral decision to take a chattel with him to a distant State. Rather,
jurisdiction is premised on the deliberate and purposeful actions of the defendants
themselves in choosing to become part of a nationwide, indeed a global, network for
marketing and servicing automobiles.
Petitioners are sellers of a product whose utility derives from its mobility. The unique
importance of the automobile in today's society, which is discussed in MR. JUSTICE
BLACKMUN's dissenting opinion, post at 444 U. S. 318, needs no further elaboration.
Petitioners know that their customers buy cars not only to make short trips, but also to
travel long distances. In fact, the nationwide service network with which they are
affiliated was designed to facilitate and encourage such travel. Seaway would be
unlikely to sell many cars if authorized service were available only in Massena, N.Y.
Moreover, local dealers normally derive a substantial portion of their revenues from
their service operations, and thereby obtain a further economic benefit from the
opportunity to service cars which were sold in other States. It is apparent that
petitioners have not attempted to minimize the chance that their activities will have
effects in other States; on the contrary, they have chosen to do business in a way that
increases that chance, because it is to their economic advantage to do so.
To be sure, petitioners could not know in advance that this particular automobile would
be driven to Oklahoma. They must have anticipated, however, that a substantial portion
of the cars they sold would travel out of New York. Seaway, a local dealer in the second
most populous State, and World-Wide,
Page 444 U. S. 315
one of only seven regional Audi distributors in the entire country, see Brief for
Respondents 2, would scarcely have been surprised to learn that a car sold by then had
been driven in Oklahoma on Interstate 44, a heavily traveled transcontinental highway.
In the case of the distributor, in particular, the probability that some of the cars it sells
will be driven in every one of the contiguous States must amount to a virtual certainty.
This knowledge should alert a reasonable businessman to the likelihood that a defect in
the product might manifest itself in the forum State -- not because of some
unpredictable, aberrant, unilateral action by a single buyer, but in the normal course of
the operation of the vehicles for their intended purpose.
It is misleading for the majority to characterize the argument in favor of jurisdiction as
one of "foreseeability' alone." Ante at 444 U. S. 295. As economic entities, petitioners
reach out from New York, knowingly causing effects in other States and receiving
economic advantage both from the ability to cause such effects themselves and from the
activities of dealers and distributors in other States. While they did not receive revenue
from making direct sales in Oklahoma, they intentionally became part of an interstate
economic network, which included dealerships in Oklahoma, for pecuniary gain. In light
of this purposeful conduct, I do not believe it can be said that petitioners "had no reason
to expect to be haled before a[n Oklahoma] court." Shaffer v. Heitner, supra at 433 U. S.
216; see ante at 444 U. S. 297, and Kulko v. California Superior Court, 436 U. S. 84, 436
U. S. 97-98 (1978).
The majority apparently acknowledges that, if a product is purchased in the forum State
by a consumer, that State may assert jurisdiction over everyone in the chain of
distribution. See ante at 444 U. S. 297-298. With this I agree. But I cannot agree that
jurisdiction is necessarily lacking if the product enters the State not through the
channels of distribution but in the course of its intended use by the consumer. We have
recognized
Page 444 U. S. 316
the role played by the automobile in the expansion of our notions of personal
jurisdiction. See Shaffer v. Heitner, supra at 433 U. S. 204; Hess v. Pawloski, 274 U. S.
352 (1927). Unlike most other chattels, which may find their way into States far from
where they were purchased because their owner takes them there, the intended use of
the automobile is precisely as a means of traveling from one place to another. In such a
case, it is highly artificial to restrict the concept of the "stream of commerce" to the
chain of distribution from the manufacturer to the ultimate consumer.
I sympathize with the majority's concern that persons ought to be able to structure their
conduct so as not to be subject to suit in distant forums. But that may not always be
possible. Some activities, by their very nature, may foreclose the option of conducting
them in such a way as to avoid subjecting oneself to jurisdiction in multiple forums. This
is by no means to say that all sellers of automobiles should be subject to suit
everywhere; but a distributor of automobiles to a multistate market and a local
automobile dealer who makes himself part of a nationwide network of dealerships can
fairly expect that the cars they sell may cause injury in distant States and that they may
be called on to defend a resulting lawsuit there.
In light of the quality and nature of petitioners' activity, the majority's reliance on Kulko
v. California Superior Court, supra, is misplaced. Kulko involved the assertion of state
court jurisdiction over a nonresident individual in connection with an action to modify
his child custody rights and support obligations. His only contact with the forum State
was that he gave his minor child permission to live there with her mother. In holding
that the exercise of jurisdiction violated the Due Process Clause, we emphasized that
the cause of action, as well as the defendant's actions in relation to the forum State,
arose "not from the defendant's commercial transactions in interstate commerce, but
rather from his personal,
Page 444 U. S. 317
domestic relations," 436 U.S. at 436 U. S. 97 (emphasis supplied), contrasting Kulko's
actions with those of the insurance company in McGee v. International Life Ins. Co., 355
U. S. 220 (1957), which were undertaken for commercial benefit.*
Manifestly, the "quality and nature" of commercial activity is different, for purposes of
the International Shoetest, from actions from which a defendant obtains no economic
advantage. Commercial activity is more likely to cause effects in a larger sphere, and the
actor derives an economic benefit from the activity that makes it fair to require him to
answer for his conduct where its effects are felt. The profits may be used to pay the
costs of suit, and, knowing that the activity is likely to have effects in other States, the
defendant can readily insure against the costs of those effects, thereby sparing himself
much of the inconvenience of defending in a distant forum.
Of course, the Constitution forbids the exercise of jurisdiction if the defendant had no
judicially cognizable contacts with the forum. But as the majority acknowledges, if such
contacts are present, the jurisdictional inquiry requires a balancing of various interests
and policies. See ante at 444 U. S. 292; Rush v. Savchuk, postat 444 U. S. 332. I believe
such contacts are to be found here, and that, considering all of the interests and policies
at stake, requiring petitioners to defend this action in Oklahoma is not beyond the
bounds of the Constitution. Accordingly, I dissent.
* Similarly, I believe the Court in Hanson v. Denckla, 357 U. S. 235 (1958), was
influenced by the fact that trust administration has traditionally been considered a
peculiarly local activity.
MR JUSTICE BLACKMUN, dissenting. MR. JUSTICE BRENNAN points out in his dissent, ante at 444 U. S. 307, that an
automobile dealer derives substantial benefits from States other than its own. The same
I confess that I am somewhat puzzled why the plaintiffs in this litigation are so insistent is true of the regional distributor. Oklahoma does its best to provide safe roads. Its
that the regional distributor and the retail dealer, the petitioners here, who handled the police investigate accidents. It regulates driving within the State. It provides aid to the
ill-fated Audi automobile involved in this litigation, be named defendants. It would victim, and thereby, it is hoped, lessens damages. Accident reports are prepared and
appear that the manufacturer and the made available. All this contributes to and enhances the business of those engaged
professionally in the distribution and sale of automobiles. All this also may benefit
Page 444 U. S. 318
defendants in the very lawsuits over which the State asserts jurisdiction.
importer, whose subjectability to Oklahoma jurisdiction is not challenged before this
My position need not now take me beyond the automobile and the professional who
Court, ought not to be judgment-proof. It may, of course, ultimately amount to a
does business by way of distributing and retailing automobiles. Cases concerning other
contest between insurance companies that, once begun, is not easily brought to a
instrumentalities will be dealt with as they arise, and in their own contexts.
termination. Having made this much of an observation, I pursue it no further.
I would affirm the judgment of the Supreme Court of Oklahoma. Because the Court
For me, a critical factor in the disposition of the litigation is the nature of the
reverses that judgment, it will now be about parsing every variant in the myriad of
instrumentality under consideration. It has been said that we are a nation on wheels.
motor vehicle fact situations that present themselves. Some will justify jurisdiction and
What we are concerned with here is the automobile and its peripatetic character. One
others will not. All will depend on the "contact" that the Court sees fit to perceive in the
need only examine our national network of interstate highways, or make an appearance
individual case.
on one of them, or observe the variety of license plates present not only on those
highways but in any metropolitan area, to realize that any automobile is likely to wander
far from its place of licensure or from its place of distribution and retail sale. Miles per
gallon on the highway (as well as in the city) and mileage per tankful are familiar
allegations in manufacturers' advertisements today. To expect that any new automobile
will remain in the vicinity of its retail sale -- like the 1914 electric car driven by the
proverbial "little old lady" -- is to blink at reality. The automobile is intended for
distance, as well as for transportation within a limited area.

It therefore seems to me not unreasonable -- and certainly not unconstitutional and

beyond the reach of the principles laid down in International Shoe Co. v.
Washington, 326 U. S. 310 (1945), and its progeny -- to uphold Oklahoma jurisdiction
over this New York distributor and this New York dealer when the accident happened in
Oklahoma. I see nothing more unfair for them than for the manufacturer and the
importer. All are in the business of providing vehicles that spread out over the highways
of our several States. It is not too much to anticipate, at the time of distribution and at
the time of retail sale, that this Audi would be in Oklahoma. Moreover, in assessing
"minimum contacts," foreseeable use in another State seems to me to be little different
from foreseeable resale

Page 444 U. S. 319

in another State: yet the Court declares this distinction determinative. Ante at 444 U. S.
297-299.
U.S. Supreme Court
Asahi Metal Indus. v. Superior Court, 480 U.S. 102 (1987)
Asahi Metal Indus. Co., Ltd. v. Superior Ct. of California
No. 85-693
Argued November 5, 1986
Decided February 24, 1987
480 U.S. 102
CERTIORARI TO THE SUPREME COURT OF CALIFORNIA
JUSTICE O'CONNOR, joined by THE CHIEF JUSTICE, JUSTICE POWELL, and JUSTICE
SCALIA, concluded in Parts II-A and III that, even assuming, arguendo, that petitioner
was aware that some of the assemblies it sold to Cheng Shin would be incorporated into
tires sold in California, the facts do not establish minimum contacts sufficient to render
the State's exercise of personal jurisdiction consistent with fair play and substantial
justice, as required by the Due Process Clause. Since petitioner does not do business,
have an office, agents, employees, or property, or advertise or solicit business in
California, and since it did not create, control, or employ the distribution system that
brought its assemblies to, or design them in anticipation of sales in, California, it did not
engage in any action to purposely avail itself of the California market. The "substantial
connection" between a defendant and the forum State necessary for a finding of
minimum contacts must derive from an action purposely directed toward the forum
State, and the mere placement of a product
Page 480 U. S. 104
into the stream of commerce is not such an act, even if done with an awareness that the
stream will sweep the product into the forum State absent additional conduct indicating
an intent to serve the forum state market. Pp. 480 U. S. 108-113, 116.
JUSTICE BRENNAN, joined by JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE
BLACKMUN, agreed with the Court's conclusion in Part II-B that the exercise of
jurisdiction over petitioner would not comport with "fair play and substantial justice,"
but disagreed with Part II-A's interpretation of the stream-of-commerce theory, and
with the conclusion that petitioner did not purposely avail itself of the California market.
As long as a defendant is aware that the final product is being marketed in the forum
State, jurisdiction premised on the placement of a product into the stream of commerce
is consistent with the Due Process Clause, and no showing of additional conduct is
required. Here, even though petitioner did not design or control the distribution system
that carried its assemblies into California, its regular and extensive sales to a
manufacturer it knew was making regular sales of the final product in California were
sufficient to establish minimum contacts with California. Pp. 480 U. S. 116-121.
JUSTICE STEVENS, joined by JUSTICE WHITE and JUSTICE BLACKMUN, agreed that the
California Supreme Court's judgment should be reversed for the reasons stated in Part
II-B of the Court's opinion, but did not join Part II-A, for the reasons that (1) the Court's
holding that the State's exercise of jurisdiction over petitioner would be "unreasonable
and unfair" alone requires reversal, and renders any examination of minimum contacts
unnecessary; and (2) even assuming that the "purposeful availment" test should be
formulated here, Part II-A misapplies it to the facts of this case, since, in its dealings with
Cheng Shin, petitioner has arguably engaged in a higher quantum of conduct than the
mere placement of a product into the stream of commerce. Pp. 480 U. S. 121-122.
O'CONNOR, J., announced the judgment of the Court and delivered the opinion for a
unanimous Court with respect to Part I, the opinion of the Court with respect to Part II-
B, in which REHNQUIST, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL,
and STEVENS, JJ., joined, and an opinion with respect to Parts II-A and III, in which
REHNQUIST, C.J., and POWELL and SCALIA, JJ., joined. BRENNAN, J., filed an opinion
concurring in part and concurring in the judgment, in which WHITE, MARSHALL, and
BLACKMUN, JJ., joined, post, p. 480 U. S. 116. STEVENS, J., filed an opinion concurring in
part and concurring in the judgment, in which WHITE and BLACKMUN, JJ.,
joined, post, p. 480 U. S. 121.
Page 480 U. S. 105
JUSTICE O'CONNOR announced the judgment of the Court and delivered the unanimous
opinion of the Court with respect to Part I, the opinion of the Court with respect to Part
II-B, in which THE CHIEF JUSTICE, JUSTICE BRENNAN, JUSTICE WHITE, JUSTICE
MARSHALL, JUSTICE BLACKMUN, JUSTICE POWELL, and JUSTICE STEVENS join, and an
opinion with respect to Parts II-A and III, in which THE CHIEF JUSTICE, JUSTICE POWELL,
and JUSTICE SCALIA join.
This case presents the question whether the mere awareness on the part of a foreign
defendant that the components it manufactured, sold, and delivered outside the United
States would reach the forum State in the stream of commerce constitutes "minimum
contacts" between the defendant and the forum State such that the exercise of
jurisdiction "does not offend traditional notions of fair play and substantial
justice.'"International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316 (1945),
quoting Milliken v. Meyer, 311 U. S. 457,311 U. S. 463 (1940).
I manufactured in Japan or Taiwan, and of those 97, 21 valve stems were marked with
On September 23, 1978, on Interstate Highway 80 in Solano County, California, Gary
Zurcher lost control of his Honda motorcycle and collided with a tractor. Zurcher was
severely injured, and his passenger and wife, Ruth Ann Moreno, was killed. In
September 1979, Zurcher filed a product liability action in the Superior Court of the
State of
Page 480 U. S. 106
California in and for the County of Solano. Zurcher alleged that the 1978 accident was
caused by a sudden loss of air and an explosion in the rear tire of the motorcycle, and
alleged that the motorcycle tire, tube, and sealant were defective. Zurcher's complaint
named, inter alia, Cheng Shin Rubber Industrial Co., Ltd. (Cheng Shin), the Taiwanese
manufacturer of the tube. Cheng Shin in turn filed a cross-complaint seeking
indemnification from its codefendants and from petitioner, Asahi Metal Industry Co.,
Ltd. (Asahi), the manufacturer of the tube's valve assembly. Zurcher's claims against
Cheng Shin and the other defendants were eventually settled and dismissed, leaving
only Cheng Shin's indemnity action against Asahi.
California's long-arm statute authorizes the exercise of jurisdiction "on any basis not
inconsistent with the Constitution of this state or of the United States."
Cal.Civ.Proc.Code Ann. § 410.10 (West 1973). Asahi moved to quash Cheng Shin's
service of summons, arguing the State could not exert jurisdiction over it consistent with
the Due Process Clause of the Fourteenth Amendment.
In relation to the motion, the following information was submitted by Asahi and Cheng
Shin. Asahi is a Japanese corporation. It manufactures tire valve assemblies in Japan and
sells the assemblies to Cheng Shin, and to several other tire manufacturers, for use as
components in finished tire tubes. Asahi's sales to Cheng Shin took place in Taiwan. The
shipments from Asahi to Cheng Shin were sent from Japan to Taiwan. Cheng Shin
bought and incorporated into its tire tubes 150,000 Asahi valve assemblies in 1978;
500,000 in 1979; 500,000 in 1980;100,000 in 1981; and 100,000 in 1982. Sales to Cheng
Shin accounted for 1.24 percent of Asahi's income in 1981 and 0.44 percent in 1982.
Cheng Shin alleged that approximately 20 percent of its sales in the United States are in
California. Cheng Shin purchases valve assemblies from other suppliers as well, and sells
finished tubes throughout the world.
Page 480 U. S. 107
In 1983, an attorney for Cheng Shin conducted an informal examination of the valve
stems of the tire tubes sold in one cycle store in Solano County. The attorney declared
that, of the approximately 115 tire tubes in the store, 97 were purportedly
the circled letter "A", apparently Asahi's trademark. Of the 21 Asahi valve stems, 12
were incorporated into Cheng Shin tire tubes. The store contained 41 other Cheng Shin
tubes that incorporated the valve assemblies of other manufacturers. Declaration of
Kenneth B. Shepard in Opposition to Motion to Quash Subpoena, App. to Brief for
Respondent 5-6. An affidavit of a manager of Cheng Shin whose duties included the
purchasing of component parts stated:
"In discussions with Asahi regarding the purchase of valve stem assemblies, the fact that
my Company sells tubes throughout the world and specifically the United States has
been discussed. I am informed and believe that Asahi was fully aware that valve stem
assemblies sold to my Company and to others would end up throughout the United
States and in California."
39 Cal.3d 35, 48, n. 4, 702 P.2d 543, 549-550, n. 4 (1985). An affidavit of the president of
Asahi, on the other hand, declared that Asahi "has never contemplated that its limited
sales of tire valves to Cheng Shin in Taiwan would subject it to lawsuits in
California." Ibid. The record does not include any contract between Cheng Shin and
Asahi. Tr. of Oral Arg. 24.
Primarily on the basis of the above information, the Superior Court denied the motion
to quash summons, stating:
"Asahi obviously does business on an international scale. It is not unreasonable that
they defend claims of defect in their product on an international scale."
Order Denying Motion to Quash Summons, Zurcher v. Dunlop Tire & Rubber Co., No.
76180 (Super. Ct., Solano County, Cal., Apr. 20, 1983).
The Court of Appeal of the State of California issued a peremptory writ of mandate
commanding the Superior Court to quash service of summons. The court concluded that
"it
Page 480 U. S. 108
would be unreasonable to require Asahi to respond in California solely on the basis of
ultimately realized foreseeability that the product into which its component was
embodied would be sold all over the world, including California."
App. to Pet. for Cert. B5-B6.
The Supreme Court of the State of California reversed and discharged the writ issued by
the Court of Appeal. 39 Cal.3d 35, 702 P.2d 543 (1985). The court observed:
"Asahi has no offices, property or agents in California. It solicits no business in California,
and has made no direct sales [in California]."
Id. at 48, 702 P.2d at 549. Moreover, "Asahi did not design or control the system of
distribution that carried its valve assemblies into California." Id. at 49, 702 P.2d at 549.
Nevertheless, the court found the exercise of jurisdiction over Asahi to be consistent
with the Due Process Clause. It concluded that Asahi knew that some of the valve
assemblies sold to Cheng Shin would be incorporated into tire tubes sold in California,
and that Asahi benefited indirectly from the sale in California of products incorporating
its components. The court considered Asahi's intentional act of placing its components
into the stream of commerce -- that is, by delivering the components to Cheng Shin in
Taiwan -- coupled with Asahi's awareness that some of the components would
eventually find their way into California, sufficient to form the basis for state court
jurisdiction under the Due Process Clause.
We granted certiorari, 475 U.S. 1044 (1986), and now reverse.
II
B
The Due Process Clause of the Fourteenth Amendment limits the power of a state court
to exert personal jurisdiction over a nonresident defendant. "[T]he constitutional
touchstone" of the determination whether an exercise of personal jurisdiction comports
with due process "remains whether the defendant purposefully established minimum
contacts' in the
Page 480 U. S. 109
forum State." Burger King Corp. v. Rudzewicz, 471 U. S. 462, 471 U. S. 474 (1985),
quoting International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 316. Most recently,
we have reaffirmed the oft-quoted reasoning of Hanson v. Denckla, 357 U. S. 235, 357 U.
S. 253 (1958), that minimum contacts must have a basis in
"some act by which the defendant purposefully avails itself of the privilege of
conducting activities within the forum State, thus invoking the benefits and protections
of its laws."
Burger King, 471 U.S. at 471 U. S. 475.
"Jurisdiction is proper . . . where the contacts proximately result from actions by the
defendant himself that create a 'substantial connection' with the forum State."
Ibid., quoting McGee v. International Life Insurance Co., 355 U. S. 220, 355 U. S.
223 (1957) (emphasis in original).
Applying the principle that minimum contacts must be based on an act of the
defendant, the Court in World-Wide Volkswagen Corp. v. Woodson, 444 U. S.
286 (1980), rejected the assertion that a consumer's unilateral act of bringing the
defendant's product into the forum State was a sufficient constitutional basis for
personal jurisdiction over the defendant. It had been argued in World-Wide
Volkswagen that, because an automobile retailer and its wholesale distributor sold a
product mobile by design and purpose, they could foresee being haled into court in the
distant States into which their customers might drive. The Court rejected this concept of
foreseeability as an insufficient basis for jurisdiction under the Due Process
Clause.Id. at 444 U. S. 295-296. The Court disclaimed, however, the idea that
"foreseeability is wholly irrelevant" to personal jurisdiction, concluding that
"[t]he forum State does not exceed its powers under the Due Process Clause if it asserts
personal jurisdiction over a corporation that delivers its products into the stream of
commerce with the expectation that they will be purchased by consumers in the forum
State."
Id. at 444 U. S. 297-298 (citation omitted). The Court reasoned:
Page 480 U. S. 110
"When a corporation 'purposefully avails itself of the privilege of conducting activities
within the forum State,' Hanson v. Denckla, 357 U.S. [235,] 357 U. S. 253 [(1958)], it has
clear notice that it is subject to suit there, and can act to alleviate the risk of
burdensome litigation by procuring insurance, passing the expected costs on to
customers, or, if the risks are too great, severing its connection with the State. Hence, if
the sale of a product of a manufacturer or distributor . . . is not simply an isolated
occurrence, but arises from the efforts of the manufacturer or distributor to serve,
directly or indirectly, the market for its product in other States, it is not unreasonable to
subject it to suit in one of those States if its allegedly defective merchandise has there
been the source of injury to its owners or to others."
Id. at 444 U. S. 297.
In World-Wide Volkswagen itself, the state court sought to base jurisdiction not on any
act of the defendant, but on the foreseeable unilateral actions of the consumer.
Since World-Wide Volkswagen, lower courts have been confronted with cases in which
the defendant acted by placing a product in the stream of commerce, and the stream
eventually swept defendant's product into the forum State, but the defendant did
nothing else to purposefully avail itself of the market in the forum State. Some courts
have understood the Due Process Clause, as interpreted in World-Wide Volkswagen, to
allow an exercise of personal jurisdiction to be based on no more than the defendant's
act of placing the product in the stream of commerce. Other courts have understood
the Due Process Clause and the above-quoted language in World-Wide Volkswagen to
require the action of the defendant to be more purposefully directed at the forum State
than the mere act of placing a product in the stream of commerce.
The reasoning of the Supreme Court of California in the present case illustrates the
former interpretation of World-Wide Volkswagen. The Supreme Court of California held
that, because the stream of commerce eventually brought
Page 480 U. S. 111
some valves Asahi sold Cheng Shin into California, Asahi's awareness that its valves
would be sold in California was sufficient to permit California to exercise jurisdiction
over Asahi consistent with the requirements of the Due Process Clause. The Supreme
Court of California's position was consistent with those courts that have held that mere
foreseeability or awareness was a constitutionally sufficient basis for personal
jurisdiction if the defendant's product made its way into the forum State while still in
the stream of commerce. See Bean Dredging Corp. v. Dredge Technology Corp., 744 F.2d
1081 (CA5 1984); Hedrick v. Daiko Shoji Co., 715 F.2d 1355 (CA9 1983).
Other courts, however, have understood the Due Process Clause to require something
more than that the defendant was aware of its product's entry into the forum State
through the stream of commerce in order for the State to exert jurisdiction over the
defendant. In the present case, for example, the State Court of Appeal did not read the
Due Process Clause, as interpreted by World-Wide Volkswagen, to allow
"mere foreseeability that the product will enter the forum state [to] be enough by itself
to establish jurisdiction over the distributor and retailer."
App. to Pet. for Cert. B5. In Humble v. Toyota Motor Co., 727 F.2d 709 (CA8 1984), an
injured car passenger brought suit against Arakawa Auto Body Company, a Japanese
corporation that manufactured car seats for Toyota. Arakawa did no business in the
United States; it had no office, affiliate, subsidiary, or agent in the United States; it
manufactured its component parts outside the United States and delivered them to
Toyota Motor Company in Japan. The Court of Appeals, adopting the reasoning of the
District Court in that case, noted that, although it "does not doubt that Arakawa could
have foreseen that its product would find its way into the United States," it would be
"manifestly unjust" to require Arakawa to defend itself in the United States. Id. at 710-
711, quoting 578 F.Supp. 530, 533 (ND Iowa 1982). See also Hutson v. Fehr Bros.,
Page 480 U. S. 112
Inc., 584 F.2d 833 (CA8 1978); see generally Max Daetwyler Corp. v. R. Meyer, 762 F.2d
290, 299 (CA3 1985) (collecting "stream of commerce" cases in which the
"manufacturers involved had made deliberate decisions to market their products in the
forum state").
We now find this latter position to be consonant with the requirements of due process.
The "substantial connection," Burger King, 471 U.S. at 471 U. S. 475; McGee, 355 U.S.
at 355 U. S. 223, between the defendant and the forum State necessary for a finding of
minimum contacts must come about by an action of the defendant purposefully directed
toward the forum State. Burger King, supra, at 471 U. S. 476; Keeton v. Hustler
Magazine, Inc., 465 U. S. 770, 465 U. S. 774 (1984). The placement of a product into the
stream of commerce, without more, is not an act of the defendant purposefully directed
toward the forum State. Additional conduct of the defendant may indicate an intent or
purpose to serve the market in the forum State, for example, designing the product for
the market in the forum State, advertising in the forum State, establishing channels for
providing regular advice to customers in the forum State, or marketing the product
through a distributor who has agreed to serve as the sales agent in the forum State. But
a defendant's awareness that the stream of commerce may or will sweep the product
into the forum State does not convert the mere act of placing the product into the
stream into an act purposefully directed toward the forum State.
Assuming, arguendo, that respondents have established Asahi's awareness that some of
the valves sold to Cheng Shin would be incorporated into tire tubes sold in California,
respondents have not demonstrated any action by Asahi to purposefully avail itself of
the California market. Asahi does not do business in California. It has no office, agents,
employees, or property in California. It does not advertise or otherwise solicit business
in California. It did not create, control, or employ the distribution system that brought
its valves to California. Cf. Hicks v. Kawasaki Heavy Industries,
Page 480 U. S. 113
452 F.Supp. 130 (MD Pa. 1978). There is no evidence that Asahi designed its product in
anticipation of sales in California. Cf. Rockwell International Corp. v. Costruzioni
Aeronautiche Giovanni Agusta, 553 F.Supp. 328 (ED Pa. 1982). On the basis of these
facts, the exertion of personal jurisdiction over Asahi by the Superior Court of
California exceeds the limits of due process.
B
The strictures of the Due Process Clause forbid a state court to exercise personal
jurisdiction over Asahi under circumstances that would offend "traditional notions of
fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. at 326
U. S. 316, quoting Milliken v. Meyer, 311 U.S. at 311 U. S. 463.
We have previously explained that the determination of the reasonableness of the
exercise of jurisdiction in each case will depend on an evaluation of several factors. A
court must consider the burden on the defendant, the interests of the forum State, and
the plaintiff's interest in obtaining relief. It must also weigh in its determination
"the interstate judicial system's interest in obtaining the most efficient resolution of
controversies; and the shared interest of the several States in furthering fundamental
substantive social policies."
World-Wide Volkswagen, 444 U.S. at 444 U. S. 292 (citations omitted).
Page 480 U. S. 114
A consideration of these factors in the present case clearly reveals the
unreasonableness of the assertion of jurisdiction over Asahi, even apart from the
question of the placement of goods in the stream of commerce.
Certainly the burden on the defendant in this case is severe. Asahi has been
commanded by the Supreme Court of California not only to traverse the distance
between Asahi's headquarters in Japan and the Superior Court of California in and for
the County of Solano, but also to submit its dispute with Cheng Shin to a foreign nation's
judicial system. The unique burdens placed upon one who must defend oneself in a
foreign legal system should have significant weight in assessing the reasonableness of
stretching the long arm of personal jurisdiction over national borders.
When minimum contacts have been established, often the interests of the plaintiff and
the forum in the exercise of jurisdiction will justify even the serious burdens placed on
the alien defendant. In the present case, however, the interests of the plaintiff and the
forum in California's assertion of jurisdiction over Asahi are slight. All that remains is a
claim for indemnification asserted by Cheng Shin, a Tawainese corporation, against
Asahi. The transaction on which the indemnification claim is based took place in Taiwan;
Asahi's components were shipped from Japan to Taiwan. Cheng Shin has not
demonstrated that it is more convenient for it to litigate its indemnification claim
against Asahi in California, rather than in Taiwan or Japan.
Because the plaintiff is not a California resident, California's legitimate interests in the
dispute have considerably diminished. The Supreme Court of California argued that the
State had an interest in "protecting its consumers by ensuring that foreign
manufacturers comply with the state's safety standards." 39 Cal.3d at 49, 702 P.2d at
550. The State Supreme Court's definition of California's interest, however, was overly
broad. The dispute between Cheng Shin and Asahi is primarily about indemnification,
rather than safety
Page 480 U. S. 115
standards. Moreover, it is not at all clear at this point that California law should govern
the question whether a Japanese corporation should indemnify a Taiwanese corporation
on the basis of a sale made in Taiwan and a shipment of goods from Japan to
Taiwan. Phillips Petroleum Co. v. Shutts, 472 U. S. 797, 472 U. S. 821-822 (1985); Allstate
Insurance Co. v. Hague, 449 U. S. 302, 449 U. S. 312-313 (1981). The possibility of being
haled into a California court as a result of an accident involving Asahi's components
undoubtedly creates an additional deterrent to the manufacture of unsafe components;
however, similar pressures will be placed on Asahi by the purchasers of its components
as long as those who use Asahi components in their final products, and sell those
products in California, are subject to the application of California tort law.
World-Wide Volkswagen also admonished courts to take into consideration the interests
of the "several States," in addition to the forum State, in the efficient judicial resolution
of the dispute and the advancement of substantive policies. In the present case, this
advice calls for a court to consider the procedural and substantive policies of
other nations whose interests are affected by the assertion of jurisdiction by the
California court. The procedural and substantive interests of other nations in a state
court's assertion of jurisdiction over an alien defendant will differ from case to case. In
every case, however, those interests, as well as the Federal Government's interest in its
foreign relations policies, will be best served by a careful inquiry into the reasonableness
of the assertion of jurisdiction in the particular case, and an unwillingness to find the
serious burdens on an alien defendant outweighed by minimal interests on the part of
the plaintiff or the forum State. "Great care and reserve should be exercised when
extending our notions of personal jurisdiction into the international field." United States
v. First National City Bank, 379 U. S. 378, 379 U. S. 404 (1965) (Harlan, J.,
dissenting). See Born, Reflections on Judicial Jurisdiction in International Cases, to be
published in 17 Ga.J.Int'l & Comp.L. 1 (1987).
Page 480 U. S. 116
Considering the international context, the heavy burden on the alien defendant, and the
slight interests of the plaintiff and the forum State, the exercise of personal jurisdiction
by a California court over Asahi in this instance would be unreasonable and unfair.
III
Because the facts of this case do not establish minimum contacts such that the exercise
of personal jurisdiction is consistent with fair play and substantial justice, the judgment
of the Supreme Court of California is reversed, and the case is remanded for further Ante at 480 U. S. 112. Under this view, a plaintiff would be required to show
proceedings not inconsistent with this opinion. "[a]dditional conduct" directed toward the forum before finding the exercise of
jurisdiction over the defendant to be consistent with the Due Process Clause. Ibid. I see
It is so ordered. no need for such a showing, however. The stream of commerce refers not to
unpredictable currents or eddies, but to the regular and anticipated flow of products
* We have no occasion here to determine whether Congress could, consistent with the
from manufacture to distribution to retail sale. As long as a participant in this process is
Due Process Clause of the Fifth Amendment, authorize federal court personal
aware that the final product is being marketed in the forum State, the possibility of a
jurisdiction over alien defendants based on the aggregate of national contacts, rather
lawsuit there cannot come as a surprise. Nor will the litigation present a burden for
than on the contacts between the defendant and the State in which the federal court
which there is no corresponding benefit. A defendant who has placed goods in the
sits. See Max Daetwyler Corp. v. R. Meyer, 762 F.2d 290, 293-295 (CA3 1985); DeJames
stream of commerce benefits economically from the retail sale of the final product in
v. Magnificence Carriers, Inc., 654 F.2d 280, 283 (CA3 1981); see also Born, Reflections
the forum State, and indirectly benefits from the State's laws that regulate and facilitate
on Judicial Jurisdiction in International Cases, to be published in 17 Ga. J. Int'l & Comp. L.
commercial activity. These benefits accrue regardless of whether that participant
1 (1987); Lilly, Jurisdiction Over Domestic and Alien Defendants, 69 Va.L.Rev. 85, 127-
directly conducts business in the forum State, or engages in additional conduct directed
145 (1983).
toward that State. Accordingly, most courts and commentators have found that
JUSTICE BRENNAN, with whom JUSTICE WHITE, JUSTICE MARSHALL, and JUSTICE jurisdiction premised on the placement of a product into the stream of commerce is
BLACKMUN join, concurring in part and concurring in the judgment. consistent with the Due Process Clause, and have not required a showing of additional
conduct. [Footnote 1]
I do not agree with the interpretation in Part II-A of the stream-of-commerce theory,
nor with the conclusion that Asahi did not "purposely avail itself of the California Page 480 U. S. 118
market." Ante at 480 U. S. 112. I do agree, however, with the Court's conclusion in Part
The endorsement in Part II-A of what appears to be the minority view among Federal
II-B that the exercise of personal jurisdiction over Asahi in this case would not comport
Courts of Appeals [Footnote 2] represents a marked retreat from the analysis in World-
with "fair play and substantial justice," International Shoe Co. v. Washington, 326 U. S.
Wide Volkswagen v. Woodson, 444 U. S. 286 (1980). In that case,
310, 326 U. S. 320 (1945). This is one of those rare cases in which
"respondents [sought] to base jurisdiction on one isolated occurrence and whatever
"minimum requirements inherent in the concept of 'fair play and substantial justice' . . .
inferences can be drawn therefrom: the fortuitous circumstance that a single Audi
defeat the reasonableness of jurisdiction even [though] the defendant has purposefully
automobile, sold in New York to New York residents, happened to suffer an accident
engaged in forum activities."
while passing through Oklahoma."
Burger King Corp. v. Rudzewicz, 471 U. S. 462, 471 U. S. 477-478 (1985). I therefore join
Id. at 444 U. S. 295. The Court held that the possibility of an accident in Oklahoma, while
Parts I and II-B of the Court's opinion, and write separately to explain my disagreement
to some extent foreseeable in light of the inherent mobility of the automobile, was not
with Part II-A.
enough to establish
Part II-A states that
Page 480 U. S. 119
"a defendant's awareness that the stream of commerce may or will sweep the product
minimum contacts between the forum State and the retailer or distributor. Id. at 444 U.
into the forum State does not convert the mere act of placing the product into the
S. 295-296. The Court then carefully explained:
stream into an act purposefully directed toward
"[T]his is not to say, of course, that foreseeability is wholly irrelevant. But the
Page 480 U. S. 117
foreseeability that is critical to due process analysis is not the mere likelihood that a
the forum State." product will find its way into the forum State. Rather, it is that the defendant's conduct
and connection with the forum State are such that he should reasonably anticipate
being haled into Court there."
Id. at 444 U. S. 297. The Court reasoned that, when a corporation may reasonably
anticipate litigation in a particular forum, it cannot claim that such litigation is unjust or
unfair, because it
"can act to alleviate the risk of burdensome litigation by procuring insurance, passing
the expected costs on to consumers, or, if the risks are too great, severing its connection
with the State."
Ibid.
Wide Volkswagen preserved the stream-of-commerce theory. See App. to Pet. for Cert.
C-9, and n. 3, C-13-C-15; cf. Comment, Federalism, Due Process, and Minimum
Contacts: World-Wide Volkswagen Corp v. Woodson, 80 Colum.L.Rev. 1341, 1359-1361,
and nn. 140-146 (1980).
Page 480 U. S. 121
In this case, the facts found by the California Supreme Court support its finding of
minimum contacts. The court found that,

To illustrate the point, the Court contrasted the foreseeability of litigation in a State to "[a]lthough Asahi did not design or control the system of distribution that carried its
which a consumer fortuitously transports a defendant's product (insufficient contacts) valve assemblies into California, Asahi was aware of the distribution system's operation,
with the foreseeability of litigation in a State where the defendant's product was and it knew that it would benefit economically from the sale in California of products
regularly sold (sufficient contacts). The Court stated: incorporating its components."

"Hence, if the sale of a product of a manufacturer or distributor such as Audi or App. to Pet. for Cert. C-11. [Footnote 4] Accordingly, I cannot join the determination in
Volkswagen is not simply an isolated occurrence, but arises from the efforts of the Part II-A that Asahi's regular and extensive sales of component parts to a manufacturer
manufacturer or distributor to serve, directly or indirectly, the market for its product in it knew was making regular sales of the final product in California is insufficient to
other States, it is not unreasonable to subject it to suit in one of those States if its establish minimum contacts with California.
allegedly defective merchandise has there been the source of injury to its owner or to
others. The forum State does not exceed its powers under the Due Process Clause if it
asserts personal jurisdiction over a corporation that delivers its products into the stream
of commerce with the expectation that they will be purchased

Page 480 U. S. 120

by consumers in the forum State."

Id. at 444 U. S. 297-298 (emphasis added). The Court concluded its illustration by
referring to Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176
N.E.2d 761 (1961), a well known stream-of-commerce case in which the Illinois Supreme
Court applied the theory to assert jurisdiction over a component parts manufacturer
that sold no components directly in Illinois, but did sell them to a manufacturer who
incorporated them into a final product that was sold in Illinois. 444 U.S. at 444 U. S. 297-
298.

The Court in World-Wide Volkswagen thus took great care to distinguish

"between a case involving goods which reach a distant State through a chain of
distribution and a case involving goods which reach the same State because a consumer
. . . took them there."

Id. at 444 U. S. 306-307 (BRENNAN, J., dissenting). [Footnote 3] The California Supreme
Court took note of this distinction, and correctly concluded that our holding in World-
U.S. Supreme Court
Societe Nationale v. District Court, 482 U.S. 522 (1987)
Societe Nationale Industrielle Aerospatiale v. United States
District Court for the Southern District of Iowa
No. 85-1695
Argued January 14, 1987
Decided June 15, 1987
482 U.S. 522
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE EIGHTH CIRCUIT
JUSTICE STEVENS delivered the opinion of the Court.
The United States, the Republic of France, and 15 other Nations have acceded to the
Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters,
opened for signature, Mar. 18, 1970, 23 U.S.T. 2555, T.I.A.S. No. 7444. [Footnote 1] This
Convention -- sometimes referred to as the "Hague Convention" or the "Evidence
Convention" -- prescribes certain procedures by which a judicial authority in one
contracting state may request evidence located in another contracting state. The
question presented in this case concerns the extent to which a federal district court
must employ the procedures set forth in the Convention when litigants seek answers to
interrogatories, the production of documents, and admissions from a French adversary
over whom the court has personal jurisdiction.
I
The two petitioners are corporations owned by the Republic of France. [Footnote 2]
They are engaged in the business of designing,
Page 482 U. S. 525
manufacturing, and marketing aircraft. One of their planes, the "Rallye," was allegedly
advertised in American aviation publications as "the World's safest and most
economical STOL plane." [Footnote 3] On August 19, 1980, a Rallye crashed in Iowa,
injuring the pilot and a passenger. Dennis Jones, John George, and Rosa George brought
separate suits based upon this accident in the United States District Court for the
Southern District of Iowa, alleging that petitioners had manufactured and sold a
defective plane, and that they were guilty of negligence and breach of warranty.
Petitioners answered the complaints, apparently without questioning the jurisdiction of
the District Court. With the parties' consent, the cases were consolidated and referred
to a Magistrate. See 28 U.S.C. § 636(c)(1).
Initial discovery was conducted by both sides pursuant to the Federal Rules of Civil
Procedure without objection. [Footnote 4] When plaintiffs [Footnote 5] served a second
request for the production of documents pursuant to Rule 34, a set of interrogatories
pursuant to Rule 33, and requests for admission pursuant to Rule 36, however,
petitioners filed a motion for a protective order. App. 27-37. The motion alleged that,
because petitioners are "French corporations, and the discovery sought
Page 482 U. S. 526
can only be found in a foreign state, namely France," the Hague Convention dictated the
exclusive procedures that must be followed for pretrial discovery. App. 2. In addition,
the motion stated that, under French penal law, the petitioners could not respond to
discovery requests that did not comply with the Convention. Ibid. [Footnote 6]
The Magistrate denied the motion insofar as it related to answering interrogatories,
producing documents, and making admissions. [Footnote 7] After reviewing the relevant
cases, the Magistrate explained:
"To permit the Hague Evidence Convention to override the Federal Rules of Civil
Procedure would frustrate the courts' interests, which particularly arise in products
liability
Page 482 U. S. 527
cases, in protecting United States citizens from harmful products and in compensating
them for injuries arising from use of such products."
App. to Pet. for Cert. 25a.
The Magistrate made two responses to petitioners' argument that they could not
comply with the discovery requests without violating French penal law. Noting that the
law was originally "inspired to impede enforcement of United States antitrust laws,'"
[Footnote 8] and that it did not appear to have been strictly enforced in France, he first
questioned whether it would be construed to apply to the pretrial discovery requests at
issue. [Footnote 9] Id. at 22a-24a. Second, he balanced the interests in the "protection of
United States citizens from harmful foreign products and compensation for injuries
caused by such products" against France's interest in protecting its citizens "from
intrusive foreign discovery procedures." The Magistrate concluded that the former
interests were stronger, particularly because compliance with the requested discovery
will "not have to take place in France," and will not be greatly intrusive or abusive. Id. at
23a-25a.
Petitioners sought a writ of mandamus from the Court of Appeals for the Eighth Circuit
under Federal Rule of Appellate Procedure 21(a). Although immediate appellate review
of an interlocutory discovery order is not ordinarily available, See Kerr v. United States
District Court, 426 U. S. 394,
Page 482 U. S. 528
426 U. S. 402-403 (1976), the Court of Appeals considered that the novelty and the
importance of the question presented, and the likelihood of its recurrence, made
consideration of the merits of the petition appropriate. 782 F.2d 120 (1986). It then held
that
"when the district court has jurisdiction over a foreign litigant, the Hague Convention
does not apply to the production of evidence in that litigant's possession, even though
the documents and information sought may physically be located within the territory of
a foreign signatory to the Convention."
Id. at 124. The Court of Appeals disagreed with petitioners' argument that this
construction would render the entire Hague Convention "meaningless," noting that it
would still serve the purpose of providing an improved procedure for obtaining
evidence from nonparties. Id. at 125. The court also rejected petitioners' contention
that considerations of international comity required plaintiffs to resort to Hague
Convention procedures as an initial matter ("first use"), and correspondingly to invoke
the federal discovery rules only if the treaty procedures turned out to be futile. The
Court of Appeals believed that the potential overruling of foreign tribunals' denial of
discovery would do more to defeat than to promote international comity. Id. at 125-
126. Finally, the Court of Appeals concluded that objections based on the French penal
statute should be considered in two stages: first, whether the discovery order was
proper even though compliance may require petitioners to violate French law; and
second, what sanctions, if any, should be imposed if petitioners are unable to comply.
The Court of Appeals held that the Magistrate properly answered the first question, and
that it was premature to address the second. [Footnote 10] The court
Page 482 U. S. 529
therefore denied the petition for mandamus. We granted certiorari. 476 U.S. 1168
(1986).
II
In the District Court and the Court of Appeals, petitioners contended that the Hague
Evidence Convention
"provides the exclusive and mandatory procedures for obtaining documents and
information located within the territory of a foreign signatory."
782 F.2d at 124. [Footnote 11] We are satisfied that the Court of Appeals correctly
rejected this extreme position. We believe it is foreclosed by the plain language of the
Convention. Before discussing the text of the Convention, however, we briefly review its
history.
The Hague Conference on Private International Law, an association of sovereign states,
has been conducting periodic sessions since 1893. S.Exec.Doc. A, 92d Cong., 2d Sess., p.
v (1972) (S. Exec. Doc. A). The United States participated in those sessions as an
observer in 1956 and 1960, and as a member beginning in 1964 pursuant to
congressional authorization. [Footnote 12] In that year, Congress amended the Judicial
Code to grant foreign litigants, without any requirement of reciprocity, special
assistance in obtaining evidence in the
Page 482 U. S. 530
United States. [Footnote 13] In 1965, the Hague Conference adopted a Convention on
the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial
Matters (Service Convention), 20 U.S.T. 361, T.I.A.S. No. 6638, to which the Senate gave
its advice and consent in 1967. The favorable response to the Service Convention,
coupled with the longstanding interest of American lawyers in improving procedures for
obtaining evidence abroad, motivated the United States to take the initiative in
proposing that an evidence convention be adopted. Statement of Carl F. Salans, Deputy
Legal Adviser, Department of State, Convention on Taking of Evidence Abroad,
S.Exec.Rep. No. 92-25, p. 3 (1972). The Conference organized a special commission to
prepare the draft convention, and the draft was approved without a dissenting vote on
October 26, 1968. S.Exec.Doc. A, p. v. It was signed on behalf of the United States in
1970, and ratified by a unanimous vote of the Senate in 1972. [Footnote 14] The
Convention's purpose was to establish a system for obtaining evidence located abroad
that would be "tolerable" to the state executing the request and would produce
evidence "utilizable" in the requesting state. Amram, Explanatory Report on the
Convention on the Taking of Evidence
Page 482 U. S. 531
Abroad in Civil or Commercial Matters, in S.Exec.Doc. A, p. 11.
In his letter of transmittal recommending ratification of the Convention, the President
noted that it was
"supported by such national legal organizations as the American Bar Association, the
Judicial Conference of the United States, the National Conference of Commissions on
Uniform State Laws, and by a number of State, local, and specialized bar associations."
S.Exec.Doc. A, p. III. There is no evidence of any opposition to the Convention in any of
those organizations. The Convention was fairly summarized in the Secretary of State's
letter of submittal to the President:
"The willingness of the Conference to proceed promptly with work on the evidence
convention is perhaps attributable in large measure to the difficulties encountered by
courts and lawyers in obtaining evidence abroad from countries with markedly different
legal systems. Some countries have insisted on the exclusive use of the complicated,
dilatory and expensive system of letters rogatory or letters of request. Other countries
have refused adequate judicial assistance because of the absence of a treaty or
convention regulating the matter. The substantial increase in litigation with foreign
aspects arising, in part, from the unparalleled expansion of international trade and
travel in recent decades had intensified the need for an effective international
agreement to set up a model system to bridge differences between the common law
and civil law approaches to the taking of evidence abroad."
"Civil law countries tend to concentrate on commissions rogatoires, while common law
countries take testimony on notice, by stipulation and through commissions to consuls
or commissioners. Letters of request for judicial assistance from courts abroad in
securing needed evidence have been the exception, rather than the rule. The civil law
technique results normally in a resume of
Page 482 U. S. 532
evidence, prepared by the executing judge and signed by the witness, while the
common law technique results normally in a verbatim transcript of the witness's
testimony certified by the reporter."
"Failure by either the requesting state or the state of execution fully to take into
account the differences of approach to the taking of evidence abroad under the two
systems and the absence of agreed standards applicable to letters of request have
frequently caused difficulties for courts and litigants. To minimize such difficulties in the
future, the enclosed convention, which consists of a preamble and forty-two articles, is
designed to:"
"1. Make the employment of letters of request a principal means of obtaining evidence
abroad;"
"2. Improve the means of securing evidence abroad by increasing the powers of consuls
and by introducing in the civil law world, on a limited basis, the concept of the
commissioner;"
"3. Provide means for securing evidence in the form needed by the court where the
action is pending; and"
"4. Preserve all more favorable and less restrictive practices arising from internal law,
internal rules of procedure and bilateral or multilateral conventions."
"What the convention does is to provide a set of minimum standards with which
contracting states agree to comply. Further, through articles 27, 28 and 32, it provides a
flexible framework within which any future liberalizing changes in policy and tradition in
any country with respect to international judicial cooperation may be translated into
effective change in international procedures. At the same time, it recognizes and
preserves procedures of every country which now or hereafter may provide
international cooperation in the taking of evidence on more liberal and less restrictive
bases, whether this is effected by supplementary agreements or by municipal law and
practice."
Id. p. VI.
Page 482 U. S. 533
III
In arguing their entitlement to a protective order, petitioners correctly assert that both
the discovery rules set forth in the Federal Rules of Civil Procedure and the Hague
Convention are the law of the United States. Brief for Petitioners 31. This observation,
however, does not dispose of the question before us; we must analyze the interaction
between these two bodies of federal law. Initially, we note that at least four different
interpretations of the relationship between the federal discovery rules and the Hague
Convention are possible. Two of these interpretations assume that the Hague
Convention, by its terms, dictates the extent to which it supplants normal discovery
rules. First, the Hague Convention might be read as requiring its use to the exclusion of
any other discovery procedures whenever evidence located abroad is sought for use in
an American court. Second, the Hague Convention might be interpreted to require first,
but not exclusive, use of its procedures. Two other interpretations assume that
international comity, rather than the obligations created by the treaty, should guide
judicial resort to the Hague Convention. Third, then, the Convention might be viewed as
establishing a supplemental set of discovery procedures, strictly optional under treaty
law, to which concerns of comity nevertheless require first resort by American courts in
all cases. Fourth, the treaty may be viewed as an undertaking among sovereigns to
facilitate discovery to which an American court should resort when it deems that course
of action appropriate, after considering the situations of the parties before it as well as
the interests of the concerned foreign state.
In interpreting an international treaty, we are mindful that it is "in the nature of a
contract between nations," Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U. S.
243, 466 U. S. 253 (1984), to which "[g]eneral rules of construction apply." Id. at 466 U.
S. 262. See Ware v. Hilton, 3 Dall.199, 3 U. S. 240-241(1796)
Page 482 U. S. 534
(opinion of Chase, J.). We therefore begin "with the text of the treaty and the context in
which the written words are used." Air France v. Saks, 470 U. S. 392, 470 U. S.
397 (1985). The treaty's history, "'the negotiations, and the practical construction
adopted by the parties'" may also be relevant. Id. at 470 U. S. 396 (quoting Choctaw
Nation of Indians v. United States, 318 U. S. 423, 318 U. S. 431-432 (1943)).
We reject the first two of the possible interpretations as inconsistent with the language
and negotiating history of the Hague Convention. The preamble of the Convention
specifies its purpose "to facilitate the transmission and execution of Letters of Request"
and to "improve mutual judicial cooperation in civil or commercial matters." 23 U.S.T. at
2557, T.I.A.S. No. 7444. The preamble does not speak in mandatory terms which would
purport to describe the procedures for all permissible transnational discovery and
exclude all other existing practices. [Footnote 15] The text of the Evidence Convention
itself does not modify the law of any contracting state, require any contracting state to
use the Convention procedures, either in requesting evidence or in responding to such
requests, or compel any contracting state to change its own evidence-gathering
procedures. [Footnote 16]
Page 482 U. S. 535
The Convention contains three chapters. Chapter I, entitled "Letters of Requests," and
chapter II, entitled "Taking of Evidence by Diplomatic Officers, Consular Agents and
Commissioners," both use permissive, rather than mandatory, language. Thus, Article 1
provides that a judicial authority in one contracting state "may" forward a letter of
request to the competent authority in another contracting state for the purpose of
obtaining evidence. [Footnote 17] Similarly, Articles 15, 16, and 17 provide that
diplomatic officers, consular agents, and commissioners "may . . . without compulsion,"
take evidence under certain conditions. [Footnote 18] The absence of any command
that a contracting state must use Convention procedures when they are not needed is
conspicuous. [Footnote 19]
Page 482 U. S. 536
Two of the Articles in chapter III, entitled "General Clauses," buttress our conclusion
that the Convention was intended as a permissive supplement, not a preemptive
replacement, for other means of obtaining evidence located abroad. [Footnote 20]
Article 23 expressly authorizes a contracting state to declare that it will not execute any
letter of request in aid of pretrial discovery of documents in a common law country.
[Footnote 21] Surely, if the Convention had been intended to replace completely the
broad discovery powers that the common law courts in the United States previously
exercised over foreign litigants subject to their jurisdiction, it would have been most
anomalous for the common law contracting parties to agree to
Page 482 U. S. 537
Article 23, which enables a contracting party to revoke its consent to the treaty's
procedures for pretrial discovery. [Footnote 22] In the absence of explicit textual
support, we are unable to accept the hypothesis that the common law contracting
states abjured recourse to all preexisting discovery procedures at the same time that
they accepted the possibility that a contracting party could unilaterally abrogate even
the Convention's procedures. [Footnote 23] Moreover, Article 27 plainly states that
Page 482 U. S. 538
the Convention does not prevent a contracting state from using more liberal methods of
rendering evidence than those authorized by the Convention. [Footnote 24] Thus, the
text of the Evidence Convention, as well as the history of its proposal and ratification by
the United States, unambiguously supports the conclusion that it was intended to
establish optional procedures that would facilitate the taking of evidence
abroad. SeeAmram, The Proposed Convention on the Taking of Evidence Abroad, 55
A.B.A.J. 651, 655 (1969); President's Letter of Transmittal, Sen.Exec.Doc. A, p. III.
Page 482 U. S. 539
An interpretation of the Hague Convention as the exclusive means for obtaining
evidence located abroad would effectively subject every American court hearing a case
involving a national of a contracting state to the internal laws of that state.
Interrogatories and document requests are staples of international commercial
litigation, no less than of other suits, yet a rule of exclusivity would subordinate the
court's supervision of even the most routine of these pretrial proceedings to the actions
or, equally, to the inactions of foreign judicial authorities. As the Court of Appeals for
the Fifth Circuit observed in In re Anschuetz & Co., GmbH, 754 F.2d 602, 612 (1985), cert.
pending, No. 85-98:
"It seems patently obvious that, if the Convention were interpreted as preempting
interrogatories and document requests, the Convention would really be much more
than an agreement on taking evidence abroad. Instead, the Convention would amount
to a major regulation of the overall conduct of litigation between nationals of different
signatory states, raising a significant possibility of very serious interference with the
jurisdiction of United States courts."
"* * * *"
"While it is conceivable that the United States could enter into a treaty giving other
signatories control over litigation instituted and pursued in American courts, a treaty
intended to bring about such a curtailment of the rights given to all litigants by the
federal rules would surely state its intention clearly and precisely identify crucial terms."
The Hague Convention, however, contains no such plain statement of a preemptive
intent. We conclude accordingly that the Hague Convention did not deprive the District
Court of the jurisdiction it otherwise possessed to order a foreign
Page 482 U. S. 540
national party before it to produce evidence physically located within a signatory nation.
[Footnote 25]
IV
While the Hague Convention does not divest the District Court of jurisdiction to order
discovery under the Federal Rules of Civil Procedure, the optional character of the
Convention procedures sheds light on one aspect of the Court of Appeals' opinion that
we consider erroneous. That court concluded that the Convention simply "does not
apply" to discovery sought from a foreign litigant that is subject to the jurisdiction of an
American court. 782 F.2d at 124. Plaintiffs argue that this conclusion is supported by
two considerations. First, the Federal Rules of Civil Procedure provide
Page 482 U. S. 541
ample means for obtaining discovery from parties who are subject to the court's
jurisdiction, while before the Convention was ratified it was often extremely difficult, if
not impossible, to obtain evidence from nonparty witnesses abroad. Plaintiffs contend
that it is appropriate to construe the Convention as applying only in the area in which
improvement was badly needed. Second, when a litigant is subject to the jurisdiction of
the district court, arguably the evidence it is required to produce is not "abroad" within
the meaning of the Convention, even though it is in fact located in a foreign country at
the time of the discovery request and even though it will have to be gathered or
otherwise prepared abroad. See In re Anschuetz & Co., GmbH, 754 F.2d at 611; In re
Messerschmitt Bolkow Blohm GmbH, 757 F.2d 729, 731 (CA5 1985), cert. vacated,476
U.S. 1168 (1986); Daimler-Benz Aktiengesellschaft v. United States District Court, 805
F.2d 340, 341-342 (CA10 1986).
Nevertheless, the text of the Convention draws no distinction between evidence
obtained from third parties and that obtained from the litigants themselves; nor does it
purport to draw any sharp line between evidence that is "abroad" and evidence that is
within the control of a party subject to the jurisdiction of the requesting court. Thus, it
appears clear to us that the optional Convention procedures are available whenever
they will facilitate the gathering of evidence by the means authorized in the Convention.
Although these procedures are not mandatory, the Hague Convention does "apply" to
the production of evidence in a litigant's possession in the sense that it is one method of
seeking evidence that a court may elect to employ.See Briefs of Amici Curiae for the
United States and the SEC 9-10, the Federal Republic of Germany 5-6, the Republic of
France 8-12, and the Government of the United Kingdom and Northern Ireland 8.
V
Petitioners contend that even if the Hague Convention's procedures are not mandatory,
this Court should adopt a rule
Page 482 U. S. 542
requiring that American litigants first resort to those procedures before initiating any
discovery pursuant to the normal methods of the Federal Rules of Civil Procedure. See,
e.g., Laker Airways, Ltd. v. Pan American World Airways, 103 F.R.D. 42 (DC
1984); Philadelphia Gear Corp. v. American Pfauter Corp., 100 F.R.D. 58 (ED Pa.1983).
The Court of Appeals rejected this argument because it was convinced that an American
court's order ultimately requiring discovery that a foreign court had refused under
Convention procedures would constitute "the greatest insult" to the sovereignty of that
tribunal. 782 F.2d at 125-126. We disagree with the Court of Appeals' view. It is well
known that the scope of American discovery is often significantly broader than is
permitted in other jurisdictions, and we are satisfied that foreign tribunals will recognize
that the final decision on the evidence to be used in litigation conducted in American
courts must be made by those courts. We therefore do not believe that an American
court should refuse to make use of Convention procedures because of a concern that it
may ultimately find it necessary to order the production of evidence that a foreign
tribunal permitted a party to withhold.
Nevertheless, we cannot accept petitioners' invitation to announce a new rule of law
that would require first resort to Convention procedures whenever discovery is sought
from a foreign litigant. Assuming, without deciding, that we have the lawmaking power
to do so, we are convinced that such a general rule would be unwise. In many situations,
the Letter of Request procedure authorized by the Convention would be unduly time-
consuming and expensive, as well as less certain to produce needed evidence than
direct use of the Federal Rules. [Footnote 26] A rule of first resort in all cases would
Page 482 U. S. 543
therefore be inconsistent with the overriding interest in the "just, speedy, and
inexpensive determination" of litigation in our courts. See Fed.Rule Civ.Proc. 1.
Petitioners argue that a rule of first resort is necessary to accord respect to the
sovereignty of states in which evidence is located. It is true that the process of obtaining
evidence in a civil law jurisdiction is normally conducted by a judicial officer, rather than
by private attorneys. Petitioners contend that, if performed on French soil, for example,
by an unauthorized person, such evidence-gathering might violate the "judicial
sovereignty" of the host nation. Because it is only through the Convention that civil law
nations have given their consent to evidence-gathering activities within their borders,
petitioners argue, we have a duty to employ those procedures whenever they are
available. Brief for Petitioners 27-28. We find that argument unpersuasive. If such a duty
were to be inferred from the adoption of the Convention itself, we believe it would have
been described in the text of that document. Moreover, the concept of international
comity [Footnote 27] requires in this context a more particularized analysis of
Page 482 U. S. 544
the respective interests of the foreign nation and the requesting nation than petitioners'
proposed general rule would generate. [Footnote 28] We therefore decline to hold, as a
blanket matter, that comity requires resort to Hague Evidence Convention procedures
without prior scrutiny in each case of the particular facts, sovereign interests, and
likelihood that resort to those procedures will prove effective. [Footnote 29]
Page 482 U. S. 545
Some discovery procedures are much more "intrusive" than others. In this case, for
example, an interrogatory asking petitioners to identify the pilots who flew flight tests in
the Rallye before it was certified for flight by the Federal Aviation Administration, or a
request to admit that petitioners authorized certain advertising in a particular magazine,
is certainly less intrusive than a request to produce all of the
"design specifications, line drawings and engineering plans and all engineering change
orders and plans and all drawings concerning the leading edge slats for the Rallye type
aircraft manufactured by the Defendants."
App. 29. Even if a court might be persuaded that a particular document request was too
burdensome or too "intrusive" to be granted in full, with or without an appropriate
protective order, it might well refuse to insist upon the use of Convention procedures
Page 482 U. S. 546
before requiring responses to simple interrogatories or requests for admissions. The
exact line between reasonableness and unreasonableness in each case must be drawn
by the trial court, based on its knowledge of the case and of the claims and interests of
the parties and the governments whose statutes and policies they invoke.
American courts, in supervising pretrial proceedings, should exercise special vigilance to
protect foreign litigants from the danger that unnecessary, or unduly burdensome,
discovery may place them in a disadvantageous position. Judicial supervision of
discovery should always seek to minimize its costs and inconvenience, and to prevent
improper uses of discovery requests. When it is necessary to seek evidence abroad,
however, the district court must supervise pretrial proceedings particularly closely to
prevent discovery abuses. For example, the additional cost of transportation of
documents or witnesses to or from foreign locations may increase the danger that
discovery may be sought for the improper purpose of motivating settlement, rather
than finding relevant and probative evidence. Objections to "abusive" discovery that
foreign litigants advance should therefore receive the most careful consideration. In
addition, we have long recognized the demands of comity in suits involving foreign
states, either as parties or as sovereigns with a coordinate interest in the litigation. See
Hilton v. Guyot, 159 U. S. 113 (1895). American courts should therefore take care to
demonstrate due respect for any special problem confronted by the foreign litigant on
account of its nationality or the location of its operations, and for any sovereign interest
expressed by a foreign state. We do not articulate specific rules to guide this delicate
task of adjudication. [Footnote 30]
Page 482 U. S. 547
VI
In the case before us, the Magistrate and the Court of Appeals correctly refused to grant
the broad protective order that petitioners requested. The Court of Appeals erred,
however, in stating that the Evidence Convention does not apply to the pending
discovery demands. This holding may be read as indicating that the Convention
procedures are not even an option that is open to the District Court. It must be recalled,
however, that the Convention's specification of duties in executing states creates
corresponding rights in requesting states; holding that the Convention does not apply in
this situation would deprive domestic litigants of access to evidence through treaty
procedures to which the contracting states have assented. Moreover, such a rule would
deny the foreign litigant a full and fair opportunity to demonstrate appropriate reasons
for employing Convention procedures in the first instance, for some aspects of the
discovery process.
Accordingly, the judgment of the Court of Appeals is vacated, and the case is remanded
for further proceedings consistent with this opinion.
It is so ordered.
JUSTICE BLACKMUN, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and JUSTICE
O'CONNOR join, concurring in part and dissenting in part.
Some might well regard the Court's decision in this case as an affront to the nations that
have joined the United States in ratifying the Hague Convention on the Taking of
Evidence
Page 482 U. S. 548
Abroad in Civil or Commercial Matters, opened for signature, Mar. 18, 1970, 23 U.S.T.
2555, T.I.A.S. No. 7444. The Court ignores the importance of the Convention by
relegating it to an "optional" status, without acknowledging the significant achievement
in accommodating divergent interests that the Convention represents. Experience to
date indicates that there is a large risk that the case-by-case comity analysis now to be
permitted by the Court will be performed inadequately, and that the somewhat
unfamiliar procedures of the Convention will be invoked infrequently. I fear the Court's
decision means that courts will resort unnecessarily to issuing discovery orders under
the Federal Rules of Civil Procedure in a raw exercise of their jurisdictional power to the
detriment of the United States' national and international interests. The Court's view of
this country's international obligations is particularly unfortunate in a world in which
regular commercial and legal channels loom ever more crucial.
I do agree with the Court's repudiation of the positions at both extremes of the
spectrum with regard to the use of the Convention. Its rejection of the view that the
Convention is not "applicable" at all to this case is surely correct: the Convention clearly
applies to litigants as well as to third parties, and to requests for evidence located
abroad, no matter where that evidence is actually "produced." The Court also correctly
rejects the far opposite position that the Convention provides the exclusive means for
discovery involving signatory countries. I dissent, however, because I cannot endorse
the Court's case-by-case inquiry for determining whether to use Convention procedures,
and its failure to provide lower courts with any meaningful guidance for carrying out
that inquiry. In my view, the Convention provides effective discovery procedures that
largely eliminate the conflicts between United States and foreign law on evidence-
gathering. I therefore would apply a general presumption that, in most cases, courts
should resort first to the Convention
Page 482 U. S. 549
procedures. [Footnote 2/1] An individualized analysis of the circumstances of a
particular case is appropriate only when it appears that it would be futile to employ the
Convention or when its procedures prove to be unhelpful.
I
Even though the Convention does not expressly require discovery of materials in foreign
countries to proceed exclusively according to its procedures, it cannot be viewed as
merely advisory. The Convention was drafted at the request and with the enthusiastic
participation of the United States, which sought to broaden the techniques available for
the taking of evidence abroad. The differences between discovery practices in the
United States and those in other countries are significant, and
"[n]o aspect of the extension of the American legal system beyond the territorial
frontier of the United States has given rise to so much friction as the request for
documents associated with investigation and litigation in the United States."
Restatement of Foreign Relations Law of the United States (Revised) § 437, Reporters'
Note 1, p. 35 (Tent. Draft No. 7, Apr. 10, 1986). Of particular
Page 482 U. S. 550
import is the fact that discovery conducted by the parties, as is common in the United
States, is alien to the legal systems of civil law nations, which typically regard evidence
gathering as a judicial function.
The Convention furthers important United States interests by providing channels for
discovery abroad that would not be available otherwise. In general, it establishes
"methods to reconcile the differing legal philosophies of the Civil Law, Common Law,
and other systems with respect to the taking of evidence."
Rapport de la Commission speciale, 4 Conference de La Haye de droit international
prive: Actes et documents de la Onzieme session 55 (1970) (Actes et documents). It
serves the interests of both requesting and receiving countries by advancing the
following goals:
"[T]he techniques for the taking of evidence must be 'utilizable' in the eyes of the State
where the lawsuit is pending, and must also be 'tolerable' in the eyes of the State where
the evidence is to be taken."
Id. at 56. The Convention also serves the long-term interests of the United States in
helping to further and to maintain the climate of cooperation and goodwill necessary to
the functioning of the international legal and commercial systems.
It is not at all satisfactory to view the Convention as nothing more than an optional
supplement to the Federal Rules of Civil Procedure, useful as a means to "facilitate
discovery" when a court "deems that course of action appropriate." Ante at 482 U. S.
533. Unless they had expected the Convention to provide the normal channels for
discovery, other parties to the Convention would have had no incentive to agree to its
terms. The civil law nations committed themselves to employ more effective procedures
for gathering evidence within their borders, even to the extent of requiring some
common law practices alien to their systems. At the time of the Convention's
enactment, the liberal American policy, which allowed foreigners to collect evidence
with ease in the United States, see anteat 482 U. S. 529-530, and n. 13, was in place and,
because
Page 482 U. S. 551
it was not conditioned on reciprocity, there was little likelihood that the policy would
change as a result of treaty negotiations. As a result, the primary benefit the other
signatory nations would have expected in return for their concessions was that the
United States would respect their territorial sovereignty by using the Convention
procedures. [Footnote 2/2]
II
By viewing the Convention as merely optional, and leaving the decision whether to
apply it to the court in each individual case, the majority ignores the policies established
by the political branches when they negotiated and ratified the treaty. The result will be
a duplicative analysis for which courts are not well designed. The discovery process
usually concerns discrete interests that a court is well equipped to accommodate -- the
interests of the parties before the court coupled with the interest of the judicial system
in resolving the conflict on the basis of the best available information. When a lawsuit
requires discovery of materials located in a foreign nation, however, foreign legal
systems and foreign interests
Page 482 U. S. 552
are implicated as well. The presence of these interests creates a tension between the
broad discretion our courts normally exercise in managing pretrial discovery and the
discretion usually allotted to the Executive in foreign matters.
It is the Executive that normally decides when a course of action is important enough to
risk affronting a foreign nation or placing a strain on foreign commerce. It is the
Executive, as well, that is best equipped to determine how to accommodate foreign
interests along with our own. [Footnote 2/3] Unlike the courts,
"diplomatic and executive channels are, by definition, designed to exchange, negotiate,
and reconcile the problems which accompany the realization of national interests within
the sphere of international association."
Laker Airways, Ltd. v. Sabena, Belgian World Airlines, 235 U.S.App.D.C. 207, 253, 731
F.2d 909, 955 (1984). The Convention embodies the result of the best efforts of the
Executive Branch, in negotiating the treaty, and the Legislative Branch, in ratifying it, to
balance competing national interests. As such, the Convention represents a political
determination -- one that, consistent with the principle of separation of powers, courts
should not attempt to second-guess.
Not only is the question of foreign discovery more appropriately considered by the
Executive and Congress, but in addition, courts are generally ill equipped to assume the
role of balancing the interests of foreign nations with that of our own. Although
transnational litigation is increasing, relatively few judges are experienced in the area,
and the procedures of foreign legal systems are often poorly understood. Wilkey,
Transnational Adjudication: A View from the Bench, 18 Int'l Lawyer 541, 543 (1984);
Ristau, Overview of International
Page 482 U. S. 553
Judicial Assistance, 18 Int'l Lawyer 525, 531 (1984). As this Court recently stated, it has
"little competence in determining precisely when foreign nations will be offended by
particular acts." Container Corp. v. Franchise Tax Bd., 463 U. S. 159, 463 U. S. 194 (1983).
A pro-forum bias is likely to creep into the supposedly neutral balancing process,
[Footnote 2/4] and courts, not surprisingly, often will turn to the more familiar
procedures established by their local rules. In addition, it simply is not reasonable to
expect the Federal Government or the foreign state in which the discovery will take
place to participate in every individual case in order to articulate the broader
international and foreign interests that are relevant
Page 482 U. S. 554
to the decision whether to use the Convention. Indeed, the opportunities for such
participation are limited. [Footnote 2/5] Exacerbating these shortcomings is the limited
appellate review of interlocutory discovery decisions, [Footnote 2/6] which prevents any
effective case-by-case correction of erroneous discovery decisions.
III
The principle of comity leads to more definite rules than the ad hoc approach endorsed
by the majority. The Court asserts that the concept of comity requires an individualized
analysis of the interests present in each particular case before a court decides whether
to apply the Convention. See ante at 482 U. S. 543-544. There is, however, nothing
inherent in the comity principle that requires case-by-case analysis. The Court
frequently has relied upon a comity analysis when it has adopted general rules to cover
recurring situations in areas such as choice of forum, [Footnote 2/7] maritime law,
[Footnote 2/8] and sovereign
Page 482 U. S. 555
immunity, [Footnote 2/9] and the Court offers no reasons for abandoning that approach
here.
Comity is not just a vague political concern favoring international cooperation when it is
in our interest to do so. Rather, it is a principle under which judicial decisions reflect the
systemic value of reciprocal tolerance and goodwill. See Maier, Extraterritorial
Jurisdiction at a Crossroads: An Intersection Between Public and International Law, 76
Am. J.Int'l L. 280, 281-285 (1982); J. Story, Commentaries on the Conflict of Laws §§ 35,
38 (8th ed. 1883). [Footnote 2/10] As in the choice-of-law analysis, which from the very
beginning has been linked to international comity, the threshold question in a comity
analysis is whether there is, in fact, a true conflict between domestic and foreign law.
When there is a conflict, a court should seek a reasonable accommodation that
reconciles the central concerns of both sets of laws. In doing so, it should perform a
tripartite analysis that considers the foreign interests, the interests of the United States,
and the mutual interests of all nations in a smoothly functioning international legal
regime. [Footnote 2/11]
Page 482 U. S. 556
In most cases in which a discovery request concerns a nation that has ratified the
Convention, there is no need to resort to comity principles; the conflicts they are
designed to resolve already have been eliminated by the agreements expressed in the
treaty. The analysis set forth in the Restatement (Revised) of Foreign Relations Law of
the United States, see ante at 482 U. S. 544, n. 28, is perfectly appropriate for courts to
use when no treaty has been negotiated to accommodate the different legal systems. It
would also be appropriate if the Convention failed to resolve the conflict in a particular
case. The Court, however, adds an additional layer of so-called comity analysis by
holding that courts should determine on a case-by-case basis whether resort to the
Convention is desirable. Although this analysis is unnecessary in the absence of any
conflicts, it should lead courts to the use of the Convention if they recognize that the
Convention already has largely accommodated all three categories of interests relevant
to a comity analysis -- foreign interests, domestic interests, and the interest in a well-
functioning international order.
A
I am encouraged by the extent to which the Court emphasizes the importance of foreign
interests, and by its admonition to lower courts to take special care to respect those
interests. See ante at 482 U. S. 546. Nonetheless, the Court's view of the Convention
rests on an incomplete analysis of the sovereign interests of foreign states. The Court
acknowledges that evidence is normally obtained in civil law countries by a judicial
officer, ante at 482 U. S. 543, but it fails to recognize the significance of that practice.
Under the classic view of territorial
Page 482 U. S. 557
sovereignty, each state has a monopoly on the exercise of governmental power within
its borders, and no state may perform an act in the territory of a foreign state without
consent. [Footnote 2/12] As explained in the Report of United States Delegation to
Eleventh Session of the Hague Conference on Private International Law, the taking of
evidence in a civil law country may constitute the performance of a public judicial act by
an unauthorized foreign person:
"In drafting the Convention, the doctrine of 'judicial sovereignty' had to be constantly
borne in mind. Unlike the common law practice, which places upon the parties to the
litigation the duty of privately securing and presenting the evidence at the trial, the civil
law considers obtaining of evidence a matter primarily for the courts, with the parties in
the subordinate position of assisting the judicial authorities."
"The act of taking evidence in a common law country from a willing witness, without
compulsion and without a breach of the peace, in aid of a foreign proceeding, is a purely
private matter, in which the host country has no interest and in which its judicial
authorities have normally no wish to participate. To the contrary, the same act in a civil
law country may be a public matter, and may constitute the performance of a public
judicial act by an unauthorized foreign person. It may violate the
Page 482 U. S. 558
'judicial sovereignty' of the host country, unless its authorities participate or give their
consent."
8 Int'l Legal Materials 785, 806 (1969). [Footnote 2/13]
Some countries also believe that the need to protect certain underlying substantive
rights requires judicial control of the taking of evidence. In the Federal Republic of
Germany, for example, there is a constitutional principle of proportionality, pursuant to
which a judge must protect personal privacy, commercial property, and business
secrets. Interference with these rights is proper only if "necessary to protect other
persons' rights in the course of civil litigation." See Meessen, The International Law on
Taking Evidence From, Not In, a Foreign State, The Anschutz and Messerschmitt opinions
of the United States Court of Appeals for the Fifth Circuit (Mar. 31, 1986), as set forth in
App. to Brief for Anschuetz & Co. GmbH and Messerschmitt-Boelkow-Blohm GmbH
as Amici Curiae 27a-28a. [Footnote 2/14]
Page 482 U. S. 559
The United States recently recognized the importance of these sovereignty principles by
taking the broad position that the Convention
"must be interpreted to preclude an evidence-taking proceeding in the territory of a
foreign state party if the Convention does not authorize it and the host country does not
otherwise permit it."
Brief for United States as Amicus Curiae in Volkswagenwerk Aktiengesellschaft v.
Falzon, O.T. 1983, No. 82-1888, p. 6. Now, however, it appears to take a narrower view
of what constitutes an "evidence-taking procedure," merely stating that "oral
depositions on foreign soil . . . are improper without the consent of the foreign nation."
Tr. of Oral Arg. 23. I am at a loss to understand why gathering documents or information
in a foreign country, even if for ultimate production in the United States, is any less an
imposition on sovereignty than the taking of a deposition when gathering documents
also is regarded as a judicial function in a civil law nation.
Use of the Convention advances the sovereign interests of foreign nations because they
have given consent to Convention procedures by ratifying them. This consent
encompasses discovery techniques that would otherwise impinge on the sovereign
interests of many civil law nations. In the absence of the Convention, the informal
techniques provided by Articles 15-22 of the Convention -- taking evidence by a
diplomatic or consular officer of the requesting state and the use of commissioners
nominated by the court of the state where the action is pending -- would raise
sovereignty issues similar to those implicated by a direct discovery order from a foreign
court. "Judicial" activities are occurring on the soil of the sovereign by agents of a
foreign state. [Footnote 2/15] These voluntary discovery procedures are a great boon to
United States litigants
Page 482 U. S. 560
and are used far more frequently in practice than is compulsory discovery pursuant to
letters of request. [Footnote 2/16]
Civil law contracting parties have also agreed to use, and even to compel, procedures
for gathering evidence that are diametrically opposed to civil law practices. The civil law
system is inquisitional, rather than adversarial, and the judge normally questions the
witness and prepares a written summary of the evidence. [Footnote 2/17] Even in
common law countries, no system of evidence-gathering resembles that of the United
States. [Footnote 2/18] Under Article 9 of the Convention, however, a foreign court
must grant a request to use a "special method or procedure," which includes requests to
compel attendance of
Page 482 U. S. 561
witnesses abroad, to administer oaths, to produce verbatim transcripts, or to permit
examination of witnesses by counsel for both parties. [Footnote 2/19] These methods
for obtaining evidence, which largely eliminate conflicts between the discovery
procedures of the United States and the laws of foreign systems, have the consent of
the ratifying nations. The use of these methods thus furthers foreign interests, because
discovery can proceed without violating the sovereignty of foreign nations.
B
The primary interest of the United States in this context is in providing effective
procedures to enable litigants to obtain evidence abroad. This was the very purpose of
the United States' participation in the treaty negotiations and, for the most part, the
Convention provides those procedures.
The Court asserts that the letters of request procedure authorized by the Convention in
many situations will be "unduly time-consuming and expensive." Ante at 482 U. S. 542.
The Court offers no support for this statement, and, until the Convention is used
extensively enough for courts to develop experience with it, such statements can be
nothing other than speculation. [Footnote 2/20] Conspicuously absent from the Court's
assessment
Page 482 U. S. 562
is any consideration of resort to the Convention's less formal and less time-consuming
alternatives -- discovery conducted by consular officials or an appointed commissioner.
Moreover, unless the costs become prohibitive, saving time and money is not such a
high priority in discovery that some additional burden cannot be tolerated in the
interest of international goodwill. Certainly discovery controlled by litigants under the
Federal Rules of Civil Procedure is not known for placing a high premium on either
speed or cost-effectiveness.
There is also apprehension that the Convention procedures will not prove fruitful.
Experience with the Convention suggests otherwise -- contracting parties have honored
their obligation to execute letters of request expeditiously and to use compulsion if
necessary. See, e.g., Report on the Work of the Special Commission on the Operation of
the Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or
Commercial Matters, 17 Int'l Legal Materials 1425, 1431, § 5 F (1978) ("[r]efusal to
execute turns out to be very infrequent
Page 482 U. S. 563
in practice"). By and large, the concessions made by parties to the Convention not only
provide United States litigants with a means for obtaining evidence, but also ensure that
the evidence will be in a form admissible in court.
There are, however, some situations in which there is legitimate concern that certain
documents cannot be made available under Convention procedures. Thirteen nations
have made official declarations pursuant to Article 23 of the Convention, which permits
a contracting state to limit its obligation to produce documents in response to a letter of
request. See ante at 482 U. S. 536, n. 21. These reservations may pose problems that
would require a comity analysis in an individual case, but they are not so all-
encompassing as the majority implies -- they certainly do not mean that a "contracting
party could unilaterally abrogate . . . the Convention's procedures." Ante at 482 U. S.
537. First, the reservations can apply only to letters of request for documents. Thus, an
Article 23 reservation affects neither the most commonly used informal Convention
procedures for taking of evidence by a consul or a commissioner nor formal requests for
depositions or interrogatories. Second, although Article 23 refers broadly to "pretrial
discovery," the intended meaning of the term appears to have been much narrower
than the normal United States usage. [Footnote 2/21] The contracting parties for the
most part have modified
Page 482 U. S. 564
the declarations made pursuant to Article 23 to limit their reach. See 7 Martindale-
Hubbell Law Directory (pt. VII) 14-19 (1986). [Footnote 2/22] Indeed, the emerging view
of this exception to discovery is that it applies only to "requests that lack sufficient
specificity or that have not been reviewed for
Page 482 U. S. 565
relevancy by the requesting court." Oxman, The Choice Between Direct Discovery and
Other Means of Obtaining Evidence Abroad: The Impact of the Hague Evidence
Convention, 37 U. Miami L.Rev. at 777. Thus, in practice, a reservation is not the
significant obstacle to discovery under the Convention that the broad wording of Article
23 would suggest. [Footnote 2/23]
In this particular case, the "French blocking statute,'" see ante at 482 U. S. 526, n. 6,
poses an additional potential barrier to obtaining discovery from France. But any conflict
posed by this legislation is easily resolved by resort to the Convention's procedures. The
French statute's prohibitions are expressly "subject to" international agreements and
applicable laws, and it does not affect the taking of evidence under the
Convention. See Toms, The French Response to the Extraterritorial Application of United
States Antitrust Laws, 15 Int'l Lawyer 585, 593-599 (1981); Heck, Federal Republic of
Germany and the EEC, 18 Int'l Lawyer 793, 800 (1984).
The second major United States interest is in fair and equal treatment of litigants. The
Court cites several fairness concerns in support of its conclusion that the Convention is
not exclusive, and apparently fears that a broad endorsement of the use of the
Convention would lead to the same "unacceptable asymmetries."See ante at 482 U. S.
540, n. 25. Courts can protect against the first two concerns noted by the majority --
that a foreign party to a lawsuit would have a discovery advantage over a domestic
litigant because it could obtain the advantages of the Federal Rules of Civil Procedure,
and that a foreign company would have an economic
Page 482 U. S. 566
competitive advantage because it would be subject to less extensive discovery -- by
exercising their discretionary powers to control discovery in order to ensure fairness to
both parties. A court may "make any order which justice requires" to limit discovery,
including an order permitting discovery only on specified terms and conditions, by a
particular discovery method, or with limitation in scope to certain matters. Fed.Rule
Civ.Proc. 26(c). If, for instance, resort to the Convention procedures would put one party
at a disadvantage, any possible unfairness could be prevented by postponing that
party's obligation to respond to discovery requests until completion of the foreign
discovery. Moreover, the Court's arguments focus on the nationality of the parties,
while it is actually the locus of the evidence that is relevant to use of the Convention: a
foreign litigant trying to secure evidence from a foreign branch of an American litigant
might also be required to resort to the Convention.
The Court's third fairness concern is illusory. It fears that a domestic litigant suing a
national of a state that is not a party to the Convention would have an advantage over a
litigant suing a national of a contracting state. This statement completely ignores the
very purpose of the Convention. The negotiations were proposed by the United States
in order to facilitate discovery, not to hamper litigants. Dissimilar treatment of litigants
similarly situated does occur, but in the manner opposite to that perceived by the Court.
Those who sue nationals of noncontracting states are disadvantaged by the
unavailability of the Convention procedures. This is an unavoidable inequality inherent
in the benefits conferred by any treaty that is less than universally ratified.
In most instances, use of the Convention will serve to advance United States interests,
particularly when those interests are viewed in a context larger than the immediate
interest of the litigants' discovery. The approach I propose is not a rigid per se rule that
would require first use of the Convention without regard to strong indications that no
evidence
Page 482 U. S. 567
would be forthcoming. All too often, however, courts have simply assumed that resort
to the Convention would be unproductive, and have embarked on speculation about
foreign procedures and interpretations.See, e.g., International Society for Krishna
Consciousness, Inc. v. Lee, 105 F.R.D. 435, 449-450 (SDNY 1984); Graco, Inc. v. Kremlin,
Inc., 101 F.R.D. 503, 509-512 (ND Ill.1984). When resort to the Convention would be
futile, a court has no choice but to resort to a traditional comity analysis. But even then,
an attempt to use the Convention will often be the best way to discover if it will be
successful, particularly in the present state of general inexperience with the
implementation of its procedures by the various contracting states. An attempt to use
the Convention will open a dialogue with the authorities in the foreign state, and, in that
way, a United States court can obtain an authoritative answer as to the limits on what it
can achieve with a discovery request in a particular contracting state.
The final component of a comity analysis is to consider if there is a course that furthers,
rather than impedes, the development of an ordered international system. A
functioning system for solving disputes across borders serves many values, among them
predictability, fairness, ease of commercial interactions, and "stability through
satisfaction of mutual expectations." Laker Airways, Ltd. v. Sabena, Belgian World
Airlines, 235 U.S.App.D.C. at 235, 731 F.2d at 937. These interests are common to all
nations, including the United States.
Use of the Convention would help develop methods for transnational litigation by
placing officials in a position to communicate directly about conflicts that arise during
discovery, thus enabling them to promote a reduction in those conflicts. In a broader
framework, courts that use the Convention will avoid foreign perceptions of unfairness
that result when United States courts show insensitivity to the interests
Page 482 U. S. 568
safeguarded by foreign legal regimes. Because of the position of the United States,
economically, politically, and militarily, many countries may be reluctant to oppose
discovery orders of United States courts. Foreign acquiescence to orders that ignore the
Convention, however, is likely to carry a price tag of accumulating resentment, with the
predictable long-term political cost that cooperation will be withheld in other matters.
Use of the Convention is a simple step to take toward avoiding that unnecessary and
undesirable consequence.
IV
I can only hope that courts faced with discovery requests for materials in foreign
countries will avoid the parochial views that too often have characterized the decisions
to date. Many of the considerations that lead me to the conclusion that there should be
a general presumption favoring use of the Convention should also carry force when
courts analyze particular cases. The majority fails to offer guidance in this endeavor, and
thus it has missed its opportunity to provide predictable and effective procedures for
international litigants in United States courts. It now falls to the lower courts to
recognize the needs of the international commercial system and the accommodation of
those needs already endorsed by the political branches and embodied in the
Convention. To the extent indicated, I respectfully dissent.
G.R. No. 158857 November 11, 2005
PFEGER R. DULAY, GODOFREDO S. DULAY, SR., ROWENA R. DULAY, ENDZELIUS R.
DULAY, GODOFREDO R. DULAY, JR., JIMPSEY R. DULAY, SHERYL R. DULAY, FLORDELIZA
R. DULAY, BENITA R. DULAY, and MARICOR L. DULAY, represented by their Attorney-
In-Fact, PFEGER R. DULAY, Petitioners,
vs.
RODRIGO S. DULAY, Respondent.
DECISION
Tinga, J.:
The instant petition seeks the review of the Decision1 dated 30 May
2002 and Resolution2 dated 28 May 2003 of the Court of Appeals in CA-G.R. SP No.
66993 entitled "Pfeger R. Dulay v. Hon. Alicia B. Gonzales-Decano, etc. and Rodrigo S.
Dulay."
In a complaint3 for recovery of his bank deposit with prayer for a writ of attachment and
damages, Rodrigo S. Dulay, a naturalized American citizen, alleged that upon his petition
sometime in October of 1996, his brother Godofredo S. Dulay, Sr. and nephew Pfeger R.
Dulay immigrated to the United States of America. The two stayed with him in his house
at Claremont, Massachusetts. Godofredo, however, decided to return to the Philippines
because he could not endure the weather. Pfeger stayed behind to take care of Rodrigo.
Having nurtured affection, love and trust for his nephew Pfeger, Rodrigo opened a trust
account with the Bank of Boston on 27 January 1997 with a deposit of Two Hundred
Thirty Thousand U.S. Dollars ($230,000.00), naming Pfeger as trustee thereof. Five
months later, Pfeger left Rodrigo’s house allegedly to join his girlfriend in California.
Rodrigo learned only later that Pfeger actually went back to the Philippines. Pfeger
returned to the United States in November of 1997, but after a brief stay returned again
to the Philippines where he went on a spending binge. Upon knowing this, Rodrigo
verified the status of his account with the Bank of Boston, and to his shock and dismay
discovered that Pfeger had already emptied the account. Rodrigo additionally claimed
that Pfeger used the money from said account to buy several vehicles, loan money to
several people, open bank accounts for his siblings, and buy a house and lot and jewelry
for his wife. Whatever was left of the account was allegedly transferred to Pfeger’s
father, Godofredo.4
Denying the accusations, respondent claimed that the money deposited in the name of
Pfeger was his own money and not Rodrigo’s. They assailed the admissibility of the
Statement of Account and the supporting Affidavit attached to the Complaint. For his
part, Pfeger asserted that he spent his own money.5
Rodrigo filed a petition for the issuance of letters rogatory in order to get the
depositions of several witnesses residing abroad.6 Petitioners, on the other hand,
moved to be allowed to file cross-examination questions to respondent’s written
interrogatories, which the trial court granted.7 In an order dated 1 December 1999, the
trial court stated:
These are petitions for letters Rogatory dated November 11, 1999 and November 22,
1999 respectively praying that this Court order the Clerk of Court to issue any order
requiring the Clerk of Court in Boston Ma., USA to conduct the examination of the
following parties:
1. Mr. Rodrigo S. Dulay of 38 Claremont St. Malden, Ma., USA, and
2. Manager or authorized representative of the Bank of Boston, Ma., USA and for the
above-named persons to answer the attached questions (direct and cross) attached to
each petition, and for the Clerk of Court of Boston to forward the same questions and
answers as soon as the same were already properly answered.
SO ORDERED.8
Meanwhile, petitioners filed a motion to dismiss the complaint on the ground of failure
to prosecute.9 This was however denied by the trial court, which instead allowed
Rodrigo to complete his depositions.10 As it turned out, however, the depositions could
not be taken before the Clerk of Court of Massachusetts, but were taken instead before
a notary public in New York.
On 2 February 2000, Rodrigo submitted to the trial court his answers to the
interrogatories and cross interrogatories of petitioners given before a notary public in
the United States. Thereafter, petitioners filed their Motion Reiterating Motion to
Dismiss Dated July 10, 2000,11 which the trial court denied in its 28 September
2000 Order.12 In the same Order, the trial court directed respondent to have the written
and cross interrogatories taken by the notary public authenticated by the consulate.
Thus, respondent filed a motion to withdraw the answers so that he could have them
authenticated by a Philippine consul in the United States.13
On 10 January 2001, petitioners filed an Omnibus Motion,14 praying that the written
interrogatories be declared inadmissible and reiterating their prayer for the dismissal of
the complaint. The lower court denied the motion on 20 February 2001, at the same
time directing the archival of the case while waiting for the documents from the United
States.15 According to the trial court, the dismissal of the case is improper considering
that Rodrigo had already commenced presenting his evidence and that it is mandated to
hear the evidence on the counterclaims of the petitioners. Anent the objection to the
admission of the answers to the written interrogatories, the trial court stated that the
deposition taken before the Notary Public from New York, whose authority was duly
certified by the Philippine Consul in New York, substantially complied with the Rules of
Court.16 Thus, on 31 August 2001, the trial court ordered the admission of the assailed
documents. Petitioners moved for the reconsideration of the order but the motion was
denied.17
Imputing grave abuse of discretion on the part of the trial judge, petitioners filed before
the Court of Appeals an original action for certiorari on 7 October 2001. The appellate
court dismissed the petition, finding that the questioned depositions were accomplished
in substantial compliance with the Rules of Court.18 According to the Court of Appeals,
Rodrigo could not be faulted for the incidental delays in the proceedings, which were
after all caused by the refusal of the American tribunal which brushed aside the letters
rogatory issued by the trial court. Putting premium on merit rather than on technicality,
the Court of Appeals held that "laxity in the application of the procedure is not
tantamount to laxity in the rendition of justice when equitable circumstances exist to
warrant the same."19Petitioners filed a motion for reconsideration to no avail as it was
denied by the Court of Appeals.20
In the present petition for review, petitioners argue that the Court of Appeals erred
when it refused to dismiss the case at the trial court level despite respondent’s failure to
prosecute his case with reasonable diligence. According to petitioners, the major delays
in the litigation of the case were caused by respondent’s failure to send on time the
needed documents to the trial court.21 In addition, petitioners allege that contrary to
the ruling of the Court of Appeals the documents submitted by respondent were not
taken in substantial compliance with the directive of the trial court itself but in violation
of Sections 11, 12, and 14, Rule 23 of the Rules of Court.22
The Court is not persuaded.
Deposition is chiefly a mode of discovery, the primary function of which is to
supplement the pleadings for the purpose of disclosing the real points of dispute
between the parties and affording an adequate factual basis during the preparation for
trial. It may be taken with leave of court after jurisdiction has been obtained over any
defendant or over property that is the subject of the action; or, without such leave, after
an answer has been served. A party’s right to avail itself of this procedure is "well-nigh
unrestricted" if the matters inquired into are otherwise relevant and not privileged, and
the inquiry is made in good faith and within the bounds of the law. 23 Nevertheless, the
use of discovery procedures is directed to the sound discretion of the trial
courts,24 which, in general, are given wide latitude in granting motions for discovery in
order to enable the parties to prepare for trial or otherwise to settle the controversy
prior thereto.25
While the letters rogatory issued by the trial court specifically directed the Clerk of
Court of Boston to take the depositions needed in the case, it became impossible to
follow the directive since the Clerk of Court of Boston merely brushed it aside and
refused to cooperate. Respondent cannot be faulted for the resultant delay brought
about by this circumstance. Neither can the trial court be faulted for allowing the
admission of the depositions taken not in strict adherence to its original directive, nor
for directing the petitioner to have the depositions authenticated. Obviously, it was not
within the trial court’s power, much less the respondent’s to force the Clerk of Court of
Boston to have the deposition taken before it. It would be illogical and unreasonable to
expect respondent to comply with the letters rogatory without the cooperation of the
very institution or personality named in the letters rogatory and requested to examine
the witnesses. After all, while a court had the authority to entertain a discovery request,
it is not required to provide judicial assistance thereto.26 This reality was recognized by
the trial court when it ordered respondent to have the questioned depositions
authenticated by the Philippine consulate. Indeed, refusing the allowance of the
depositions in issue would be going directly against the purpose of taking the
depositions in the first place, that is, the disclosure of facts which are relevant to the
proceedings in court.
More importantly, the Court finds that respondent substantially complied with the
requirements for depositions taken in foreign countries.
In our jurisdiction, depositions in foreign countries may be taken: (a) on notice before a
secretary of embassy or legation, consul general, consul, vice consul, or consular agent
of the Republic of the Philippines; (b) before such person or officer as may be appointed
by commission or under letters rogatory; or (c) before any person authorized to
administer oaths as stipulated in writing by the parties.27 While letters rogatory are
requests to foreign tribunals, commissions are directives to officials of the issuing
jurisdiction.28
Generally, a commission is an instrument issued by a court of justice, or other
competent tribunal, directed to a magistrate by his official designation or to an
individual by name, authorizing him to take the depositions of the witnesses named
therein, while a letter rogatory is a request to a foreign court to give its aid, backed by
its
power, to secure desired information.29 Commissions are taken in accordance with the
rules laid down by the court issuing the commission, while in letters rogatory, the
methods of procedure are under the control of the foreign tribunal.30
Leave of court is not required when the deposition is to be taken before a secretary of
embassy or legation, consul general, consul, vice-consul or consular agent of the
Republic of the Philippines and the defendant’s answer has already been
served.31 However, if the deposition is to be taken in a foreign country where the
Philippines has no secretary of embassy or legation, consul general, consul, vice-consul
or consular agent, it may be taken only before such person or officer as may be
appointed by commission or under letters rogatory.32

In the instant case, the authentication made by the consul was a ratification of the
authority of the notary public who took the questioned depositions. The deposition was,
in effect, obtained through a commission, and no longer through letters rogatory. It
must be noted that this move was even sanctioned by the trial court by virtue of
its Orderdated 28 September 2000.33 With the ratification of the depositions in issue,
there is no more impediment to their admissibility.

Besides, the allowance of the deposition can not be said to have caused any prejudice to
the adverse party. They were given the opportunity to cross-examine the witnesses
through their cross-interrogatories, which were in turn answered by the deponents.
Save for the complaint of delay in the proceedings, petitioners were unable to point out
any injury they suffered as a result of the trial court’s action.

The ends of justice are reached not only through the speedy disposal of cases, but more
importantly, through a meticulous and comprehensive evaluation of the merits of the
case. The parties’ right to be given full opportunity to ventilate their cases should not be
hindered by a strict adherence to technicalities. After all, as this Court has so often
enunciated, rules of procedure are not inflexible tools designed to hinder or delay, but
to facilitate and promote the administration of justice.34 A strict and rigid application of
rules, resulting in technicalities that tend to frustrate rather than promote substantial
justice, must be avoided.35

WHEREFORE, premises considered, the petition is DENIED. Costs against petitioners.

SO ORDERED.
G.R. No. 125078 May 30, 2011
BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A.
ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE
ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N.
ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA,
RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E.
ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO,
HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M.
ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P.
ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON
M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI,
HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO
BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO
BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B.
BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS,
VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C.
CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A.
CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO,
VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA,
VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAÑARES,
FLAVIANO C. CASTAÑARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B.
CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE
V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO,
CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M.
DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P.
DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG,
DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA
CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE
P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ,
LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R.
DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO,
NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M.
EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA,
DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA
ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA,
LAZARO A. ESPAÑOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D.
FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR,
ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C.
GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA,
BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V.
GIMENA, EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE
GONZALES, AMADO J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL
H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO,
TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B.
JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T.
JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C.
LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO
J. LAS PEÑAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO
LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAÑEZ, CONCISO L.
LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR.,
EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D.
MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B.
MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA
MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES,
EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R.
MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA,
ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L.
MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA, JUANITO P. MONDIA,
RICARDO MONTAÑO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUÑEZ,
CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS,
NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR.,
TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO
M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J.
PADILLA, NELSON G. PADIOS, SR., FRNACISCO G. PAGUNTALAN, RENE B. PALENCIA,
MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO
PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEÑARANDA,
ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEÑOS,
ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y.
PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO
QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F.
REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C.
ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L.
SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN G. SALIGONAN, VICTORINO
SALOMON, GENEROSO J. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN,
EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A.
SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO
SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA,
CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M.
SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO
L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY,
MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A.
TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E.
TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO
TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO
TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M.
URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO,
RODOLFO VIDAL, WALTER VILLAFAÑE, DANTE VILLALVA, PERIGRINO P. VILLARAN,
JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS,
DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA,
EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA,
FELIX N. ZABALA and GRACIANO ZAMORA, Petitioners,
vs.
HON. TEODORO A. DIZON, JR., Presiding Judge, Regional Trial Court, Branch 37,
General Santos City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL
CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO.,
INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL
FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS,
INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 125598
THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL
CORPORATION, Petitioners,
vs.
BERNABE L. NAVIDA, JOSE P. ABANGAN, JR., CEFERINO P. ABARQUEZ, ORLANDITO A.
ABISON, FELIPE ADAYA, ALBERTO R. AFRICA, BENJAMIN M. ALBAO, FELIPE
ALCANTARA, NUMERIANO S. ALCARIA, FERNANDO C. ALEJADO, LEOPOLDO N.
ALFONSO, FLORO I. ALMODIEL, ANTONIO B. ALVARADO, ELEANOR AMOLATA,
RODOLFO P. ANCORDA, TRIFINO F. ANDRADA, BERT B. ANOCHE, RAMON E.
ANTECRISTO, ISAGANI D. ANTINO, DOMINGO ANTOPINA, MANSUETO M. APARICIO,
HERMINIGILDO AQUINO, MARCELO S. AQUINO, JR., FELIPE P. ARANIA, ULYSES M.
ARAS, ARSENIO ARCE, RUPERTO G. ARINZOL, MIGUEL G. ARINZOL, EDGARADO P.
ARONG, RODRIGO D.R. ASTRALABIO, RONNIE BACAYO, SOFRONIO BALINGIT, NELSON
M. BALLENA, EMNIANO BALMONTE, MAXIMO M. BANGI, SALVADOR M. BANGI,
HERMOGENES T. BARBECHO, ARSENIO B. BARBERO, DIOSDADO BARREDO, VIRGILIO
BASAS, ALEJANDRO G. BATULAN, DOMINGO A. BAUTISTA, VICTOR BAYANI, BENIGNO
BESARES, RUFINO BETITO, GERARDO A. BONIAO, CARLO B. BUBUNGAN, FERNANDO B.
BUENAVISTA, ALEJANDRINO H. BUENO, TOMAS P. BUENO, LEONARDO M. BURDEOS,
VICENTE P. BURGOS, MARCELINO J. CABALUNA, DIOSDADO CABILING, EMETRIO C.
CACHUELA, BRAULIO B. CADIVIDA, JR., SAMSON C. CAEL, DANIEL B. CAJURAO, REY A.
CALISO, NORBERTO F. CALUMPAG, CELESTINO CALUMPAG, LORETO CAMACHO,
VICTORIANO CANETE, DOMINADOR P. CANTILLO, FRUCTUSO P. CARBAJOSA,
VICTORINO S. CARLOS, VICTOR CARLOS, GEORGE M. CASSION, JAIME S. CASTAÑARES,
FLAVIANO C. CASTAÑARES, ELPIDIO CATUBAY, NATHANIEL B. CAUSANG, BEOFIL B.
CAUSING, ADRIANO R. CEJAS, CIRILO G. CERERA, SR., CRISTITUTO M. CEREZO, DANTE
V. CONCHA, ALBERT CORNELIO, CESAR CORTES, NOEL Y. CORTEZ, SERNUE CREDO,
CORNELIO A. CRESENCIO, ALEX CRUZ, ROGER CRUZ, RANSAM CRUZ, CANUTO M.
DADULA, ROMEO L. DALDE, ZACARIAS DAMBAAN, ELISEO DAPROZA, VIRGILIO P.
DAWAL, TESIFREDO I. DE TOMAS, GAMALLER P. DEANG, CARMELINO P. DEANG,
DIOSDADO P. DEANG, DOMINGO A. DEANG, FELIPE R. DEANG, JR., JULIETO S. DELA
CRUZ, ELIEZER R. DELA TORRE, JEFFREY R. DELA TORRE, RAUL DEMONTEVERDE, FELIPE
P. DENOLAN, RUBENCIO P. DENOY, RODRIGO M. DERMIL, ROLANDO B. DIAZ,
LORENZO DIEGO, JOVENCIO DIEGO, SATURNINO DIEGO, GREGORIO DIONG, AMADO R.
DIZON, FE DIZON, VIRGILO M. DOMANTAY, LEO S. DONATO, DOMINADOR L. DOSADO,
NESTOR DUMALAG, FREDDIE DURAN, SR., MARIO C. ECHIVERE, AQUILLO M.
EMBRADORA, MIGUEL EMNACE, RIO T. EMPAS, EFRAIM ENGLIS, ANICETO ENOPIA,
DIOCENE ENTECOSA, RUBENTITO D. ENTECOSA, AVELINO C. ENTERO, FORTUNATA
ENTRADA, ROGELIO P. EROY, RODOLFO M. ESCAMILLA, SERGIO C. ESCANTILLA,
LAZARO A. ESPAÑOLA, EULOGIO M. ETURMA, PRIMO P. FERNANDEZ, EDILBERTO D.
FERNANDO, GREGORIO S. FERNANDO, VICENTE P. FERRER, MARCELO T. FLOR,
ANTONIO M. FLORES, REDENTOR T. FLOREZA, NORBERTO J. FUENTES, RICARDO C.
GABUTAN, PEDRO D.V. GALEOS, ARNULFO F. GALEOS, EDGARDO V. GARCESA,
BERNARDO P. GENTOBA, EDUARDO P. GENTOBA, VICTORIO B. GIDO, ROLANDO V.
GIMENA, EARLWIN L. GINGOYO, ERNESTO GOLEZ, JUANITO G. GONZAGA, ONOFRE
GONZALES, AMADO J. GUMERE, LEONARDO M. GUSTO, ALEJANDRO G. HALILI, NOEL
H. HERCEDA, EMILIO V. HERMONDO, CLAUDIO HIPOLITO, TORIBIO S ILLUSORIO,
TEODURO G. IMPANG, JR., GIL A. JALBUNA, HERMIE L. JALICO, ARMANDO B.
JAMERLAN, NARCISO JAPAY, LIBURO C. JAVINAS, ALEJANDO S. JIMENEZ, FEDERICO T.
JUCAR, NAPOLEON T. JUMALON, OSCAR JUNSAY, ANASTACIO D. LABANA, CARLOS C.
LABAY, AVELINO L. LAFORTEZA, LOE LAGUMBAY, NORBETO D. LAMPERNIS, ROLANDO
J. LAS PEÑAS, ISMAEL LASDOCE, RENOLO L. LEBRILLA, CAMILO G. LEDRES, ANASTACIO
LLANOS, ARMANDO A. LLIDO, CARLITO LOPEZ, ARISTON LOS BAÑEZ, CONCISO L.
LOVITOS, ARQUILLANO M. LOZADA, RODOLFO C. LUMAKIN, PRIMITIVO LUNTAO, JR.,
EMILIO S. MABASA, JR., JUANITO A. MACALISANG, TEOTIMO L. MADULIN, JOSEPH D.
MAGALLON, PEDRO P. MAGLASANG, MARIO G. MALAGAMBA, JAIME B.
MAMARADLO, PANFILO A. MANADA, SR., RICARDO S. MANDANI, CONCHITA
MANDANI, ALBERTO T. MANGGA, ALEJANDRO A. MANSANES, RUFINO T. MANSANES,
EUTIQUIO P. MANSANES, ALCIO P. MARATAS, AGAPITO D. MARQUEZ, RICARDO R.
MASIGLAT, DENDERIA MATABANG, ARNELO N. MATILLANO, HERNANI C. MEJORADA,
ROSITA MENDOZA, GREGORIO R. MESA, RENATO N. MILLADO, ANTONIO L.
MOCORRO, ALBERTO M. MOLINA, JR., DOMINGO P. MONDIA, JUANITO P. MONDIA,
RICARDO MONTAÑO, RAUL T. MONTEJO, ROGELIO MUNAR, RODOLFO E. MUÑEZ,
CRESENCIO NARCISO, PANFILO C. NARCISO, BRICS P. NECOR, MOISES P. NICOLAS,
NEMESIO G. NICOLAS, ALFREDO NOFIEL, FELIX T. NOVENA, MARCELO P. OBTIAL, SR.,
TEODORO B. OCRETO, BIBIANO C. ODI, ALFREDO M. OPERIO, TEOTISTO B. OPON, IZRO
M. ORACION, ALAN E. ORANAS, ELPEDIO T. OSIAS, ERNESTO M. PABIONA, NARCISO J.
PADILLA, NELSON G. PADIOS, SR., FRANCISCO G. PAGUNTALAN, RENE B. PALENCIA,
MICHAEL P. PALOMAR, VIRGILIO E. PANILAGAO, NOLITO C. PANULIN, ROMEO
PARAGUAS, NESTOR B. PASTERA, VICENTE Q. PEDAZO, EDGAR M. PEÑARANDA,
ILUMINIDO B. PERACULLO, ANTONIO C. PEREZ, DOMINGO PEREZ, OSCAR C. PLEÑOS,
ANTONIETO POLANCOS, SERAFIN G. PRIETO, ZENAIDA PROVIDO, FERNANDO Y.
PROVIDO, ERNESTO QUERO, ELEAZAR QUIJARDO, WILLIAM U. QUINTOY, LAURO
QUISTADIO, ROGELIO RABADON, MARCELINO M. RELIZAN, RAUL A. REYES, OCTAVIO F.
REYES, EDDIE M. RINCOR, EMMANUEL RIVAS, RODULFO RIVAS, BIENVENIDO C.
ROMANCA, JACINTO ROMOC, ROMEO S. ROMUALDO, ALBERTO ROSARIO, ROMEO L.
SABIDO, SIMON SAGNIP, TIMOTEO SALIG, ROMAN B. SALIGONAN, VICTORINO
SALOMON, GENEROSO M. SALONGKONG, RODOLFO E. SALVANI, JIMMY A. SAMELIN,
EDUARDO A. SAMELIN, ANDRES A. SAMELIN, GEORGE SAMELIN, ROMEO A.
SARAOSOS, RUDIGELIO S. SARMIENTO, CIRILO SAYAANG, JARLO SAYSON, LEONCIO
SERDONCILLO, RODOLFO C. SERRANO, NESTOR G. SEVILLA, SIMEON F. SIMBA,
CATALINO S. SIMTIM, SERAFIN T. SINSUANGCO, EDUARDO A. SOLA, VICTORINO M.
SOLOMON, JAIME B. SUFICIENCIA, LYNDON SUMAJIT, ALFREDO P. SUMAJIT, ALFREDO
L. SUMAJIT, PEDRO A. SUMARAGO, ERNESTO SUMILE, NESTOR S. SUMOG-OY,
MANUEL T. SUPAS, WILFREDO A. TABAQUE, CONSTANCIO L. TACULAD, EUFROCINO A.
TAGOTO, JR., SERAPIO TAHITIT, PANTALEON T. TAMASE, ERNESTO TARRE, MAGNO E.
TATOY, AVELINO TAYAPAD, SAMUEL S. TERRADO, APOLINARIO B. TICO, ORLANDO
TINACO, ALBERT G. TINAY, ANTONIO TOLEDO, ANTONIO M. TORREGOSA, ISABELO
TORRES, JIMMY C. TORRIBIO, EDUARDO Y. TUCLAOD, JACINTO UDAL, RICARDO M.
URBANO, ERNESTO G. VAFLOR, FILOMENO E. VALENZUELA, SALORIANO VELASCO,
RODOLFO VIDAL, WALTER VILLAFAÑE, DANTE VILLALVA, PERIGRINO P. VILLARAN,
JESUS L. VILLARBA, ELEAZAR D. VILLARBA, JENNY T. VILLAVA, HENRY C. VILLEGAS,
DELFIN C. WALOG, RODOLFO YAMBAO, EDGAR A. YARE, MANSUETO M. YBERA,
EDUARDO G. YUMANG, HENRY R. YUNGOT, ROMEO P. YUSON, ARSENIA ZABALA,
FELIX N. ZABALA, and GRACIANO ZAMORA, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 126654
CORNELIO ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO
ALEMAN, FIDEL ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA,
LEOPOLDO AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R.
ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON
ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA,
ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A.
BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN,
MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA,
ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO
CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR.,
PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M.
CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO,
CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C.
DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ,
QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA,
ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO,
RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G.
GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO,
HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS,
ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE,
ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M.
LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO
LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO
LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE,
RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP,
AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO
H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO
NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO
OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P.
PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG,
RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO,
ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO
RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO
ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD,
ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E.
TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO
TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA,
ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M. VILLEGAS, Petitioners,
vs.
THE HON. ROMEO D. MARASIGAN, Presiding Judge of Regional Trial Court, Branch 16,
Davao City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL CORP.,
STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD CO., INC.,
DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE TROPICAL
FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA BRANDS,
INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 127856
DEL MONTE FRESH PRODUCE N.A. and DEL MONTE TROPICAL FRUIT CO., Petitioners,
vs.
THE REGIONAL TRIAL COURT OF DAVAO CITY, BRANCHES 16 AND 13, CORNELIO
ABELLA, JR., IRENEO AGABATU, PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL
ALLERA, DOMINGO ALONZO, CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO
AMORADO, MARCELINO ANDIMAT, JORGE ANDOY, MARGARITO R. ANGELIA,
GREGOTIO APRIANO, ALFREDO A. ARARAO, BONIFACIO L. ARTIGAS, JERSON ASUAL,
SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J. BAHALLA, REYNALDO BAHAYA,
ANTONIO L. BALDAGO, CESAR N. BALTAZAR, DOMINADO A. BARING, ANTIPAS A.
BATINGAL, MARCIANO NATINGAL, MARINO BIBANCO, LEANDRO BILIRAN,
MARGARITO BLANCO, CATALINO BONGO, MELCHOR BRIGOLE, ELISEO BRINA,
ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO, CELSO M. BUSIA, RPDITO
CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC, CANDIDO CALO, JR.,
PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO, BONIFACIO M.
CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M. COMPENDIO,
CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR., RICADO C.
DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A. DIAZ,
QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA,
ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO,
RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G.
GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO,
HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS,
ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE,
ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M.
LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO
LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO
LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE,
RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP,
AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO
H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO
NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO
OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P.
PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG,
RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO,
ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO
RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO
ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD,
ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E.
TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO
TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA,
ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M.
VILLEGAS, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 128398
CHIQUITA BRANDS, INC., and CHIQUITA BRANDS INTERNATIONAL, INC., Petitioners,
vs.
HON. ANITA ALFELOR-ALAGABAN, in her capacity as Presiding Judge of the Regional
Trial Court, Davao City, Branch 13, CORNELIO ABELLA, JR., IRENEO AGABATU,
PRUDENCIO ALDEPOLIA, ARTEMIO ALEMAN, FIDEL ALLERA, DOMINGO ALONZO,
CORNELIO AMORA, FELIPE G. AMORA, LEOPOLDO AMORADO, MARCELINO ANDIMAT,
JORGE ANDOY, MARGARITO R. ANGELIA, GREGOTIO APRIANO, ALFREDO A. ARARAO,
BONIFACIO L. ARTIGAS, JERSON ASUAL, SERAFIN AZUCENA, FELIX M. BADOY, JULIAN J.
BAHALLA, REYNALDO BAHAYA, ANTONIO L. BALDAGO, CESAR N. BALTAZAR,
DOMINADO A. BARING, ANTIPAS A. BATINGAL, MARCIANO NATINGAL, MARINO
BIBANCO, LEANDRO BILIRAN, MARGARITO BLANCO, CATALINO BONGO, MELCHOR
BRIGOLE, ELISEO BRINA, ROBERTO BRINA, LUIS BUGHAO, EDUARDO L. BURGUINZO,
CELSO M. BUSIA, RPDITO CABAGTE, RICARADO C. CABALLES, CARLITO A. CAINDOC,
CANDIDO CALO, JR., PEDRITO CAMPAS, FERNANDO R. CAPAROSO, DANILO CARILLO,
BONIFACIO M. CATCHA, FRANKLIN CLARAS, JOSE F. COLLAMAT, BERNARDO M.
COMPENDIO, CORNELIO COSTILLAS, ENERIO R. DAGAME, FELIMON DEBUMA, JR.,
RICADO C. DEIPARIME, GREGORIO S. DE LA PENA, JOSE G. DELUAO, JR., ELPEDIO A.
DIAZ, QUINTINO DISIPULO, JR., CESAR G. DONAYRE, JOSE DULABAY, JAIRO DUQUIZA,
ANTONIO ENGBINO, ALFREDO ESPINOSA, ALONZO FAILOG, JAIME FEROLINO,
RODOLFO L. GABITO, PEDRO G. GEMENTIZA, RICARDO A. GEROLAGA, RODULFO G.
GEROY, ROGELIO GONZAGA, ROLANDO GONZALES, MODESTO M. GODELOSAO,
HECTOR GUMBAN, CAMILO HINAG, LECERIO IGBALIC, SILVERIO E. IGCALINOS,
ALFREDO INTOD, OLEGARIO IYUMA, DOMINGO B. JAGMOC, JR., EDUARDO JARGUE,
ROLANDO A. LABASON, ROLANDO LACNO, VIRGILIO A. LADURA, CONSTANCIO M.
LAGURA, FRANCISCO LAMBAN, ENRIQUE LAQUERO, LUCIO B. LASACA, SISINO
LAURDEN, VIVENCIO LAWANGON, ANECITO LAYAN, FERNANDO P. LAYAO, MARDENIO
LAYAO, NEMENCIO C. LINAO, PEDRO LOCION, ENERIO LOOD, DIOSDADO MADATE,
RAMON MAGDOSA, NILO MAGLINTE, MARINO G. MALINAO, CARLITO MANACAP,
AURELIO A. MARO, CRISOSTOMO R. MIJARES, CESAR MONAPCO, SILVANO
MONCANO, EMILIO MONTAJES, CESAR B. MONTERO, CLEMENTE NAKANO, RODRIGO
H. NALAS, EMELIANO C. NAPITAN, JUANITO B. NARON, JR., LUCIO NASAKA, TEOFILO
NUNEZ, JORGE M. OLORVIDA, CANULO P. OLOY, DOROTEO S. OMBRETE, TEOFILIO
OMOSURA, MIGUEL ORALO, SUSANTO C. OTANA, JR., CHARLIE P. PADICA, ALFREDO P.
PALASPAS, CATALINO C. PANA, ERNESTO M. PASCUAL, BIENVENIDO PAYAG,
RESURRECCION PENOS, PEDRO PILAGO, ROMEO PRESBITERO, OMEO L. PRIEGO,
ELADIO QUIBOL, JESUS D. QUIBOL, MAGNO QUIZON, DIONISIO RAMOS, MAMERTO
RANISES, NESTOR B. REBUYA, RODRIGO REQUILMEN, ISIDRO RETANAL, CARLITO
ROBLE, GLICERIO V. ROSETE, TINOY G. SABINO, MELCHOR SALIGUMBA, SILVERIO
SILANGAN, ROBERTO SIVA, PACITA SUYMAN, CANILO TAJON, AVELINO TATAPOD,
ROMEO TAYCO, RENATO TAYCO, CONRADO TECSON, AGAPITO TECSON, ROMAN. E.
TEJERO, ALFREDO TILANDOCA, CARLOS B. TIMA, HERMONEGES TIRADOR, JOSELITO
TIRO, PASTOR T. TUNGKO, LEANDRO B. TURCAL, VICENTE URQUIZA, VICENTE VILLA,
ANTONIO P. VILLARAIZ, LEOPOLDO VILLAVITO and SAMUEL M.
VILLEGAS, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of
the Rules of Court, which arose out of two civil cases that were filed in different courts
but whose factual background and issues are closely intertwined.
The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3 dated May 20,
1996 of the Regional Trial Court (RTC) of General Santos City, Branch 37, in Civil Case No.
5617. The said Order decreed the dismissal of the case in view of the perceived lack of
jurisdiction of the RTC over the subject matter of the complaint. The petition in G.R. No.
125598 also challenges the Orders dated June 4, 19964 and July 9, 1996,5 which held
that the RTC of General Santos City no longer had jurisdiction to proceed with Civil Case
No. 5617.
6 7 8
On the other hand, the petitions in G.R. Nos. 126654, 127856, and 128398 seek the
reversal of the Order9 dated October 1, 1996 of the RTC of Davao City, Branch 16, in Civil
Case No. 24,251-96, which also dismissed the case on the ground of lack of jurisdiction.
G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the
Resolutions dated February 10, 1997,10 April 28, 199711 and March 10, 1999.12
The factual antecedents of the petitions are as follows:
Proceedings before the Texas Courts
Beginning 1993, a number of personal injury suits were filed in different Texas state
courts by citizens of twelve foreign countries, including the Philippines. The thousands
of plaintiffs sought damages for injuries they allegedly sustained from their exposure to
dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while
working on farms in 23 foreign countries. The cases were eventually transferred to, and
consolidated in, the Federal District Court for the Southern District of Texas, Houston
Division. The cases therein that involved plaintiffs from the Philippines were "Jorge
Colindres Carcamo, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No.
H-94-1359, and "Juan Ramon Valdez, et al. v. Shell Oil Co., et al.," which was docketed as
Civil Action No. H-95-1356. The defendants in the consolidated cases prayed for the
dismissal of all the actions under the doctrine of forum non conveniens.
In a Memorandum and Order dated July 11, 1995, the Federal District Court
conditionally granted the defendants’ motion to dismiss. Pertinently, the court ordered
that:
Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the
entry of this Memorandum and Order provided that defendants and third- and fourth-
party defendants have:
(1) participated in expedited discovery in the United States xxx;
(2) either waived or accepted service of process and waived any other jurisdictional
defense within 40 days after the entry of this Memorandum and Order in any action
commenced by a plaintiff in these actions in his home country or the country in which
his injury occurred. Any plaintiff desiring to bring such an action will do so within 30
days after the entry of this Memorandum and Order;
(3) waived within 40 days after the entry of this Memorandum and Order any
limitations-based defense that has matured since the commencement of these actions
in the courts of Texas;
(4) stipulated within 40 days after the entry of this Memorandum and Order that any
discovery conducted during the pendency of these actions may be used in any foreign
proceeding to the same extent as if it had been conducted in proceedings initiated
there; and
(5) submitted within 40 days after the entry of this Memorandum and Order an
agreement binding them to satisfy any final judgment rendered in favor of plaintiffs by a
foreign court.
xxxx
Notwithstanding the dismissals that may result from this Memorandum and Order, in
the event that the highest court of any foreign country finally affirms the dismissal for
lack of jurisdiction of an action commenced by a plaintiff in these actions in his home
country or the country in which he was injured, that plaintiff may return to this court
and, upon proper motion, the court will resume jurisdiction over the action as if the
case had never been dismissed for [forum non conveniens]. 13
Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and
125598
In accordance with the above Memorandum and Order, a total of 336 plaintiffs from
General Santos City (the petitioners in G.R. No. 125078, hereinafter referred to as
NAVIDA, et al.) filed a Joint Complaint14 in the RTC of General Santos City on August 10,
1995. The case was docketed as Civil Case No. 5617. Named as defendants therein were:
Shell Oil Co. (SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp.
(OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit Co., Standard
Fruit and Steamship Co. (hereinafter collectively referred to as DOLE); Chiquita Brands,
Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A.
and Del Monte Tropical Fruit Co. (hereinafter collectively referred to as DEL MONTE);
Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac
Chemical Corp. (The aforementioned defendants are hereinafter collectively referred to
as defendant companies.)
Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to
the reproductive systems which they allegedly suffered because of their exposure to
DBCP. They claimed, among others, that they were exposed to this chemical during the
early 1970’s up to the early 1980’s when they used the same in the banana plantations
where they worked at; and/or when they resided within the agricultural area where
such chemical was used. Navida, et al., claimed that their illnesses and injuries were due
to the fault or negligence of each of the defendant companies in that they produced,
sold and/or otherwise put into the stream of commerce DBCP-containing products.
According to NAVIDA, et al., they were allowed to be exposed to the said products,
which the defendant companies knew, or ought to have known, were highly injurious to
the former’s health and well-being.
Instead of answering the complaint, most of the defendant companies respectively filed
their Motions for Bill of Particulars.15 During the pendency of the motions, on March 13,
1996, NAVIDA, et al., filed an Amended Joint Complaint,16 excluding Dead Sea Bromine
Co., Ltd., Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as party
defendants.
Again, the remaining defendant companies filed their various Motions for Bill of
Particulars.17 On May 15, 1996, DOW filed an Answer with Counterclaim. 18
On May 20, 1996, without resolving the motions filed by the parties, the RTC of General
Santos City issued an Order dismissing the complaint. First, the trial court determined
that it did not have jurisdiction to hear the case, to wit:
THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT SHOULD BE
DISMISSED FOR LACK OF JURISDICTION
xxxx
The substance of the cause of action as stated in the complaint against the defendant
foreign companies cites activity on their part which took place abroad and had occurred
outside and beyond the territorial domain of the Philippines. These acts of defendants
cited in the complaint included the manufacture of pesticides, their packaging in
containers, their distribution through sale or other disposition, resulting in their
becoming part of the stream of commerce.
Accordingly, the subject matter stated in the complaint and which is uniquely particular
to the present case, consisted of activity or course of conduct engaged in by foreign
defendants outside Philippine territory, hence, outside and beyond the jurisdiction of
Philippine Courts, including the present Regional Trial Court.19
Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in
their complaint is a tort category that is not recognized in Philippine laws. Said the trial
court:
THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT FOREIGN
COMPANIES IS NOT WITHIN THE SUBJECT MATTER JURISDICTION OF THE REGIONAL
TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY WITHIN THE PURVIEW OF THE
PHILIPPINE LAW
The specific tort asserted against defendant foreign companies in the present complaint
is product liability tort. When the averments in the present complaint are examined in
terms of the particular categories of tort recognized in the Philippine Civil Code, it
becomes stark clear that such averments describe and identify the category of specific
tort known as product liability tort. This is necessarily so, because it is
the product manufactured by defendant foreign companies, which is asserted to be the
proximate cause of the damages sustained by the plaintiff workers, and the liability of
the defendant foreign companies, is premised on being the manufacturer of the
pesticides.
It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case,
if and only if the Civil Code of the Philippines, or a suppletory special law prescribes a
product liability tort, inclusive of and comprehending the specific tort described in the
complaint of the plaintiff workers.20
Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into
submitting their case to the Philippine courts, viz:
FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS
The Court views that the plaintiffs did not freely choose to file the instant action, but
rather were coerced to do so, merely to comply with the U.S. District Court’s Order
dated July 11, 1995, and in order to keep open to the plaintiffs the opportunity to return
to the U.S. District Court.21
Fourth, the trial court ascribed little significance to the voluntary appearance of the
defendant companies therein, thus:
THE DEFENDANTS’ SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS ILLUSORY
Defendants have appointed their agents authorized to accept service of
summons/processes in the Philippines pursuant to the agreement in the U.S. court that
defendants will voluntarily submit to the jurisdiction of this court. While it is true that
this court acquires jurisdiction over persons of the defendants through their voluntary
appearance, it appears that such voluntary appearance of the defendants in this case is
conditional. Thus in the "Defendants’ Amended Agreement Regarding Conditions of
Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S.
District Court, defendants declared that "(t)he authority of each designated
representative to accept service of process will become effective upon final dismissal of
these actions by the Court". The decision of the U.S. District Court dismissing the case is
not yet final and executory since both the plaintiffs and defendants appealed therefrom
(par. 3(h), 3(i), Amended Complaint). Consequently, since the authority of the agent of
the defendants in the Philippines is conditioned on the final adjudication of the case
pending with the U.S. courts, the acquisition of jurisdiction by this court over the
persons of the defendants is also conditional. x x x.
The appointment of agents by the defendants, being subject to a suspensive condition,
thus produces no legal effect and is ineffective at the moment. 22
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the
case in the Philippine courts violated the rules on forum shopping and litis pendencia.
The trial court expounded:
THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING
This court frowns upon the fact that the parties herein are both vigorously pursuing
their appeal of the decision of the U.S. District court dismissing the case filed thereat. To
allow the parties to litigate in this court when they are actively pursuing the same cases
in another forum, violates the rule on ‘forum shopping’ so abhorred in this jurisdiction. x
x x.
xxxx
THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN JURISDICTION
Moreover, the filing of the case in the U.S. courts divested this court of its own
jurisdiction. This court takes note that the U.S. District Court did not decline jurisdiction
over the cause of action. The case was dismissed on the ground of forum non
conveniens, which is really a matter of venue. By taking cognizance of the case, the U.S.
District Court has, in essence, concurrent jurisdiction with this court over the subject
matter of this case. It is settled that initial acquisition of jurisdiction divests another of
its own jurisdiction. x x x.
xxxx
THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"
Furthermore, the case filed in the U.S. court involves the same parties, same rights and
interests, as in this case. There exists litis pendencia since there are two cases involving
the same parties and interests. The court would like to emphasize that in accordance
with the rule on litis pendencia x x x; the subsequent case must be dismissed. Applying
the foregoing [precept] to the case-at-bar, this court concludes that since the case
between the parties in the U.S. is still pending, then this case is barred by the rule on
"litis pendencia."23
In fine, the trial court held that:
It behooves this Court, then to dismiss this case. For to continue with these proceedings,
would be violative of the constitutional provision on the Bill of Rights guaranteeing
speedy disposition of cases (Ref. Sec. 16, Article III, Constitution). The court has no other
choice. To insist on further proceedings with this case, as it is now presented, might
accord this court a charming appearance. But the same insistence would actually thwart
the very ends of justice which it seeks to achieve.
This evaluation and action is made not on account of but rather with due consideration
to the fact that the dismissal of this case does not necessarily deprive the parties –
especially the plaintiffs – of their possible remedies. The court is cognizant that the
Federal Court may resume proceedings of that earlier case between the herein parties
involving the same acts or omissions as in this case.
WHEREFORE, in view of the foregoing considerations, this case is now considered
DISMISSED.24
On June 4, 1996, the RTC of General Santos City likewise issued an Order,25 dismissing
DOW’s Answer with Counterclaim.
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration 26 of the RTC
Order dated May 20, 1996, while DOW filed a motion for reconsideration 27 of the RTC
Order dated June 4, 1996. Subsequently, DOW and OCCIDENTAL also filed a Joint
Motion for Reconsideration28 of the RTC Order dated May 20, 1996.
In an Order29 dated July 9, 1996, the RTC of General Santos City declared that it had
already lost its jurisdiction over the case as it took into consideration the Manifestation
of the counsel of NAVIDA, et al., which stated that the latter had already filed a petition
for review on certiorari before this Court.
CHIQUITA and SHELL filed their motions for reconsideration 30 of the above order.
On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to
assail the RTC Order dated May 20, 1996, which was docketed as G.R. No. 125078.
The RTC of General Santos City then issued an Order31 dated August 14, 1996, which
merely noted the incidents still pending in Civil Case No. 5617 and reiterated that it no
longer had any jurisdiction over the case.
On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on
Certiorari,32 challenging the orders of the RTC of General Santos City dated May 20,
1996, June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No. 125598.
In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred
in ruling that it has no jurisdiction over the subject matter of the case as well as the
persons of the defendant companies.
In a Resolution33 dated October 7, 1996, this Court resolved to consolidate G.R. No.
125598 with G.R. No. 125078.
CHIQUITA filed a Petition for Review on Certiorari,34 which sought the reversal of the
RTC Orders dated May 20, 1996, July 9, 1996 and August 14, 1996. The petition was
docketed as G.R. No. 126018. In a Resolution35 dated November 13, 1996, the Court
dismissed the aforesaid petition for failure of CHIQUITA to show that the RTC
committed grave abuse of discretion. CHIQUITA filed a Motion for
Reconsideration,36 but the same was denied through a Resolution37 dated January 27,
1997.
Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856,
and 128398
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL
MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155
plaintiffs from Davao City. This case was docketed as Civil Case No. 24,251-96. These
plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.)
amended their Joint-Complaint on May 21, 1996.38
Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the
banana plantation and/or as residents near the said plantation, they were made to use
and/or were exposed to nematocides, which contained the chemical DBCP. According to
ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health,
including, but not limited to, sterility and severe injuries to their reproductive
capacities."39 ABELLA, et al., claimed that the defendant companies manufactured,
produced, sold, distributed, used, and/or made available in commerce, DBCP without
warning the users of its hazardous effects on health, and without providing instructions
on its proper use and application, which the defendant companies knew or ought to
have known, had they exercised ordinary care and prudence.
Except for DOW, the other defendant companies filed their respective motions for bill of
particulars to which ABELLA, et al., filed their opposition. DOW and DEL MONTE filed
their respective Answers dated May 17, 1996 and June 24, 1996.
The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated
October 1, 1996, which, in its entirety, reads:
Upon a thorough review of the Complaint and Amended Complaint For: Damages filed
by the plaintiffs against the defendants Shell Oil Company, DOW Chemicals Company,
Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit and
Steamship, DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc.,
Chiquita Brands International, Del Monte Fresh Produce, N.A. and Del Monte Tropical
Fruits Co., all foreign corporations with Philippine Representatives, the Court, as
correctly pointed out by one of the defendants, is convinced that plaintiffs "would have
this Honorable Court dismiss the case to pave the way for their getting an affirmance by
the Supreme Court" (#10 of Defendants’ Del Monte Fresh Produce, N.A. and Del Monte
Tropical Fruit Co., Reply to Opposition dated July 22, 1996). Consider these:
1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in
the Philippines; they have no agents as well (par. 18); plaintiffs are suing the defendants
for tortuous acts committed by these foreign corporations on their respective countries,
as plaintiffs, after having elected to sue in the place of defendants’ residence, are now
compelled by a decision of a Texas District Court to file cases under torts in this
jurisdiction for causes of actions which occurred abroad (par. 19); a petition was filed by
same plaintiffs against same defendants in the Courts of Texas, USA, plaintiffs seeking
for payment of damages based on negligence, strict liability, conspiracy and
international tort theories (par. 27); upon defendants’ Motion to Dismiss on Forum non
[conveniens], said petition was provisionally dismissed on condition that these cases be
filed in the Philippines or before 11 August 1995 (Philippine date; Should the Philippine
Courts refuse or deny jurisdiction, the U. S. Courts will reassume jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal
District Court issued a Memorandum and Order conditionally dismissing several of the
consolidated actions including those filed by the Filipino complainants. One of the
conditions imposed was for the plaintiffs to file actions in their home countries or the
countries in which they were injured x x x. Notwithstanding, the Memorandum and
[O]rder further provided that should the highest court of any foreign country affirm the
dismissal for lack of jurisdictions over these actions filed by the plaintiffs in their home
countries [or] the countries where they were injured, the said plaintiffs may return to
that court and, upon proper motion, the Court will resume jurisdiction as if the case had
never been dismissed for forum non conveniens.
The Court however is constrained to dismiss the case at bar not solely on the basis of
the above but because it shares the opinion of legal experts given in the interview made
by the Inquirer in its Special report "Pesticide Cause Mass Sterility," to wit:
1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The
Philippines should be an inconvenient forum to file this kind of damage suit against
foreign companies since the causes of action alleged in the petition do not exist under
Philippine laws. There has been no decided case in Philippine Jurisprudence awarding to
those adversely affected by DBCP. This means there is no available evidence which will
prove and disprove the relation between sterility and DBCP.
2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is
allowed in the Philippines the device has been employed strictly. Mass sterility will not
qualify as a class suit injury within the contemplation of Philippine statute.
3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of
doctrine here that permits these causes to be heard. No product liability ever filed or
tried here.
Case ordered dismissed.40
Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by
ABELLA, et al., assails before this Court the above-quoted order of the RTC of Davao
City.
ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-
96 on the ground of lack of jurisdiction.
According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject
matter of the case since Articles 2176 and 2187 of the Civil Code are broad enough to
cover the acts complained of and to support their claims for damages.
ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal
luminaries reported in a newspaper, by the RTC of Davao City is bereft of basis.
According to them, their cause of action is based on quasi-delict under Article 2176 of
the Civil Code. They also maintain that the absence of jurisprudence regarding the
award of damages in favor of those adversely affected by the DBCP does not preclude
them from presenting evidence to prove their allegations that their exposure to DBCP
caused their sterility and/or infertility.
SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of
the Order dated October 1, 1996 of the RTC of Davao City. DEL MONTE also filed its
motion for reconsideration, which contained an additional motion for the inhibition of
the presiding judge.
The presiding judge of Branch 16 then issued an Order41 dated December 2, 1996,
voluntarily inhibiting himself from trying the case. Thus, the case was re-raffled to
Branch 13 of the RTC of Davao City.
In an Order42 dated December 16, 1996, the RTC of Davao City affirmed the Order dated
October 1, 1996, and denied the respective motions for reconsideration filed by
defendant companies.
Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the
Orders dated October 1, 1996 and December 16, 1996 of the RTC of Davao City. This
case was docketed as G.R. No. 128398.
In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case
motu proprio as it acquired jurisdiction over the subject matter of the case as well as
over the persons of the defendant companies which voluntarily appeared before it.
CHIQUITA also claims that the RTC of Davao City cannot dismiss the case simply on the
basis of opinions of alleged legal experts appearing in a newspaper article.
Initially, this Court in its Resolution43 dated July 28, 1997, dismissed the petition filed by
CHIQUITA for submitting a defective certificate against forum shopping. CHIQUITA,
however, filed a motion for reconsideration, which was granted by this Court in the
Resolution44 dated October 8, 1997.
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this
Court assailing the above-mentioned orders of the RTC of Davao City. Its petition was
docketed as G.R. No. 127856.
DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-
96, as defined under the law and that the said court already obtained jurisdiction over
its person by its voluntary appearance and the filing of a motion for bill of particulars
and, later, an answer to the complaint. According to DEL MONTE, the RTC of Davao City,
therefore, acted beyond its authority when it dismissed the case motu proprio or
without any motion to dismiss from any of the parties to the case.
In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this
Court consolidated G.R. Nos. 125078, 125598, 126654, 127856, and 128398.
The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents
filed by NAVIDA, et al. and ABELLA, et al.
On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a
Consolidated Motion (to Drop Party-Respondents).45 The plaintiff claimants alleged that
they had amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in
July 1997. This settlement agreement was evidenced by facsimiles of the "Compromise
Settlement, Indemnity, and Hold Harmless Agreement," which were attached to the said
motion. Pursuant to said agreement, the plaintiff claimants sought to withdraw their
petitions as against DOW, OCCIDENTAL, and SHELL.
DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the
settlement entered into between the plaintiff claimants and DOW, OCCIDENTAL, and
SHELL.
The Memoranda of the Parties
Considering the allegations, issues, and arguments adduced by the parties, this Court, in
a Resolution dated June 22, 1998,46 required all the parties to submit their respective
memoranda.
CHIQUITA filed its Memorandum on August 28, 1998;47 SHELL asked to be excused from
the filing of a memorandum alleging that it had already executed a compromise
agreement with the plaintiff claimants.48 DOLE filed its Memorandum on October 12,
199849 while DEL MONTE filed on October 13, 1998.50 NAVIDA, et al., and ABELLA, et al.,
filed their Consolidated Memorandum on February 3, 1999;51 and DOW and
OCCIDENTAL jointly filed a Memorandum on December 23, 1999.52
The Motion to Withdraw Petition for Review in G.R. No. 125598
On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review
in G.R. No. 125598, 53explaining that the said petition "is already moot and academic
and no longer presents a justiciable controversy" since they have already entered into
an amicable settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they
have fully complied with their obligations set forth in the 1997 Compromise
Agreements.
DOLE filed its Manifestation dated September 6, 2004, 54 interposing no objection to the
withdrawal of the petition, and further stating that they maintain their position that
DOW and OCCIDENTAL, as well as other settling defendant companies, should be
retained as defendants for purposes of prosecuting the cross-claims of DOLE, in the
event that the complaint below is reinstated.
NAVIDA, et al., also filed their Comment dated September 14, 2004, 55 stating that they
agree with the view of DOW and OCCIDENTAL that the petition in G.R. No. 125598 has
become moot and academic because Civil Case No. 5617 had already been amicably
settled by the parties in 1997.
On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition
for Review Filed by Petitioners in G.R. No. 125598,56 stating that it has no objections to
the withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No. 125598.
In a Resolution57 dated October 11, 2004, this Court granted, among others, the motion
to withdraw petition for review filed by DOW and OCCIDENTAL.
THE ISSUES
In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the
following issues for our consideration:
IN REFUTATION
I. THE COURT DISMISSED THE CASE DUE TO LACK OF JURISDICTION.
a) The court did not simply dismiss the case because it was filed in bad faith with
petitioners intending to have the same dismissed and returned to the Texas court.
b) The court dismissed the case because it was convinced that it did not have
jurisdiction.
IN SUPPORT OF THE PETITION
II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.
a. The acts complained of occurred within Philippine territory.
b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover the acts
complained of.
c. Assumption of jurisdiction by the U.S. District Court over petitioner[s’] claims did not
divest Philippine [c]ourts of jurisdiction over the same.
d. The Compromise Agreement and the subsequent Consolidated Motion to Drop Party
Respondents Dow, Occidental and Shell does not unjustifiably prejudice remaining
respondents Dole, Del Monte and Chiquita.58
DISCUSSION
On the issue of jurisdiction
Essentially, the crux of the controversy in the petitions at bar is whether the RTC of
General Santos City and the RTC of Davao City erred in dismissing Civil Case Nos. 5617
and 24,251-96, respectively, for lack of jurisdiction.
Remarkably, none of the parties to this case claims that the courts a quo are bereft of
jurisdiction to determine and resolve the above-stated cases. All parties contend that
the RTC of General Santos City and the RTC of Davao City have jurisdiction over the
action for damages, specifically for approximately ₱2.7 million for each of the plaintiff
claimants.
NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or
omissions of defendant companies occurred within Philippine territory. Specifically, the
use of and exposure to DBCP that was manufactured, distributed or otherwise put into
the stream of commerce by defendant companies happened in the Philippines. Said fact
allegedly constitutes reasonable basis for our courts to assume jurisdiction over the
case. Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the provisions of
Chapter 2 of the Preliminary Title of the Civil Code, as well as Article 2176 thereof, are
broad enough to cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al.,
pray that the respective rulings of the RTC of General Santos City and the RTC of Davao
City in Civil Case Nos. 5617 and 24,251-96 be reversed and that the said cases be
remanded to the courts a quo for further proceedings.
DOLE similarly maintains that the acts attributed to defendant companies constitute a
quasi-delict, which falls under Article 2176 of the Civil Code. In addition, DOLE states
that if there were no actionable wrongs committed under Philippine law, the courts a
quo should have dismissed the civil cases on the ground that the Amended Joint-
Complaints of NAVIDA, et al., and ABELLA, et al., stated no cause of action against the
defendant companies. DOLE also argues that if indeed there is no positive law defining
the alleged acts of defendant companies as actionable wrong, Article 9 of the Civil Code
dictates that a judge may not refuse to render a decision on the ground of insufficiency
of the law. The court may still resolve the case, applying the customs of the place and, in
the absence thereof, the general principles of law. DOLE posits that the Philippines is
the situs of the tortious acts allegedly committed by defendant companies as NAVIDA,
et al., and ABELLA, et al., point to their alleged exposure to DBCP which occurred in the
Philippines, as the cause of the sterility and other reproductive system problems that
they allegedly suffered. Finally, DOLE adds that the RTC of Davao City gravely erred in
relying upon newspaper reports in dismissing Civil Case No. 24,251-96 given that
newspaper articles are hearsay and without any evidentiary value. Likewise, the alleged
legal opinions cited in the newspaper reports were taken judicial notice of, without any
notice to the parties. DOLE, however, opines that the dismissal of Civil Case Nos. 5617
and 24,251-96 was proper, given that plaintiff claimants merely prosecuted the cases
with the sole intent of securing a dismissal of the actions for the purpose of convincing
the U.S. Federal District Court to re-assume jurisdiction over the cases.
In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject
matter of the cases filed before them. The Amended Joint-Complaints sought
approximately ₱2.7 million in damages for each plaintiff claimant, which amount falls
within the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place
of the alleged exposure to DBCP, not the place of manufacture, packaging, distribution,
sale, etc., of the said chemical. This is in consonance with the lex loci delicti commisi
theory in determining the situs of a tort, which states that the law of the place where
the alleged wrong was committed will govern the action. CHIQUITA and the other
defendant companies also submitted themselves to the jurisdiction of the RTC by
making voluntary appearances and seeking for affirmative reliefs during the course of
the proceedings. None of the defendant companies ever objected to the exercise of
jurisdiction by the courts a quo over their persons. CHIQUITA, thus, prays for the
remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the
RTC of Davao City, respectively.
The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil
Case Nos. 5617 and 24,251-96, respectively
The rule is settled that jurisdiction over the subject matter of a case is conferred by law
and is determined by the allegations in the complaint and the character of the relief
sought, irrespective of whether the plaintiffs are entitled to all or some of the claims
asserted therein.59 Once vested by law, on a particular court or body, the jurisdiction
over the subject matter or nature of the action cannot be dislodged by anybody other
than by the legislature through the enactment of a law.
At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under
Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, was:
SEC. 19. Jurisdiction in civil cases. – Regional Trial Courts shall exercise exclusive original
jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of whatever
kind, attorney’s fees, litigation expenses, and costs or the value of the property in
controversy exceeds One hundred thousand pesos (₱100,000.00) or, in such other cases
in Metro Manila, where the demand, exclusive of the abovementioned items exceeds
Two hundred thousand pesos (₱200,000.00).60
Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:
2. The exclusion of the term "damages of whatever kind" in determining the
jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as
amended by R.A. No. 7691, applies to cases where the damages are merely incidental to
or a consequence of the main cause of action. However, in cases where the claim for
damages is the main cause of action, or one of the causes of action, the amount of such
claim shall be considered in determining the jurisdiction of the court.
Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended
Joint-Complaints filed before the courts a quo, the following prayer:
PRAYER
WHEREFORE, premises considered, it is most respectfully prayed that after hearing,
judgment be rendered in favor of the plaintiffs ordering the defendants:
a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred
Thousand Pesos (₱1,500,00.00);
b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand
Pesos (₱400,000.00) each;
c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand
Pesos (₱600,000.00);
d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos
(₱200,000.00); and
e) TO PAY THE COSTS of the suit.61
From the foregoing, it is clear that the claim for damages is the main cause of action and
that the total amount sought in the complaints is approximately ₱2.7 million for each of
the plaintiff claimants. The RTCs unmistakably have jurisdiction over the cases filed in
General Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al.,
fall within the purview of the definition of the jurisdiction of the RTC under Batas
Pambansa Blg. 129.
Moreover, the allegations in both Amended Joint-Complaints narrate that:
THE CAUSES OF ACTION
4. The Defendants manufactured, sold, distributed, used, AND/OR MADE AVAILABLE IN
COMMERCE nematocides containing the chemical dibromochloropropane, commonly
known as DBCP. THE CHEMICAL WAS USED AGAINST the parasite known as the
nematode, which plagued banana plantations, INCLUDING THOSE in the Philippines. AS
IT TURNED OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-EFFECTS ON
THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING the human reproductive system as
well.
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s WHILE (a) they
used this product in the banana plantations WHERE they were employed, and/or (b)
they resided within the agricultural area WHERE IT WAS USED. As a result of such
exposure, the plaintiffs suffered serious and permanent injuries TO THEIR HEALTH,
including, but not limited to, STERILITY and severe injuries to their reproductive
capacities.
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT THEY
MANUFACTURED, produced, sold, and/or USED DBCP and/or otherwise, PUT THE SAME
into the stream of commerce, WITHOUT INFORMING THE USERS OF ITS HAZARDOUS
EFFECTS ON HEALTH AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND
APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing materials
which THEY knew, or in the exercise of ordinary care and prudence ought to have
known, were highly harmful and injurious to the Plaintiffs’ health and well-being.
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD, DISTRIBUTED, MADE
AVAILABLE OR PUT DBCP INTO THE STREAM OF COMMERCE were negligent OR AT
FAULT in that they, AMONG OTHERS:
a. Failed to adequately warn Plaintiffs of the dangerous characteristics of DBCP, or to
cause their subsidiaries or affiliates to so warn plaintiffs;
b. Failed to provide plaintiffs with information as to what should be reasonably safe and
sufficient clothing and proper protective equipment and appliances, if any, to protect
plaintiffs from the harmful effects of exposure to DBCP, or to cause their subsidiaries or
affiliates to do so;
c. Failed to place adequate warnings, in a language understandable to the worker, on
containers of DBCP-containing materials to warn of the dangers to health of coming into
contact with DBCP, or to cause their subsidiaries or affiliates to do so;
d. Failed to take reasonable precaution or to exercise reasonable care to publish, adopt
and enforce a safety plan and a safe method of handling and applying DBCP, or to cause
their subsidiaries or affiliates to do so;
e. Failed to test DBCP prior to releasing these products for sale, or to cause their
subsidiaries or affiliates to do so; and
f. Failed to reveal the results of tests conducted on DBCP to each plaintiff, governmental
agencies and the public, or to cause their subsidiaries or affiliate to do so.
8. The illnesses and injuries of each plaintiff are also due to the FAULT or negligence of
defendants Standard Fruit Company, Dole Fresh Fruit Company, Dole Food Company,
Inc., Chiquita Brands, Inc. and Chiquita Brands International, Inc. in that they failed to
exercise reasonable care to prevent each plaintiff’s harmful exposure to DBCP-
containing products which defendants knew or should have known were hazardous to
each plaintiff in that they, AMONG OTHERS:
a. Failed to adequately supervise and instruct Plaintiffs in the safe and proper
application of DBCP-containing products;
b. Failed to implement proper methods and techniques of application of said products,
or to cause such to be implemented;
c. Failed to warn Plaintiffs of the hazards of exposure to said products or to cause them
to be so warned;
d. Failed to test said products for adverse health effects, or to cause said products to be
tested;
e. Concealed from Plaintiffs information concerning the observed effects of said
products on Plaintiffs;
f. Failed to monitor the health of plaintiffs exposed to said products;
g. Failed to place adequate labels on containers of said products to warn them of the
damages of said products; and
h. Failed to use substitute nematocides for said products or to cause such substitutes to
[be] used.62 (Emphasis supplied and words in brackets ours.)
Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and
ABELLA, et al., attribute to defendant companies certain acts and/or omissions which
led to their exposure to nematocides containing the chemical DBCP. According to
NAVIDA, et al., and ABELLA, et al., such exposure to the said chemical caused ill effects,
injuries and illnesses, specifically to their reproductive system.
Thus, these allegations in the complaints constitute the cause of action of plaintiff
claimants – a quasi-delict, which under the Civil Code is defined as an act, or omission
which causes damage to another, there being fault or negligence. To be precise, Article
2176 of the Civil Code provides:
Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is
no pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et
al., point to the acts and/or omissions of the defendant companies in manufacturing,
producing, selling, using, and/or otherwise putting into the stream of commerce,
nematocides which contain DBCP, "without informing the users of its hazardous effects
on health and/or without instructions on its proper use and application." 63
Verily, in Citibank, N.A. v. Court of Appeals,64 this Court has always reminded that
jurisdiction of the court over the subject matter of the action is determined by the
allegations of the complaint, irrespective of whether or not the plaintiffs are entitled to
recover upon all or some of the claims asserted therein. The jurisdiction of the court
cannot be made to depend upon the defenses set up in the answer or upon the motion
to dismiss, for otherwise, the question of jurisdiction would almost entirely depend
upon the defendants. What determines the jurisdiction of the court is the nature of the
action pleaded as appearing from the allegations in the complaint. The averments
therein and the character of the relief sought are the ones to be consulted.
Clearly then, the acts and/or omissions attributed to the defendant companies
constitute a quasi-delict which is the basis for the claim for damages filed by NAVIDA, et
al., and ABELLA, et al., with individual claims of approximately ₱2.7 million for each
plaintiff claimant, which obviously falls within the purview of the civil action jurisdiction
of the RTCs.
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly
suffered resulted from their exposure to DBCP while they were employed in the banana
plantations located in the Philippines or while they were residing within the agricultural
areas also located in the Philippines. The factual allegations in the Amended Joint-
Complaints all point to their cause of action, which undeniably occurred in the
Philippines. The RTC of General Santos City and the RTC of Davao City obviously have
reasonable basis to assume jurisdiction over the cases.
It is, therefore, error on the part of the courts a quo when they dismissed the cases on
the ground of lack of jurisdiction on the mistaken assumption that the cause of action
narrated by NAVIDA, et al., and ABELLA, et al., took place abroad and had occurred
outside and beyond the territorial boundaries of the Philippines, i.e., "the manufacture
of the pesticides, their packaging in containers, their distribution through sale or other
disposition, resulting in their becoming part of the stream of commerce,"65 and, hence,
outside the jurisdiction of the RTCs.
Certainly, the cases below are not criminal cases where territoriality, or the situs of the
act complained of, would be determinative of jurisdiction and venue for trial of cases. In
personal civil actions, such as claims for payment of damages, the Rules of Court allow
the action to be commenced and tried in the appropriate court, where any of the
plaintiffs or defendants resides, or in the case of a non-resident defendant, where he
may be found, at the election of the plaintiff.66
In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al.,
and ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all
residents of the Philippines, either in General Santos City or in Davao City. Second, the
specific areas where they were allegedly exposed to the chemical DBCP are within the
territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al.,
initially filed their claims for damages. Third, the testimonial and documentary evidence
from important witnesses, such as doctors, co-workers, family members and other
members of the community, would be easier to gather in the Philippines. Considering
the great number of plaintiff claimants involved in this case, it is not far-fetched to
assume that voluminous records are involved in the presentation of evidence to support
the claim of plaintiff claimants. Thus, these additional factors, coupled with the fact that
the alleged cause of action of NAVIDA, et al., and ABELLA, et al., against the defendant
companies for damages occurred in the Philippines, demonstrate that, apart from the
RTC of General Santos City and the RTC of Davao City having jurisdiction over the subject
matter in the instant civil cases, they are, indeed, the convenient fora for trying these
cases.67
The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction
over the persons of all the defendant companies
It is well to stress again that none of the parties claims that the courts a quo lack
jurisdiction over the cases filed before them. All parties are one in asserting that the RTC
of General Santos City and the RTC of Davao City have validly acquired jurisdiction over
the persons of the defendant companies in the action below. All parties voluntarily,
unconditionally and knowingly appeared and submitted themselves to the jurisdiction of
the courts a quo.
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendant’s
voluntary appearance in the action shall be equivalent to service of summons." In this
connection, all the defendant companies designated and authorized representatives to
receive summons and to represent them in the proceedings before the courts a quo. All
the defendant companies submitted themselves to the jurisdiction of the courts a quo
by making several voluntary appearances, by praying for various affirmative reliefs, and
by actively participating during the course of the proceedings below.
In line herewith, this Court, in Meat Packing Corporation of the Philippines v.
Sandiganbayan,68 held that jurisdiction over the person of the defendant in civil cases is
acquired either by his voluntary appearance in court and his submission to its authority
or by service of summons. Furthermore, the active participation of a party in the
proceedings is tantamount to an invocation of the court’s jurisdiction and a willingness
to abide by the resolution of the case, and will bar said party from later on impugning
the court or body’s jurisdiction.69
Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired
jurisdiction over the persons of the defendant companies, as well as over the subject
matter of the instant case. What is more, this jurisdiction, which has been acquired and
has been vested on the courts a quo, continues until the termination of the proceedings.
It may also be pertinently stressed that "jurisdiction" is different from the "exercise of
jurisdiction." Jurisdiction refers to the authority to decide a case, not the orders or the
decision rendered therein. Accordingly, where a court has jurisdiction over the persons
of the defendants and the subject matter, as in the case of the courts a quo, the
decision on all questions arising therefrom is but an exercise of such jurisdiction. Any
error that the court may commit in the exercise of its jurisdiction is merely an error of
judgment, which does not affect its authority to decide the case, much less divest the
court of the jurisdiction over the case.70
Plaintiffs’ purported bad faith in filing the subject civil cases in Philippine courts
Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith
merely to procure a dismissal of the same and to allow them to return to the forum of
their choice, this Court finds such argument much too speculative to deserve any merit.
It must be remembered that this Court does not rule on allegations that are
unsupported by evidence on record. This Court does not rule on allegations which are
manifestly conjectural, as these may not exist at all. This Court deals with facts, not
fancies; on realities, not appearances. When this Court acts on appearances instead of
realities, justice and law will be short-lived.71 This is especially true with respect to
allegations of bad faith, in line with the basic rule that good faith is always presumed
and bad faith must be proved.72
In sum, considering the fact that the RTC of General Santos City and the RTC of Davao
City have jurisdiction over the subject matter of the amended complaints filed by
NAVIDA, et al., and ABELLA, et al., and that the courts a quo have also acquired
jurisdiction over the persons of all the defendant companies, it therefore, behooves this
Court to order the remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General
Santos City and the RTC of Davao City, respectively.
On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of
their amicable settlement with NAVIDA, et al., and ABELLA, et al.
NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and
SHELL be dropped as respondents in G.R. Nos. 125078 and 126654, as well as in Civil
Case Nos. 5617 and 24,251-96. The non-settling defendants allegedly manifested that
they intended to file their cross-claims against their co-defendants who entered into
compromise agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling
defendants did not aver any cross-claim in their answers to the complaint and that they
subsequently sought to amend their answers to plead their cross-claims only after the
settlement between the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were
executed. NAVIDA, et al., and ABELLA, et al., therefore, assert that the cross-claims are
already barred.
In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et
al., and ABELLA, et al., since the latter’s Amended Complaints cited several instances of
tortious conduct that were allegedly committed jointly and severally by the defendant
companies. This solidary obligation on the part of all the defendants allegedly gives any
co-defendant the statutory right to proceed against the other co-defendants for the
payment of their respective shares. Should the subject motion of NAVIDA, et al., and
ABELLA, et al., be granted, and the Court subsequently orders the remand of the action
to the trial court for continuance, CHIQUITA and DOLE would allegedly be deprived of
their right to prosecute their cross-claims against their other co-defendants. Moreover,
a third party complaint or a separate trial, according to CHIQUITA, would only unduly
delay and complicate the proceedings. CHIQUITA and DOLE similarly insist that the
motion of NAVIDA, et al., and ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as
respondents in G.R. Nos. 125078 and 126654, as well as in Civil Case Nos. 5617 and
24,251-96, be denied.
Incidentally, on April 2, 2007, after the parties have submitted their respective
memoranda, DEL MONTE filed a Manifestation and Motion73 before the Court, stating
that similar settlement agreements were allegedly executed by the plaintiff claimants
with DEL MONTE and CHIQUITA sometime in 1999. Purportedly included in the
agreements were Civil Case Nos. 5617 and 24,251-96. Attached to the said
manifestation were copies of the Compromise Settlement, Indemnity, and Hold
Harmless Agreement between DEL MONTE and the settling plaintiffs, as well as the
Release in Full executed by the latter.74 DEL MONTE specified therein that there were
"only four (4) plaintiffs in Civil Case No. 5617 who are claiming against the Del Monte
parties"75 and that the latter have executed amicable settlements which completely
satisfied any claims against DEL MONTE. In accordance with the alleged compromise
agreements with the four plaintiffs in Civil Case No. 5617, DEL MONTE sought the
dismissal of the Amended Joint-Complaint in the said civil case. Furthermore, in view of
the above settlement agreements with ABELLA, et al., in Civil Case No. 24,251-96, DEL
MONTE stated that it no longer wished to pursue its petition in G.R. No. 127856 and
accordingly prayed that it be allowed to withdraw the same.
Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded to the
RTC of General Santos City and the RTC of Davao City, respectively, the Court deems
that the Consolidated Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and
ABELLA, et al., should likewise be referred to the said trial courts for appropriate
disposition.
Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties,
by making reciprocal concessions, avoid a litigation or put an end to one already
commenced." Like any other contract, an extrajudicial compromise agreement is not
excepted from rules and principles of a contract. It is a consensual contract, perfected
by mere consent, the latter being manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract. 76 Judicial
approval is not required for its perfection.77 A compromise has upon the parties the
effect and authority of res judicata78 and this holds true even if the agreement has not
been judicially approved.79 In addition, as a binding contract, a compromise agreement
determines the rights and obligations of only the parties to it. 80
In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of
Davao City should first receive in evidence and examine all of the alleged compromise
settlements involved in the cases at bar to determine the propriety of dropping any
party as a defendant therefrom.
The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was
filed by NAVIDA, et al., and ABELLA, et al., only pertained to DOW, OCCIDENTAL and
SHELL in view of the latter companies’ alleged compromise agreements with the plaintiff
claimants. However, in subsequent developments, DEL MONTE and CHIQUITA
supposedly reached their own amicable settlements with the plaintiff claimants, but DEL
MONTE qualified that it entered into a settlement agreement with only four of the
plaintiff claimants in Civil Case No. 5617. These four plaintiff claimants were allegedly
the only ones who were asserting claims against DEL MONTE. However, the said
allegation of DEL MONTE was simply stipulated in their Compromise Settlement,
Indemnity, and Hold Harmless Agreement and its truth could not be verified with
certainty based on the records elevated to this Court. Significantly, the 336 plaintiff
claimants in Civil Case No. 5617 jointly filed a complaint without individually specifying
their claims against DEL MONTE or any of the other defendant companies. Furthermore,
not one plaintiff claimant filed a motion for the removal of either DEL MONTE or
CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96.
There is, thus, a primary need to establish who the specific parties to the alleged
compromise agreements are, as well as their corresponding rights and obligations
therein. For this purpose, the courts a quo may require the presentation of additional
evidence from the parties. Thereafter, on the basis of the records of the cases at bar and
the additional evidence submitted by the parties, if any, the trial courts can then
determine who among the defendants may be dropped from the said cases.
It is true that, under Article 2194 of the Civil Code, the responsibility of two or more
persons who are liable for the same quasi-delict is solidary. A solidary obligation is one
in which each of the debtors is liable for the entire obligation, and each of the creditors
is entitled to demand the satisfaction of the whole obligation from any or all of the
debtors.81
In solidary obligations, the paying debtor’s right of reimbursement is provided for under
Article 1217 of the Civil Code, to wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If
two or more solidary debtors offer to pay, the creditor may choose which offer to
accept.
He who made the payment may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment already made. If the payment is
made before the debt is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share
to the debtor paying the obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.1avvphil
The above right of reimbursement of a paying debtor, and the corresponding liability of
the co-debtors to reimburse, will only arise, however, if a solidary debtor who is made
to answer for an obligation actually delivers payment to the creditor. As succinctly held
in Lapanday Agricultural Development Corporation v. Court of Appeals,82 "[p]ayment,
which means not only the delivery of money but also the performance, in any other
manner, of the obligation, is the operative fact which will entitle either of the solidary
debtors to seek reimbursement for the share which corresponds to each of the [other]
debtors."83
In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the
merits must necessarily be conducted first in order to establish whether or not
defendant companies are liable for the claims for damages filed by the plaintiff
claimants, which would necessarily give rise to an obligation to pay on the part of the
defendants.
At the point in time where the proceedings below were prematurely halted, no cross-
claims have been interposed by any defendant against another defendant. If and when
such a cross-claim is made by a non-settling defendant against a settling defendant, it is
within the discretion of the trial court to determine the propriety of allowing such a
cross-claim and if the settling defendant must remain a party to the case purely in
relation to the cross claim.
In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of
Appeals,84 the Court had the occasion to state that "where there are, along with the
parties to the compromise, other persons involved in the litigation who have not taken
part in concluding the compromise agreement but are adversely affected or feel
prejudiced thereby, should not be precluded from invoking in the same proceedings an
adequate relief therefor."85
Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, 86 the Court upheld
the ruling of the trial court that, in a joint and solidary obligation, the paying debtor may
file a third-party complaint and/or a cross-claim to enforce his right to seek contribution
from his co-debtors.
Hence, the right of the remaining defendant(s) to seek reimbursement in the above
situation, if proper, is not affected by the compromise agreements allegedly entered
into by NAVIDA, et al., and ABELLA, et al., with some of the defendant companies.
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R.
Nos. 125078, 126654, and 128398. We REVERSE and SET ASIDE the Order dated May 20,
1996 of the Regional Trial Court of General Santos City, Branch 37, in Civil Case No.
5617, and the Order dated October 1, 1996 of the Regional Trial Court of Davao City,
Branch 16, and its subsequent Order dated December 16, 1996 denying reconsideration
in Civil Case No. 24,251-96, and REMAND the records of this case to the respective
Regional Trial Courts of origin for further and appropriate proceedings in line with the
ruling herein that said courts have jurisdiction over the subject matter of the amended
complaints in Civil Case Nos. 5617 and 24,251-96.

The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in
G.R. No. 127856. In view of the previous grant of the motion to withdraw the petition in
G.R. No. 125598, both G.R. Nos. 127856 and 125598 are considered CLOSED AND
TERMINATED.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 179232 August 23, 2012 Fruit Company; Chiquita Brands, Inc.; Chiquita Brands International, Inc.; Dead Sea
Bromine Company, Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac
DEL MONTE FRESH PRODUCE N.A. and DEL MONTE FRESH PRODUCE Chemical Corporation. The Joint Complaint, docketed as Civil Case No. 95-45, alleged
COMPANY, Petitioners, that said corporations were negligent in the manufacture, distribution, and/or sale, or in
vs. not informing users of the hazardous effects, of the chemical dibromochloropropane
DOW CHEMICAL COMPANY, OCCIDENTAL CHEMICAL CORPORATION, CECILIO G. (DBCP). The plaintiffs, claiming to be banana plantation workers and residents of Davao
ABENION, et al.,* DOLE FOOD COMPANY, INC., DOLE FRESH FRUIT COMPANY, del Norte, alleged that they were exposed to DBCP in the early 1970s and 1980s and as
STANDARD FRUIT COMPANY, STANDARD FRUIT AND STEAMSHIP COMPANY, a result, suffered serious and permanent injuries to their health. The plaintiffs sought to
CHIQUITA BRANDS, INC., and CHIQillTA BRANDS INTERNATIONAL, INC.,Respondents. be jointly and solidarily recompensed by the defendant corporations in the total amount
of ₱ 2,700,000.
x-----------------------x
Prior to the filing of the defendants’ Answer, the Joint Complaint was amended to
G.R. No. 179290
implead other plaintiffs, increasing their number to 1,843 and to drop Dead Sea
THE DOW CHEMICAL COMPANY and OCCIDENTAL CHEMICAL Bromine Company, Ltd., Ameribrom, Inc., Bromine Compounds, Ltd., and Amvac
CORPORATION, Petitioners, Chemical Corporation as party-defendants.3
vs.
Some of the remaining defendants—Del Monte Fresh Produce, N.A. and Del Monte
HON. JESUS L. GRAGEDA, Presiding Judge, Regional Trial Court of Panabo City, Branch
Tropical Fruit Company (Del Monte defendants), Dow Chemical Company and
4, Panabo City, Davao del Norte; CECILIO G. ABENION, et al.; DOLE FRESH FRUIT
Occidental Chemical Corporation (Dow/Occidental defendants), Dole Food Company,
COMPANY; STANDARD FRUIT COMPANY; STANDARD FRUIT AND STEAMSHIP
Inc. and Dole Fresh Fruit Company (Dole defendants), Chiquita Brands, Inc. and Chiquita
COMPANY; DEL MONTE FRESH PRODUCE, N.A.; DEL MONTE TROPICAL FRUIT
Brands International, Inc. (Chiquita defendants)—filed their respective Answers with
COMPANY;** CHIQUITA BRANDS, INC.; and CHIQUITA BRANDS INTERNATIONAL,
Counterclaim on separate dates.
INC., Respondents.
On September 2, 1997, the Dow/Occidental defendants jointly moved for the dismissal
VELASCO, JR., J.,*
of the complaint against them, as well as their counterclaim against the plaintiffs. They
LEONARDO-DE CASTRO, ** alleged that they have already entered into a compromise agreement4 with the
plaintiffs.5 They likewise filed a Motion for Partial Judgment Based on Compromise. Both
DECISION motions were opposed by their co-defendants.

VILLARAMA, J.: The Chiquita defendants, on even date, filed their Motion for Leave to Admit Amended
Answer with Counterclaims and Cross-claims,6 citing inadvertence, oversight, and
Before this Court are consolidated petitions for review on certiorari under Rule 45 of the
excusable neglect as grounds for amendment.
1997 Rules of Civil Procedure, as amended, assailing the May 23, 2006 Decision 1 and
August 8, 20072 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 77287. The Del Monte defendants also filed a Motion to Admit Amended Answer with Cross-
Claim7 and Amended Answer with Cross-Claim8 attached thereto, alleging that they
The antecedents of the case follow:
inadvertently failed to include in their answer their cross-claims against their co-
On August 11, 1995, a Joint Complaint for damages based on quasi-delict was filed defendants.
before the Regional Trial Court (RTC) of Panabo City, Davao del Norte, by 1,185
The Dole defendants, on October 1, 1997, filed a Motion to Admit Amended
individuals against Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit
Answer9 with the Amended Answer with Cross-Claim Ad Cautelam.10 They alleged that
Company, petitioners in G.R. No. 179232; Dow Chemical Company and Occidental
since they were in imminent danger of being the only defendants left, they were
Chemical Corporation, petitioners in G.R. No. 179290; Shell Oil Company; Standard Fruit
and Steamship Company; Standard Fruit Company, Dole Food Company, Inc.; Dole Fresh
constrained to file a cross-claim against their co-defendants in order to adequately
secure their right to contribution and reimbursement as potential solidary debtors.
The parties thereafter filed numerous oppositions/motions to the pleadings filed by
each. Replies and comments were likewise filed in response thereto.
On June 4, 2001, the Del Monte defendants filed a Motion to Dismiss11 praying that as to
them, the Amended Joint Complaint be dismissed in its entirety and with prejudice, on
the ground, among others, that the claims or demands of the plaintiffs (except for 16 of
them)12 had been paid, waived, abandoned and extinguished. Attached to its Motion is a
copy of the settlement agreement entitled "Release in Full."13 The Dow/Occidental
defendants filed a Manifestation14 stating that they do not object to Del Monte’s Motion
to Dismiss.
On July 31, 2001, the Chiquita defendants filed a Motion for Partial Dismissal of the
Amended Joint Complaint15 on the ground that all the plaintiffs, except for James Bagas
and Dante Bautista, have settled their claims with them, for which each has executed a
quitclaim styled "Release in Full." Attached to the motion were copies of some of the
individual settlement agreements entitled "Release in Full"16 signed by those who have
settled their claims.
On June 4, 2002, the Dow/Occidental defendants filed a Request for
Admissions17 addressed to the plaintiffs seeking from them the admission that payments
were already made to them by the Dow/Occidental defendants.
On December 20, 2002, the RTC issued the assailed Omnibus Order.18
The portions of the fallo of the order pertinent to the instant petitions read:
WHEREFORE, the court, hereby resolves:
Under No. 1, supra, to admit: x x x the amended answer dated September 2, 1997 of the
Chiquita defendants; x x x the motion to admit new amended answer and the amended
answer with cross-claims dated November 3, 1997, noting as well the manifestation of
even date of the Del Monte defendants; x x x Dole’s motion to admit amended answer
and the amended answer itself dated October 1, 1997; x x x
xxxx
Under No. 3, supra, the joint motion to dismiss and motion for partial judgment
between the plaintiffs and defendants Dow and Occidental under the provisions of
"compromise settlement, indemnity and hold harmless agreement(s)," embodied in
annexes "A" and "B," which documents by reference are, hereby, incorporated,
adopted, and made integral parts hereof, not being contrary to law, good morals, public
order or policy are, hereby, approved by way of judgment on compromise and the
causes of action of the plaintiffs in their joint amended complaint as well as the counter-
claims of defendants Dow and Occidental are dismissed;
xxxx
The cross-claims of all the co-defendants in the above-entitled case between and among
themselves, in effect leaving all the said co-defendants cross-claimants ("plaintiffs") and
cross defendants ("defendants") against each other shall continue to be taken
cognizance of by the court.
xxxx
All other motions filed by the parties in relation to or in connection to the issues
hereinabove resolved but which have been wittingly or unwittingly left unresolved are
hereby considered moot and academic; likewise, all previous orders contrary to or not
in accordance with the foregoing resolutions are hereby reconsidered, set aside and
vacated.
SO ORDERED.19
The Dow/Occidental defendants filed a Motion for Partial Reconsideration 20 of said
omnibus order but the same was denied.
On December 26, 2002, the plaintiffs who entered into compromise agreements filed a
Motion for Execution21alleging:
1. Earlier on, certain plaintiffs had been compelled to file a Motion for Execution
because defendants DOW, Shell, Occidental, Del Monte and Chiquita had failed to abide
by the terms and conditions of the Compromise Agreements which they entered into
with the above named defendants as early as 1997 or five (5) years ago, more or less;
2. Consequently, the said motion for execution dated March 4, 2002 faced stiff
opposition from defendants. Almost unending exchanges of comments ensued touching
on certain plaintiffs’ Motion for Execution. In effect, all parties have been given the
chance to be heard. As such, due process of law has been complied with. On their
part, defendants DOW and Occidental opposed said motion because the compromise
agreements in question have not yet been approved by this Honorable Court;
3. On December 20, 2002, the Honorable Court issued its Omnibus Order approving the
compromise agreements in question executed by defendants Dow, Shell, Occidental,
Del Monte and Chiquita x x x;
4. Pursuant to the Omnibus Order dated 20 December 2002, the provisions of
"Compromise Settlement, Indemnity and Hold Harmless Agreements" entered into by
and between plaintiffs and defendants DOW, Shell, Occidental, Del Monte and Chiquita
have been approved by way of judgment on compromise. Significantly, the dispositive
portion of the Omnibus Order which provides that: "The foregoing parties are, hereby,
enjoined to strictly abide by the terms and conditions of their respective settlements" is
adequate for purposes of execution x x x;
5. In view of the fact that this Honorable Court has already approved by way of
judgment on compromise entered into by and between plaintiffs and defendants DOW,
Shell, Occidental, Del Monte and Chiquita, the same is immediately executory. It then
becomes ministerial for this Honorable Court to order the execution of its final
executory judgment against above named defendants. x x x 22(Emphasis in the original;
underscoring supplied.)
On April 23, 2003, the RTC issued a Writ of Execution23 which declared that the
Compromise Agreements entered into by the Dow/Occidental, Del Monte and Chiquita
defendants with the compromising plaintiffs are immediately final and executory. The
dispositive portion of the writ reads:
NOW THEREFORE, you are hereby commanded to cause the execution of the Omnibus
Order of this court dated December 20, 2002 specifically to collect or demand from each
of the herein defendants the following amounts to wit:
1. Defendants Dow Chemical Company ("Dow") and Occidental Chemical Corporation
("Occidental") the amount of:
a. $22 million or such amount equivalent to the plaintiffs’ claim in this case in
accordance with their Compromise Settlement, Indemnity, and Hold Harmless
Agreement (Annex "A"); and
b. The amount of $20 million or such amount equivalent to the plaintiffs’ claim in this
case in accordance with their Compromise Settlement, Indemnity, and Hold Harmless
Agreement (Annex "B")
2. Defendants Del Monte Fresh Produce, N.A. and Del Monte Fresh Produce Company
(formerly Del Monte Tropical Fruit, Co.) (collectively, the "Del Monte defendants") the
amount of One
Thousand Eight and No/100 Dollars ($1,008.00) for each plaintiff in accordance with
their Release in Full Agreement;
3. Defendants Chiquita Brands, Inc. and Chiquita Brands, International, Inc. (collectively
the "Chiquita Defendants") the amount of Two Thousand One Hundred Fifty Seven and
No/100 Dollars ($2,157.00) for each plaintiff in accordance with their Release in Full
Agreement.24
The Dow/Occidental defendants then filed a petition for certiorari with the CA seeking
the annulment of the omnibus order in so far as it:
(1) Admitted the amended answers with cross-claims filed by the Dole defendants, Del
Monte defendants and Chiquita defendants;
(2) Ruled that it shall continue to take cognizance of the cross-claims of the Dole, Del
Monte and Chiquita defendants against petitioners; and
(3) Ruled that all the other motions filed by the parties in relation to the issues which
have been left unresolved are considered moot and academic relative to the
Dow/Occidental defendants’ Request for Admission.
The Dow/Occidental defendants argue, among others, that the RTC gravely abused its
discretion when it did not dismiss the cross-claims filed by the Dole, Del Monte and
Chiquita defendants despite the following: (1) the cross-claims were already filed
beyond the reglementary period; and (2) the complaint against them and the Del Monte
and Chiquita defendants, including their respective counterclaims, were already
dismissed on the bases of the compromise agreements they each had with the plaintiffs.
On May 23, 2006, the appellate court issued the assailed decision, disposing as follows:
WHEREFORE, above premises considered, the instant Petition is partially GRANTED. The
December 20, 2002 Omnibus Order issued by the Regional Trial Court, Branch 4, Panabo
City, Davao del Norte is hereby AFFIRMED with MODIFICATION. As modified, the cross-
claims filedby the Chiquita defendants, except as to the claims of James Bagas and
Dante Bautista, and by the Del Monte defendants, except as to the claims of Romeo
Acelo, Jesus Aguelo, Manuel Apas, Antonio Cabulang, Rodrigo Catulong, Enrique Dinoy,
Fidel Ebrano, Cairus B. Francisco, Primo Magpatoc, Peter Manica, Ernesto Olleque,
Teodoro Pardillo, Federico Pesaña, Desiderio G. Rivas, Patricio Villotes, Ireneo P. Yaras,
are hereby DISMISSED. No costs.
SO ORDERED.25
The CA ruled that the cross-claims of the Dole, Del Monte and Chiquita defendants,
which were all filed with leave of court, on the grounds provided under said rule, and
before judgment was rendered, clearly complied with the requirements of the law. It
held that cross-claims filed at any time before judgment is rendered cannot be
considered belatedly filed especially in this case when the compromise agreement
submitted by the plaintiffs and the Dow/Occidental defendants has yet to be approved.
The CA also held that the dismissal of the complaint as regards the Dow/Occidental
defendants in the civil case did not carry with it the dismissal of the cross-claims filed
against said defendants. It ruled that the dismissal of the complaint against the
Dow/Occidental defendants was not due to any finding by the RTC that the complaint
therein was without basis. In fact, the dismissal was because of the compromise
agreement the parties entered into. The appellate court likewise held that the
Dow/Occidental defendants and the Dole, Del Monte and Chiquita defendants were
sought to be held solidarily liable by the plaintiffs. Yet, despite the compromise
agreements entered into by the Dow/Occidental, Del Monte, and Chiquita defendants
with majority of the plaintiffs below, the civil case was not dismissed nor the amount of
damages sought by plaintiffs therein reduced. Thus, if the remaining defendants are
made liable to the plaintiffs for the full amount of damages sought, said remaining
defendants have a right to proceed against the Dow/Occidental defendants through
their cross-claims.
The CA, however, ruled that the RTC gravely abused its discretion when it admitted the
cross-claims against the Dow/Occidental defendants without any qualification. It held
that only the cross-claims filed by the Dole defendants, the Chiquita defendants (with
respect to the claims of James Bagas and Dante Bautista) and the Del Monte defendants
(with respect to the 16 non-compromising plaintiffs) against the Dow/Occidental
defendants can be rightly admitted by the RTC. Since the Del Monte and Chiquita
defendants can no longer be held liable by the compromising plaintiffs, no reason
existed for them anymore to sue the Dow/Occidental defendants as far as the
compromising plaintiffs are concerned under the cross-claim. The case, however, is
different with the Dole defendants. Since the Dole defendants did not enter into a
compromise agreement with any of the plaintiffs, their cross-claims against the
Dow/Occidental, Chiquita and Del Monte defendants are still viable in its entirety.
With respect to the Request for Admission served by the Dow/Occidental defendants on
the compromising plaintiffs, the CA ruled that their belated resort to such mode of
discovery was clearly improper since it was made only after a writ of execution was
issued against them. Moreover, the questions propounded pertain to matters that are
within the knowledge of the Dow/Occidental defendants. Thus, the best evidence to
prove that payments had been made were the receipts which the Dow/Occidental
defendants themselves claim to be in the possession of their U.S. counsels.
Unsatisfied, the Dow/Occidental defendants, as petitioners in G.R. No. 179290, come to
this Court arguing that the CA committed reversible error in not finding that the cross-
claims of the Dole, Del Monte and Chiquita defendants should all be dismissed and the
Request for Admission was timely filed and proper.
The Del Monte defendants, as petitioners in G.R. No. 179232, are also before this Court
seeking a partial reversal of the CA decision. They submit that their cross-claims against
the Dow/Occidental defendants should extend to all the plaintiffs, that is, the 16
plaintiffs who did not settle, as well as those who have settled with them.
Essentially, the issues to be resolved are: (1) Does the dismissal of the civil case against
the Dow/Occidental defendants carry with it the dismissal of cross-claims against them?
(2) Is the Request for Admission by the Dow/Occidental defendants proper?
We deny the petitions.
Section 10, Rule 11 of the 1997 Rules of Civil Procedure, as amended, provides:
SEC. 10. Omitted counterclaim or cross-claim. — When a pleader fails to set up a
counterclaim or a cross-claim through oversight, inadvertence, or excusable neglect, or
when justice requires, he may, by leave of court, set up the counterclaim or cross-claim
by amendment before judgment.
Based on the above-quoted provision, there are two requisites for a court to allow an
omitted counterclaim or cross-claim by amendment: (1) there was oversight,
inadvertence, or excusable neglect, or when justice requires; and (2) the amendment is
made before judgment.
The CA correctly held that there is basis for allowing the cross-claims of the Dole, Del
Monte and Chiquita defendants against the Dow/Occidental defendants as they
complied with the rules. It is undisputed that the Dole, Del Monte and Chiquita
defendants sought to amend their answers to include their cross-claims before
judgment. More importantly, justice requires that they be allowed to do so in
consonance with the policy against multiplicity of suits.
We further agree with the appellate court when it ruled that the dismissal of the
complaint against the Dow/Occidental defendants does not carry with it the dismissal of
the cross-claims against them. The ruling in Ruiz, Jr. v. Court of Appeals26 that the
dismissal of the complaint divested the cross-claimants of whatever appealable interest
they might have had before, and made the cross-claim itself no longer viable, is not
applicable in the instant case because in Ruiz, the dismissal of the complaint was based
on the ground that it lacked merit. In the case at bar, the dismissal of the complaint
against the Dow/Occidental defendants resulted from the settlement with the plaintiffs,
which is in effect an admission of liability on the part of the Dow/Occidental defendants.
As held in Bañez v. Court of Appeals:27
A third-party complaint is indeed similar to a cross-claim, except only with respect to the
persons against whom they are directed.
However, the ruling in Ruiz cannot be successfully invoked by petitioners. In Ruiz we
declared that the dismissal of the main action rendered the cross-claim no longer viable
only because the main action was categorically dismissed for lack of cause of action.
Hence, since defendants could no longer be held liable under the main complaint, no
reason existed for them anymore to sue their co-party under the cross-claim.
In sharp contrast thereto, the termination of the main action between PESALA and PNB-
RB was not due to any finding that it was bereft of any basis. On the contrary, further
proceedings were rendered unnecessary only because defendant (third-party plaintiff)
PNB-RB, to avoid a protracted litigation, voluntarily admitted liability in the amount of ₱
20,226,685.00. Hence, the termination of the main action between PESALA and PNB-RB
could not have rendered lifeless the third-party complaint filed against petitioners, as it
did the cross-claim in Ruiz, Jr. v. Court of Appeals, since it involved a finding of liability
on the part of PNB-RB even if it be by compromise.
And as correctly observed by the CA, the plaintiffs are seeking to hold all defendant
companies solidarily liable. Thus, even with the compromise agreements entered into
by the Dow/Occidental, Del Monte and Chiquita defendants with majority of the
plaintiffs below, the civil case was not dismissed nor the amount of damages sought by
plaintiffs therein reduced. Therefore, the remaining defendants can still be made liable
by plaintiffs for the full amount. If that happens, the remaining defendants can still
proceed with their cross-claims against the compromising defendants, including the
Dow/Occidental defendants, for their respective shares.
As to the Request for Admission served by the Dow/Occidental defendants, this Court
finds that the issue on its propriety has been rendered moot by the compromising
plaintiffs' motion for execution and the subsequent issuance of the writ of execution by
the R TC on April 23, 2003. The Request for Admission was seeking the compromising
plaintiffs' admission that they have received the payments as agreed upon in the
compromise agreement. However, in the plaintiffs' Motion for Execution dated
December 26, 2002, they alleged that the compromising defendants still have not
complied with the terms. and conditions of the compromise agreements, thereby
forcing said. plaintiffs to file the motion. Thus, the admission sought by the
Dow/Occidental defendants has already been impliedly responded to by a denial of
receipt of payment under the compromise agreement. With said denial, the RTC did not
commit grave abuse of discretion in not resolving the Request for Admission. It is
incumbent upon the Dow/Occidental defendants to prove that payments have been
made to the compromising plaintiffs.
WHEREFORE, the present petitions for review on certiorari are DENIED for lack of merit.
The assailed May 23, 2006 Decision and August 8, 2007 Resolution of the Court of
Appeals in CA-G.R. SP No. 77287 are AFFIRMED and UPHELD.
With costs against the petitioners.
SO ORDERED.

We also uphold the appellate court’s ruling that the RTC gravely abused its discretion
when it admitted the cross-claims against the Dow/Occidental defendants without any
qualification. The Del Monte and Chiquita defendants’ cross-claims against the
Dow/Occidental defendants cannot extend to the plaintiffs with whom they had settled,
but only with respect to those plaintiffs who refused to enter into a compromise
agreement with them, that is, with respect only to James Bagas and Dante Bautista for
the Chiquita defendants and the 16 plaintiffs for the Del Monte defendants. Simply put,
as the compromising plaintiffs can no longer hold the Del Monte and Chiquita
defendants liable, there is no more reason for the latter to sue the Dow/Occidental
defendants as far as the compromising plaintiffs are concerned under the cross-claim.

With respect to the Dole defendants, however, as the Dole defendants did not enter
into a compromise agreement with any of the plaintiffs, their cross-claims against the
Dow/Occidental, Del Monte and Chiquita defendants should be admitted in its totality.