Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 120135

March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners, vs. COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents. AUSTRIA-MARTINEZ, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November 29, 1994 decision of the Court of Appeals1 and the April 28, 1995 resolution denying petitioners' motion for reconsideration. The factual background of the case is as follows: On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a Complaint2 before the Regional Trial Court of Pasig against the Bank of America NT&SA and Bank of America International, Ltd. (defendant banks for brevity) alleging that: they were engaged in the shipping business; they owned two vessels: Don Aurelio and El Champion, through their wholly-owned corporations; they deposited their revenues from said business together with other funds with the branches of said banks in the United Kingdom and Hongkong up to 1979; with their business doing well, the defendant banks induced them to increase the number of their ships in operation, offering them easy loans to acquire said vessels;3 thereafter, the defendant banks acquired, through their (Litonjuas') corporations as the borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6; and (d) El Conqueror7; the vessels were registered in the names of their corporations; the operation and the funds derived therefrom were placed under the complete and exclusive control and disposition of the petitioners;8 and the possession the vessels was also placed by defendant banks in the hands of persons selected and designated by them (defendant banks).9 The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the income derived from the operation of the vessels as well as of the proceeds of the subsequent foreclosure sale;10 because of the breach of their fiduciary duties and/or negligence of the petitioners and/or the persons designated by them in the operation of private respondents' six vessels, the revenues derived from the operation of all the vessels declined drastically; the loans acquired for the purchase of the four additional vessels then matured and remained unpaid, prompting defendant banks to have all the six vessels, including the two vessels originally owned by the private respondents, foreclosed and sold at public auction to answer for the obligations incurred for and in behalf of the operation of the vessels; they (Litonjuas) lost sizeable amounts of their own personal funds equivalent to ten percent (10%) of the acquisition cost of the four vessels and were left with the unpaid balance of their loans with defendant banks.11 The Litonjuas prayed for the accounting of the revenues derived in the operation of the six vessels and of the proceeds of the sale thereof at the foreclosure proceedings instituted by petitioners; damages for breach of trust; exemplary damages and attorney's fees.12 Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against them.13 On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus: "WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby DENIED. The defendant is therefore, given a period of ten (10) days to file its Answer to the complaint. "SO ORDERED."14 Instead of filing an answer the defendant banks went to the Court of Appeals on a "Petition for Review on Certiorari"15 which was aptly treated by the appellate court as a petition for certiorari. They assailed the above-quoted order as well as the subsequent denial of their Motion for Reconsideration.16 The appellate court dismissed the petition and denied petitioners' Motion for Reconsideration.17 Hence, herein petition anchored on the following grounds: "1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN

CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE. "2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM NONCONVENIENS IS MORE APPROPRIATE AND PROPER. "3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF FORUM SHOPPING." 18 As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the vessels are the foreign corporations and not private respondents Litonjuas who are mere stockholders; and that the revenues derived from the operations of all the vessels are deposited in the accounts of the corporations. Hence, petitioners maintain that these foreign corporations are the legal entities that have the personalities to sue and not herein private respondents; that private respondents, being mere shareholders, have no claim on the vessels as owners since they merely have an inchoate right to whatever may remain upon the dissolution of the said foreign corporations and after all creditors have been fully paid and satisfied;19 and that while private respondents may have allegedly spent amounts equal to 10% of the acquisition costs of the vessels in question, their 10% however represents their investments as stockholders in the foreign corporations.20 Anent the second assigned error, petitioners posit that while the application of the principle of forum non conveniens is discretionary on the part of the Court, said discretion is limited by the guidelines pertaining to the private as well as public interest factors in determining whether plaintiffs' choice of forum should be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co. vs. Reyno,22 to wit: "Private interest factors include: (a) the relative ease of access to sources of proof; (b) the availability of compulsory process for the attendance of unwilling witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all other practical problems that make trial of a case easy, expeditious and inexpensive. Public interest factors include: (a) the administrative difficulties flowing from court congestion; (b) the local interest in having localized controversies decided at home; (c) the avoidance of unnecessary problems in conflict of laws or in the application of foreign law; or (d) the unfairness of burdening citizens in an unrelated forum with jury duty."23 In support of their claim that the local court is not the proper forum, petitioners allege the following: "i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are based in Hongkong and England. As such, the evidence and the witnesses are not readily available in the Philippines; "ii) The loan transactions were obtained, perfected, performed, consummated and partially paid outside the Philippines; "iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels were part of an offshore fleet, not based in the Philippines; "iv) All the loans involved were granted to the Private Respondents' foreign CORPORATIONS; "v) The Restructuring Agreements were ALL governed by the laws of England; "vi) The subsequent sales of the mortgaged vessels and the application of the sales proceeds occurred and transpired outside the Philippines, and the deliveries of the sold mortgaged vessels were likewise made outside the Philippines; "vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL deposited to the Accounts of the foreign CORPORATIONS abroad; and "viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in the Philippines."24 Petitioners argue further that the loan agreements, security documentation and all subsequent restructuring agreements uniformly, unconditionally and expressly provided that they will be governed by the laws of England;25 that Philippine Courts would then have to apply English law in resolving whatever issues may be presented to it in the event it recognizes and accepts herein case; that it would then be imposing a significant and unnecessary expense and burden not only upon the parties to the

transaction but also to the local court. Petitioners insist that the inconvenience and difficulty of applying English law with respect to a wholly foreign transaction in a case pending in the Philippines may be avoided by its dismissal on the ground of forum non conveniens. 26 Finally, petitioners claim that private respondents have already waived their alleged causes of action in the case at bar for their refusal to contest the foreign civil cases earlier filed by the petitioners against them in Hongkong and England, to wit: "1.) Civil action in England in its High Court of Justice, Queen's Bench Division Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA. "2.) Civil action in England in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN LITONJUA. "3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA. "4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA." and that private respondents' alleged cause of action is already barred by the pendency of another action or by litis pendentia as shown above.27 On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or misrepresented in the present petition for certiorari; that the prefatory statement failed to state that part of the security of the foreign loans were mortgages on a 39-hectare piece of real estate located in the Philippines;28 that while the complaint was filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by the private respondents who are Filipinos and therefore under Philippine laws, aside from the said corporate borrowers being but their alter-egos, they have interests of their own in the vessels.29 Private respondents also argue that the dismissal by the Court of Appeals of the petition for certiorari was justified because there was neither allegation nor any showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law from the Order of the trial judge denying their Motion to Dismiss; that the remedy available to the petitioners after their Motion to Dismiss was denied was to file an Answer to the complaint;30 that as upheld by the Court of Appeals, the decision of the trial court in not applying the principle of forum non conveniens is in the lawful exercise of its discretion.31 Finally, private respondents aver that the statement of petitioners that the doctrine of res judicata also applies to foreign judgment is merely an opinion advanced by them and not based on a categorical ruling of this Court;32 and that herein private respondents did not actually participate in the proceedings in the foreign courts.33 We deny the petition for lack of merit. It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari. Petitioners should have filed an answer to the complaint, proceed to trial and await judgment before making an appeal. As repeatedly held by this Court: "An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in due course. xxx Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant needlessly to go through a protracted trial and clogging the court dockets by another futile case."34 Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners' motion to dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would appeal, under the

circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in conjunction with the issues raised by the parties. First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that plaintiffs have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which are the registered owners of the vessels and the borrowers of petitioners? No. Petitioners' argument that private respondents, being mere stockholders of the foreign corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.35 In San Lorenzo Village Association, Inc. vs. Court of Appeals,36 this Court clarified that a complaint states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.37 To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of the complaint but rather the fact that the complaint states no cause of action.38 "Failure to state a cause of action" refers to the insufficiency of allegation in the pleading, unlike "lack of cause of action" which refers to the insufficiency of factual basis for the action. "Failure to state a cause of action" may be raised at the earliest stages of an action through a motion to dismiss the complaint, while "lack of cause of action" may be raised any time after the questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.39 In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein private respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason of the fiduciary relationship that was created between the parties involving the vessels in question; (2) petitioners have the obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the same. Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the corporation; that the corporate entities have juridical personalities separate and distinct from those of the private respondents. Private respondents maintain that the corporations are wholly owned by them and prior to the incorporation of such entities, they were clients of petitioners which induced them to acquire loans from said petitioners to invest on the additional ships. We agree with private respondents. As held in the San Lorenzo case,40 "xxx assuming that the allegation of facts constituting plaintiffs' cause of action is not as clear and categorical as would otherwise be desired, any uncertainty thereby arising should be so resolved as to enable a full inquiry into the merits of the action." As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law abhors, and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on account of the alleged fatal flaws of the complaint would obviously be indecisive and would not end the controversy, since the institution of another action upon a revised complaint would not be foreclosed.41 Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens? No. The doctrine of forum non-conveniens, literally meaning 'the forum is inconvenient', emerged in private international law to deter the practice of global forum shopping,42 that is to prevent non-resident litigants from choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this doctrine, 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.43 Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court.44 In the case of Communication Materials and Design, Inc. vs. Court of Appeals,45 this Court held that "xxx [a Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision."46 Evidently, all these requisites are present in the instant case. Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,47 that the doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain from

assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the court's desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered a matter of defense.48 Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign action? No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will amount to res judicata in the other.49 Parenthetically, for litis pendentia to be a ground for the dismissal of an action there must be: (a) identity of the parties or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two cases should be such that the judgment which may be rendered in one would, regardless of which party is successful, amount to res judicata in the other.50 In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties, notwithstanding the presence of other respondents,51 as well as the reversal in positions of plaintiffs and defendants52, still the other requirements necessary for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were filed in Hongkong and England without however showing the identity of rights asserted and the reliefs sought for as well as the presence of the elements of res judicata should one of the cases be adjudged. As the Court of Appeals aptly observed: "xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, failed to provide this Court with relevant and clear specifications that would show the presence of the above-quoted elements or requisites for res judicata. While it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72), after enumerating the various civil actions instituted abroad, did aver that "Copies of the foreign judgments are hereto attached and made integral parts hereof as Annexes 'B', 'C', 'D' and 'E'", they failed, wittingly or inadvertently, to include a single foreign judgment in their pleadings submitted to this Court as annexes to their petition. How then could We have been expected to rule on this issue even if We were to hold that foreign judgments could be the basis for the application of the aforementioned principle of res judicata?"53 Consequently, both courts correctly denied the dismissal of herein subject complaint. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing and Callejo, Sr., JJ., concur.
Footnotes 1 In CA-G.R. SP No. 34382, entitled, "Bank of America NT&SA, Bank of America International Ltd., Plaintiffs/Petitioners, versus, Hon. Manuel S. Padolina, as Judge Regional Trial Court of Pasig, M.M., Branch 162 and Eduardo Litonjua, Sr., et al., Defendants/Respondents". 2 Docketed as Civil Case No. 63181 and entitled, "Eduardo K. Lintonjua, Sr. and Aurelio K. Litonjua, Jr., Plaintiffs, versus, Bank of America, National Trust & Savings Corporation and Bank of America, Internaitonal Ltd., Defendants." p. 54, SC Rollo. 3 Id., at pp. 54-56. 4 Panamanian flag, registered owners Espriona Shipping Co., S.A. 5 Liberian flag, registered owners Liberia Transport Navigation S.A. 6 Panamanian flag, registered owners El Challenger S.A. 7 Panamanian flag, registered owners Eshley Compania Naviera S.A. 8 Rollo, p. 57. 9 Id., at 58. 10 Id., at p. 59. 11 Id., at p. 60. 12 Rollo, pp. 62-63. 13 Id., at p. 38. 14 Id., at pp. 24-25. 15 Rollo, pp. 71-98 16 Rollo, at p. 71-98. 17 Id., at pp. 48-50. 18 Rollo, p. 18. 19 Id., at p. 20. 20 Id., at p. 21. 21 330 US 501, 508 (1947), cited on page 14, Petition for Review. 22 454 US 235, 241 (1981), cited on page 14, Petition for Review. 23 Petition for Review, p. 14; Rollo, p. 24.

24 25

Rollo, pp. 24-25. Rollo, p. 26, Petition for Review, 16. 26 Rollo, pp. 25-26. 27 Id., p. 248 28 Rollo, pp. 103-104. 29 Id., at pp. 104-105. 30 Id., at pp. 108-109. 31 Id., at p. 117. 32 Id., at p. 120. 33 Id., at p. 121. 34 Far East Bank and Trust Company vs. Court of Appeals and SMP, Inc., 341 SCRA 485, 492 (2000). 35 Columbia Pictures Inc. vs. Court of Appeals, 261 SCRA 144, 162 (1996). 36 San Lorenzo Village Association, Inc. vs. Court of Appeals, 288 SCRA 115 (1998). 37 Id. at p. 128. 38 Ibid. 39 Dabuco et al., vs. Court of Appeals, (January 20, 2002). 40 Supra, at p. 128. 41 Ibid, at p. 128 (1998). 42 Jorge R. Coquia and Elizabeth Aguiling-Pangalangan, CONFLICTS OF LAWS, pp. 40-41, 2000 Ed. 43 First Philippine International Bank vs. Court of Appeals, 252 SCRA 259, 281 (1996). 44 Hongkong and Shanghai Banking Corp. vs. Sherman, 176 SCRA 331, 339 (1989). 45 260 SCRA 673 (1996). 46 Id. at p. 695. 47 Philsec. Investment Corp. vs. Court of Appeals, 274 SCRA 102, 113 (1997), citing Hongkong and Shanghai Banking Corp. vs. Sherman, 176 SCRA 331 at 339 (1989). 48 Id. at p. 113. 49 R & M General Merchandise, Inc. vs. Court of Appeals and La Perla Industries, Inc., G.R. No. 144189 (October 5, 2001). 50 Ibid. 51 Dasmarinas Vill. Assn. Inc., et al., vs. CA, 299 SCRA 598, 605 (1998). 52 Cokaliong Shipping Lines, Inc. vs. Amin, 260 SCRA 122, 125 (1996). 53 Rollo, p. 47; CA Decision, p. 14

Republic of the Philippines SUPREME COURT FIRST DIVISION

G.R. No. 120077

October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS, respondents. PARDO, J.: The case before the Court is a petition for certiorari1 to annul the following orders of the National Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or with excess jurisdiction and with grave abuse of discretion:2 (1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4 The questioned order declared that the NLRC, not the Philippine Overseas Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over private respondent's complaint; (2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and attorney's fees amounting to ten percent (10%) of the total award; and (3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners. In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of China and later terminated due to retrenchment. Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel International Company, Limited (hereinafter referred to as "MHICL"). When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and existing under the laws of the Philippines. MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an "incorporator" of MHICL, owning 50% of its capital stock.8 By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited), MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China. Now the facts. During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one Nestor Buenio, a friend of his. Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased benefits. The position was slated to open on October 1, 1988.11 On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer. On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional pictures for his visa to China.

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30, 1988, under the pretext that he was needed at home to help with the family's piggery and poultry business. On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4, 1988) and notified them that he was going to arrive in Manila during the first week of July 1988. The employment contract of June 4, 1988 stated that his employment would commence September 1, 1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year.13 On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press. On July 1, 1988, respondent Santos arrived in Manila. On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace Hotel.14 Subsequently, respondent Santos signed an amended "employment agreement" with the Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the employment agreement under the word "noted". From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned to China and reassumed his post on July 17, 1989. On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten note that respondent Santos be given one (1) month notice of his release from employment. On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the political upheaval in China.15 We quote the letter:16 "After the unfortunate happenings in China and especially Beijing (referring to Tiannamen Square incidents), our business has been severely affected. To reduce expenses, we will not open/operate printshop for the time being. "We sincerely regret that a decision like this has to be made, but rest assured this does in no way reflect your past performance which we found up to our expectations." "Should a turnaround in the business happen, we will contact you directly and give you priority on future assignment." On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid all benefits due him, including his plane fare back to the Philippines. On October 3, 1989, respondent Santos was repatriated to the Philippines. On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt, demanding full compensation pursuant to the employment agreement. On November 11, 1989, Mr. Shmidt replied, to wit:17 His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month notice clause and Mr. Santos received all benefits due him. "For your information the Print Shop at the Palace Hotel is still not operational and with a low business outlook, retrenchment in various departments of the hotel is going on which is a normal management practice to control costs. "When going through the latest performance ratings, please also be advised that his performance was below average and a Chinese National who is doing his job now shows a better approach. "In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed free accommodation/laundry/meals up to the day of his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents. The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before the Labor Arbiter.18 On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19 "WHEREFORE, judgment is hereby rendered: "1. directing all the respondents to pay complainant jointly and severally; "a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries; "b) P50,000.00 as moral damages; "c) P40,000.00 as exemplary damages; and "d) Ten (10) percent of the total award as attorney's fees. "SO ORDERED." On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the case. On August 28, 1992, the NLRC promulgated a resolution, stating:20 "WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA. "SO ORDERED." On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas contract worker."21 On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was retrenched or dismissed.22 On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial and documentary evidence presented to and heard by him.23 Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24 On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent Santos was illegally dismissed from employment and recommended that he be paid actual damages equivalent to his salaries for the unexpired portion of his contract.26 On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27 "WHEREFORE, finding that the report and recommendations of Arbiter de Vera are supported by substantial evidence, judgment is hereby rendered, directing the respondents to jointly and severally pay complainant the following computed contractual benefits: (1) US$12,600.00 as salaries for the unexpired portion of the parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two (2) years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of complainant's total award.

"SO ORDERED." On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de Vera's recommendation had no basis in law and in fact.28 On March 30, 1995, the NLRC denied the motion for reconsideration.29 Hence, this petition.30 On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of judgment of the NLRC dated July 31, 1995.31 On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents to file their respective comments, without giving due course to the petition.32 On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed decision and orders. The Solicitor General prayed that he be excused from filing a comment on behalf of the NLRC33 On April 30,1996, private respondent Santos filed his comment.34 On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own comment to the petition.35 On January 7, 1997, the NLRC filed its comment. The petition is meritorious. I. Forum Non-Conveniens The NLRC was a seriously inconvenient forum. We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here. The employment contract. Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of the POEA or any authorized recruitment agency of the government.36 Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at bar. Not Convenient. We fail to see how the NLRC is a convenient forum given that all the incidents of the case from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines. No power to determine applicable law. Neither can an intelligent decision be made as to the law governing the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the place where the contract was made).38 The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's Republic of China. No power to determine the facts. Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position to determine whether the

Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment. Principle of effectiveness, no power to execute decision. Even assuming that a proper decision could be reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired. This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum, specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a fact which he admits with conviction.40 Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision cannot be sustained. II. MHC Not Liable Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable. True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC. Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is done only when a corporation is a mere alter ego or business conduit of a person or another corporation. In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities." The tests in determining whether the corporate veil may be pierced are: First, the defendant must have control or complete domination of the other corporation's finances, policy and business practices with regard to the transaction attacked. There must be proof that the other corporation had no separate mind, will or existence with respect the act complained of. Second, control must be used by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the proximate cause of the injury or loss complained of. The absence of any of the elements prevents the piercing of the corporate veil.43 It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other legal entity to which it may be related.44 Clear and convincing evidence is needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL and MHC are one and the same entity. III. MHICL not Liable Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment contract with the Palace Hotel. This fact fails to persuade us. First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda signed the employment contract as a mere witness. He merely signed under the word "noted". When one "notes" a contract, one is not expressing his agreement or approval, as a party would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term "noted" means that the person so noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter. Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the document is that which, "in a deed or other formal instrument is that part which comes after the recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written statement"50 a memorandum or observation. Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In determining the existence of an employer-employee relationship, the following elements are considered:51

"(1) the selection and engagement of the employee; "(2) the payment of wages; "(3) the power to dismiss; and "(4) the power to control employee's conduct." MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos' services. Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel. Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL and the Palace Hotel. IV. Grave Abuse of Discretion Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90. Labor Arbiters have exclusive and original jurisdiction only over the following:53 "1. Unfair labor practice cases; "2. Termination disputes; "3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; "4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee relations; "5. Cases arising from any violation of Article 264 of this Code, including questions involving legality of strikes and lockouts; and "6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement." In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can be resolved by reference to the Labor Code, or other labor statutes, or their collective bargaining agreements.54 "To determine which body has jurisdiction over the present controversy, we rely on the sound judicial principle that jurisdiction over the subject matter is conferred by law and is determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein."55 The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint. His failure to dismiss the case amounts to grave abuse of discretion.56

V. The Fallo WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders and resolutions of the National Labor Relations Commission dated May 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-0201058-90). No costs.

SO ORDERED. Davide, Jr., C .J ., Puno, Kapunan, Pardo and Ynares-Santiago, JJ ., concur.

Footnotes
1 2

Under Rule 65, Revised Rules of Court. Rollo, pp. 2-6. 3 In NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-02-01058-90), Commissioner Vicente S. E. Veloso, ponente, concurred in by Commissioners Edna Bonto Perez and Alberto R. Quimpo. 4 Penned by Commissioner V. S. E. Veloso and concurred in by Commissioners Bartolome S. Carale and Romeo B. Putong. 5 Penned by Commissioner V. S. E. Veloso and concurred in by Commissioners B. S. Carale and A. R. Quimpo. 6 Ibid. 7 With principal office at 18094 Swire House Charter Road, Hongkong, as shown by its Articles of Association dated May 23, 1986. 8 MHC represented by its President Victor Sison and the Philippine Agency Limited represented by its Director, Cheung Kwoh-Nean are MHICL's incorporators (Rollo, p. 76). 9 The management agreement was terminated on April 1, 1990. 10 Rollo, p. 71. 11 Ibid., p. 65. 12 Ibid., p. 96. 13 Rollo, p. 65. 14 Ibid., p. 97. 15 Rollo, pp. 8-14. 16 Rollo, p. 66. 17 Ibid., pp. 66-67. 18 Rollo, p. 72. 19 Ibid., p. 126. 20 Rollo, p. 99. 21 Ibid., pp. 91-92. 22 Ibid., pp. 81-83. 23 Rollo, p. 52. 24 Ibid., p. 63. 25 Ibid. 26 Ibid., pp. 78-79. 27 Ibid., pp. 79-80. 28 Rollo, pp. 51-62. 29 Rollo, pp. 49-50. 30 Filed on May 22, 1995, Rollo, pp. 42-48. On October 7, 1997, we resolved to give due course to the petition (Rollo, p. 217). Petitioners filed their memorandum on December 1, 1997. The petition involves pure questions of law; thus, we except this case from the ruling in San Martin Funeral Homes vs. NLRC, 295 SCRA 494 [1998]. Rather than refer the case to the Court of Appeals, whose decision would be appealable to the Supreme Court, our ruling would finally put an end to the litigation. 31 Rollo, pp. 127-133. 32 Rollo, p. 140. 33 Rollo, pp. 148-149. 34 Rollo, pp. 156. 35 Rollo, p. 157. 36 Rollo, p. 82. 37 Communication Materials and Design, Inc. v. Court of Appeals, 260 SCRA 673, 695 (1996). 38 Triple Eight Integrated Services, Inc. v. NLRC, 299 SCRA 608, 618 (1998). 39 Eastern Shipping Lines, Inc. v. POEA, 170 SCRA 54, 57 (1989), There we stated that, "the POEA shall have original and exclusive jurisdiction over all cases, including money claims, involving employer-employee relationship arising out of or by virtue of any law or contract involving Filipino workers for overseas employment, including seamen." 40 Rollo, pp. 91-92. 41 San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals, 296 SCRA 631, 649-650 (1998); Complex Electronics Employees Association v. NLRC, 310 SCRA 403, 417-418 (1999). 42 269 SCRA 15, 29-30 (1997). 43 Rufina Luy Lim v. Court of Appeals, G.R. No. 124715, January 24, 2000. 44 ARB Construction Co., Inc. v. Court of Appeals, G.R. No. 126554, May 31, 2000. 45 Laguio v. National Labor Relations Commission, 262 SCRA 715, 720-721 (1996); De La Salle University v. De La Salle University Employees Association, G.R. Nos. 109002 and 110072, April 12, 2000. 46 Halili v. Court of Industrial Relations, 140 SCRA 73, 91 (1985). 47 94 SCRA 61, 69 (1979). 48 Black's Law Dictionary, Fifth Edition (1979), p. 1438. 49 Ibid.

50 51

Supra, p. 956. Philippine Airlines, Inc. v. NLRC, 263 SCRA 642, 654 (1996). 52 "(a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machinery, work premises, among others; and "(b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer." Asia Brewery, Inc. v. NLRC, 259 SCRA 185, 189-190 (1996). 53 Labor Code of the Philippines, Article 217. 54 Coca Cola Bottlers Phils., Inc. v. Jose S. Roque, 308 SCRA 215, 220 (1999). 55 Marcina Saura v. Ramon Saura, Jr., 313 SCRA 465, 472 (1999). 56 Philippine Airlines, Inc. v. NLRC, supra, p. 657.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. Nos. 90306-07 July 30, 1990 K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners, vs. THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE VESSEL M/V "ESTELLA", respondents. Hernandez, Velicaria Vibar & Santiago for petitioners. Cesar C. Cruz & Partners for private respondents CORTES, J: Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being considered final and conclusive. However, when its factual conclusions are manifestly mistaken, the Court will step in to correct the misapprehension [De la Cruz v. Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September 29, 1983, 124 SCRA 808.] This case is one such instance calling for the Court's review of the facts. On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a corporation formed and existing under the laws of Japan, filed a complaint for the collection of a sum of money with preliminary attachment against Atlantic Venus Co., S.A. (hereinafter referred to as "Atlantic"), a corporation registered in Panama, the vessel MV Estella and Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine corporation. Atlantic is the owner of the MV Estella. The complaint, docketed as Civil Case No. 8738930 of the Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as bareboat charterer and operator of the MV Estella, appointed N.S. Shipping Corporation (hereinafter referred to as "NSS"), a Japanese corporation, as its general agent in Japan. The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai as its local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and services but despite repeated demands Crestamonte failed to pay the amounts due. NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-intervention. On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a corporation organized in Hong Kong and not doing business in the Philippines, filed a motion for leave to intervene with an attached complaint-in-intervention, alleging that Fu Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six Cents (US$152,412.56) but such has remained unpaid despite demand and that the claim constitutes a maritime lien. The issuance of a writ of attachment was also prayed for. On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to as K.K. Shell"), a corporation organized in Japan and not doing business in the Philippines, likewise filed a motion to intervene with an attached complaint-inintervention, alleging that upon request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan and that despite previous demands Crestamonte has failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen (Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime lien on the MV Estella. The complaint-inintervention sought the issuance of a writ of preliminary attachment. The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and August 11, 1987, respectively. Writs of preliminary attachment were issued on August 25, 1987 upon posting of the appropriate bonds. Upon the posting of counterbonds, the writs of attachment were discharged on September 3, 1987. Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed by Fu Hing and K.K. Shell. In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against the trial court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which sought the annulment of the orders of the trial court dated April 30, 1987 and August 11, 1987. Among others, the omnibus order dated August 11, 1987 denied the motion to reconsider the order allowing Fu Hing's intervention and granted K.K. Shell's motion to intervene. Again Fu Hing and K.K. Shell intervened, CA-G.R. SP No. 12999 was consolidated with another case (CA-G.R. SP No. 12341). Fu Hing and K.K. Shell intervened in CA-G.R. SP No. 12999.

In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court and directed it to cease and desist from proceeding with the case. According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence they were bound by the Agency Agreement between Crestamonte and NSS, particularly, the choice of forum clause, which provides: 12.0-That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising between the parties hereto concerned regarding this Agreement shall be subject exclusively to the jurisdiction of the District Courts of Japan. Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to intervene. A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the Court of Appeals. Hence this petition; In this case, we shall review the decision of the Court of Appeals only insofar as it relate to the intervention of K.K. Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-petitioner on March 7, 1990, alleging that an amicable settlement had been reached with private respondents. The Court granted the motion on March 19, 1990. After considering the pleadings filed by the parties and the arguments raised therein, the Court finds reversible error on the part of the Court of Appeals in so far; as it disallowed petitioners' intervention in the case before the trial court and ordered the latter to cease and desist from proceeding with the case. 1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a sub-agent of NSS and is, therefore, bound by the agreement. The body of the Agency Agreement entered into by and between Crestamonte (referred to in the agreement as "Owner") and NSS ("Agent") provides: WITNESSETH That the OWNER has appointed and by these presents hereby appoints the AGENT as its General Agents for all Japan in connection with the Owner's vessels and/or providing suitable vessels for Japan Ports under the following terms and conditions: 1.0 - In general, the Agent will abide by the Owner's decisions regarding the mode of operations of the vessels in Japan and that all cargo bookings, vessel's fixtures/charters, etc. by the Agent, shall always be subject to the prior approval and consent of the Owners. 2.0 - That the Agent shall provide for the necessary services required for the husbanding of the Owner's vessels in all Japan Ports and issue Bill(s) of Lading to Shippers in the form prescribed by the Owners. 3.0 - That the Agent shall be responsible for fixing south-bound cargoes with revenues sufficient to cover ordinary liner operation expenses such as bunkers, additives, lubricating oil, water, running repairs, drydocking expenses, usual port disbursement accounts, cargo handling charges including stevedorage, provisions and ship's stores and cash advance to crew (excluding crew provisions). The Agent expressly agrees that the Owner's cash flow in Japan shall be essentially the Agent's responsibility, and should the revenue for south-bound cargoes as above-mentioned be insufficient to cover the aforesaid expenses, the Agent shall provide credit to the extent of the vessels' requirements, provided however that said obligation shall be secured by the Owner committing at least forty-eight (48) mailings of Japan/Philippines liner service per year. The Agent shall settle, in behalf of the Owner, all outstanding payments for the operation costs on Owner's liner service carried forward from the present Owner's agent, subject to approval of Owner's Representative in Japan in regard to amount and nature thereof. 4.0- That the agent shall furnish office space of approximately thirty (30) square meters for the exclusive use of the Owner and its representatives, within the premises of the Agent's office, free of charge.

5.0 That the responsibilities of the Agent in regard to the cargo shall begin, in the case of imports into the territory of Japan, from the time such cargo has left the ship's tackles, and shall cease, in case of export, upon completion of loading. 6.0 That the remuneration of the Agent from the Owner shall be as follows: xxx xxx xxx 7.0 That the Agent shall exert best efforts to recommend to Owners stevedoring and other expenses incurred in connection with work on board the Owner's vessels, as well as customs house charges, pilotage, harbour dues, cables, etc. which are for Owner's account, on the cheapest possible terms. Owners shall decide and may appoint through the Agent the services described herein. 8.0 That the Agent shall be responsible for the due collection of and due payment to the Owner of all outward freight prepaid for cargo without delay upon the sailing of each vessel from the port. The Agent shall be also responsible for the due collection of all inward freight payable at the port against delivery unless otherwise instructed by the Owner to the contrary. 9.0 The account statements supported by vouchers in two copies itemized for each service and/or supply for each vessel, shall be forwarded by the Agent to the Owner promptly after the departure of each vessel but in no case later than 60 days thereafter. 10.0 That the freightage to be collected by the Agent in Japan shall be paid to the Owner after deducting the total amount of disbursements incurred in Japan. 11.0 That this Agreement takes effect as of April 15, 1983 and shall remain in force unless terminated by either party upon 60 days notice. 12.0 That this Agreement shall be governed by the Laws of Japan. Any matters, disputes, and/or differences arising between the parties hereto concerned regarding this reement shall be subject exclusively to the jurisdiction of the District Courts of Japan. [Annex "G" of the Petition, Rollo, pp. 100-104.] No express reference to the contracting of sub-agents or the applicability of the terms of the agreement, particularly the choiceof-forum clause, to sub-agents is made in the text of the agreement. What the contract clearly states are NSS' principal duties, i.e., that it shall provide for the necessary services required for the husbanding of Crestamonte's vessels in Japanese ports (section 2.0) and shall be responsible for fixing southbound cargoes with revenues sufficient to cover ordinary expenses (section 3.0).itc-asl Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided and supplied the MV Estella with marine diesel oil/fuel, upon request of NSS who was acting for and as duly appointed agent of Crestamonte [Rollo, pp. 116117.] There is thus no basis for the Court of Appeal's finding, as regards K.K Shell in relation to its intervention in Civil Case No. 8738930, that "the sub-agents admitted in their pleadings that they were appointed as local agent/sub-agent or representatives by NSS by virtue of said Agency Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of Appeals could have been referring to was K.K. Shell's Urgent Motion for Leave to Intervene dated February 24, 1987 in another case (Civil Case No. 86-38704) in another court and involving other vessels (NW Ofelia and MV Christina C), where it was alleged that K.K. Shell is "one of the representatives of NS Shipping Corporation for the supply of bunker oil, fuel oil, provisions and other necessaries to vessels of which NS Shipping Corporation was the general agent." [Comment, p. 17; Rollo, p. 274.] However, this allegation does not conclusively establish a sub-agency between NSS and K.K. Shell. It is therefore surprising how the Court of Appeals could have come to the conclusion, just on the basis of the Agency Agreement and the pleadings filed in the trial court, that "Crestamonte is the principal, NSS is the agent and ... Fu Hing and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.] In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial court, additional evidence, if there be any, would still have to be presented to establish the allegation that K.K. Shell is a sub-agent of NSS. In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not been conclusively shown to be binding upon K.K. Shell, additional evidence would also still have to be presented to establish this defense, K.K. Shell cannot therefore, as of yet, be barred from instituting an action in the Philippines. 2. Private respondents have anticipated the possibility that the courts will not find that K.K. Shell is expressly bound by the Agency Agreement, and thus they fall back on the argument that even if this were so, the doctrine of forum non conveniens would be a valid ground to cause the dismissal of K.K. Shell's complaint-in-intervention.

K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites Presidential Decree No. 1521, the Ship Mortgage Decree of 1978, which provides: SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any person furnishing repairs, supplies, to wage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K. Shell cannot rely on the maritime lien because the fuel was provided not exclusively for the benefit of the MV Estella, but for the benefit of Crestamonte in general. Under the law it must be established that the credit was extended to the vessel itself. Now, this is a defense that calls precisely for a factual determination by the trial court of who benefitted from the delivery of the fuel. Hence, again, the necessity for the reception of evidence before the trial court. In other words, considering the dearth of evidence due to the fact that the private respondents have yet to file their answer in the proceedings below and trial on the merits is still to be conducted, whether or not petitioners are indeed maritime lienholders and as such may enforce the lien against the MV Estella are matters that still have to be established. Neither are we ready to rule on the private respondents' invocation of the doctrine of forum non conveniens, as the exact nature of the relationship of the parties is still to be established. We leave this matter to the sound discretion of the trial court judge who is in the best position, after some vital facts are established, to determine whether special circumstances require that his court desist from assuming jurisdiction over the suit. It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's orders, insofar as K.K. Shell is concerned, and order the trial court to cease and desist from proceeding with Civil Case No. 87-38930. There are still numerous material facts to be established in order to arrive at a conclusion as to the true nature of the relationship between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse would have been to allow the trial court to proceed with Civil Case No. 87-38930 and consider whatever defenses may be raised by private respondents after they have filed their answer and evidence to support their conflicting claims has been presented. The Court of Appeals, however, substituted its judgment for that of the trial court and decided the merits of the case, even in the absence of evidence, on the pretext of reviewing an interlocutory order. WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is REVERSED in CA-G.R. SP No. 12999, insofar as it annulled the order of the August 11, 1987 and directed the trial court to cease and desist from proceeding with Civil Case No. 87-38930. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 102223 August 22, 1996 COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., (formerly ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, petitioners, vs. THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC, INC., respondents. TORRES, JR., J.:p Business Corporations, according to Lord Coke, "have no souls." They do business peddling goods, wares or even services across national boundaries in "souless forms" in quest for profits albeit at times, unwelcomed in these strange lands venturing into uncertain markets and, the risk of dealing with wily competitors. This is one of the issues in the case at bar. Contested in this petition for review on Certiorari is the Decision of the Court of Appeals on June 7, 1991, sustaining the RTC Order dated February 22, 1991, denying the petitioners' Motion to Dismiss, and directing the issuance of a writ of preliminary injunction, and its companion Resolution of October 9, 1991, denying the petitioners' Motion for Reconsideration. Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic corporations, while petitioner Francisco S. Aguirre is their President and majority stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are corporations duly organized and existing under the laws of the State of Alabama, United States of America. There is no dispute that ITEC is a foreign corporation not licensed to do business in the Philippines. On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as "Representative Agreement". 1 Pursuant to the contract, ITEC engaged ASPAC as its "exclusive representative" in the Philippines for the sale of ITEC's products, in consideration of which, ASPAC was paid a stipulated commission. The agreement was signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC respectively, for and in behalf of their companies. 2 The said agreement was initially for a term of twenty-four months. After the lapse of the agreed period, the agreement was renewed for another twenty-four months. Through a "License Agreement" 3 entered into by the same parties on November 10, 1988, ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines). By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their sole customer, the Philippine Long Distance Telephone Company, (PLDT, for brevity). To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL" 4 which defined the project details for the supply of ITEC's Interface Equipment in connection with the Fifth Expansion Program of PLDT. One year into the second term of the parties' Representative Agreement, ITEC decided to terminate the same, because petitioner ASPAC allegedly violated its contractual commitment as stipulated in their agreements. 5 ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise petitioner Aguirre, of using knowledge and information of ITEC's products specifications to develop their own line of equipment and product support, which are similar, if not identical to ITEC's own, and offering them to ITEC's former customer. On January 31, 1991, the complaint 6 in Civil Case No. 91-294, was filed with the Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin, first, preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre and their agents and business associates, to cease and desist from selling or attempting to sell to PLDT and to any other party, products which have been copied or manufactured "in like manner,

similar or identical to the products, wares and equipment of plaintiff," and (2) defendant ASPAC, to cease and desist from using in its corporate name, letter heads, envelopes, sign boards and business dealings, plaintiff's trademark, internationally known as ITEC; and the recovery from defendants in solidum, damages of at least P500,000.00, attorney's fees and litigation expenses. In due time, defendants filed a motion to dismiss 7 the complaint on the following grounds: (1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business in the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is simply engaged in forum shopping which justifies the application against it of the principle of "forum non conveniens". On February 8, 1991, the complaint was amended by virtue of which ITEC INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. 8 In their Supplemental Motion to Dismiss, 9 defendants took note of the amendment of the complaint and asked the court to consider in toto their motion to dismiss and their supplemental motion as their answer to the amended complaint. After conducting hearings on the prayer for preliminary injunction, the court a quo on February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being devoid of legal merit with a rejection of both grounds relied upon by the defendants in their motion to dismiss, and (2) directing the issuance of a writ of preliminary injunction on the same day. From the foregoing order, petitioners elevated the case to the respondent Court of Appeals on a Petition for Certiorari and Prohibition 11 under Rule 65 of the Revised Rules of Court, assailing and seeking the nullification and the setting aside of the Order and the Writ of Preliminary Injunction issued by the Regional Trial Court. The respondent appellate court stated, thus: We find no reason whether in law or from the facts of record, to disagree with the (lower court's) ruling. We therefore are unable to find in respondent Judge's issuance of said writ the grave abuse of discretion ascribed thereto by the petitioners. In fine, We find that the petition prima facie does not show that Certiorari lies in the present case and therefore, the petition does not deserve to be given due course. WHEREFORE, the present petition should be, as it is hereby, denied due course and accordingly, is hereby dismissed. Costs against the petitioners. SO ORDERED. 12 Petitioners filed a motion for reconsideration 13 on June 7, 1991, which was likewise denied by the respondent court. WHEREFORE, the present motion for reconsideration should be, as it is hereby, denied for lack of merit. For the same reason, the motion to have the motion for reconsideration set for oral argument likewise should be and is hereby denied. SO ORDERED. 14 Petitioners are now before us via Petition for Review on Certiorari 15 under Rule 45 of the Revised Rules of Court. It is the petitioners' submission that private respondents are foreign corporations actually doing business in the Philippines without the requisite authority and license from the Board of Investments and the Securities and Exchange Commission, and thus, disqualified from instituting the present action in our courts. It is their contention that the provisions of the Representative Agreement, petitioner ASPAC executed with private respondent ITEC, are similarly "highly restrictive" in nature as those found in the agreements which confronted the Court in the case of Top-Weld Manufacturing, Inc. vs. ECED S.A. et al., 16 as to reduce petitioner ASPAC to a mere conduit or extension of private respondents in the Philippines. In that case, we ruled that respondent foreign corporations are doing business in the Philippines because when the respondents entered into the disputed contracts with the petitioner, they were carrying out the purposes for which they

were created, i.e., to manufacture and market welding products and equipment. The terms and conditions of the contracts as well as the respondents' conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. The respondents could be exempted from the requirements of Republic Act 5455 if the petitioner is an independent entity which buys and distributes products not only of the petitioner, but also of other manufacturers or transacts business in its name and for its account and not in the name or for the account of the foreign principal. A reading of the agreements between the petitioner and the respondents shows that they are highly restrictive in nature, thus making the petitioner a mere conduit or extension of the respondents. It is alleged that certain provisions of the "Representative Agreement" executed by the parties are similar to those found in the License Agreement of the parties in the Top-Weld case which were considered as "highly restrictive" by this Court. The provisions in point are: 2.0 Terms and Conditions of Sales. 2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to time. Unless otherwise expressly agreed to in writing by ITEC the purchase price is net to ITEC and does not include any transportation charges, import charges or taxes into or within the Territory. All orders from customers are subject to formal acceptance by ITEC at its Huntsville, Alabama U.S.A. facility. xxx xxx xxx 3.0 Duties of Representative 3.1. REPRESENTATIVE SHALL: 3.1.1. Not represent or offer for sale within the Territory any product which competes with an existing ITEC product or any product which ITEC has under active development. 3.1.2. Actively solicit all potential customers within the Territory in a systematic and business like manner. 3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid and the like within the Territory. 3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales Goals for the first 24 months is set forth on Attachment two (2) hereto. The Sales Goal for additional twelve month periods, if any, shall be sent to the Sales Agent by ITEC at the beginning of each period. These Sales Goals shall be incorporated into this Agreement and made a part hereof. xxx xxx xxx 6.0. Representative as Independent Contractor xxx xxx xxx 6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit sales within the Territory on ITEC's behalf but is authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on terms and conditions expressly authorized by ITEC in writing. 17 Aside from the abovestated provisions, petitioners point out the following matters of record, which allegedly bear witness to the respondents' activities within the Philippines in pursuit of their business dealings: a. While petitioner ASPAC was the authorized exclusive representative for three (3) years, it solicited from and closed several sales for and on behalf of private respondents as to their products only and no other, to PLDT, worth no less than US $ 15 Million (p. 20, tsn, Feb. 18, 1991); b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by private respondents' sole witness, Mr. Clarence Long, is not in the name of petitioner ASPAC as such representative, but in the name of private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);

c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL (Annex C of the original and amended complaints) which defined the responsibilities of the parties thereto as to the supply, installation and maintenance of the ITEC equipment sold under said Contract No. 1 is, as its very title indicates, in the names jointly of the petitioner ASPAC and private respondents; d. To evidence receipt of the purchase price of US $ 15 Million, private respondent ITEC, Inc. issued in its letter head, a Confirmation of payment dated November 13, 1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the Motion to Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were identified by private respondent's sole witness, Mr. Clarence Long (pp. 25-27, tsn, Feb. 18, 1991). 18 Petitioners contend that the above acts or activities belie the supposed independence of petitioner ASPAC from private respondents. "The unrebutted evidence on record below for the petitioners likewise reveal the continuous character of doing business in the Philippines by private respondents based on the standards laid down by this Court in Wang Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al. 19 and again in TOP-WELD. (supra)" It thus appears that as the respondent Court of Appeals and the trial court's failure to give credence on the grounds relied upon in support of their Motion to Dismiss that petitioners ascribe grave abuse of discretion amounting to an excess of jurisdiction of said courts. Petitioners likewise argue that since private respondents have no capacity to bring suit here, the Philippines is not the "most convenient forum" because the trial court is devoid of any power to enforce its orders issued or decisions rendered in a case that could not have been commenced to begin with, such that in insisting to assume and exercise jurisdiction over the case below, the trial court had gravely abused its discretion and even actually exceeded its jurisdiction. As against petitioner's insistence that private respondent is "doing business" in the Philippines, the latter maintains that it is not. We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations Implementing the Omnibus Investments Code of 1987, the following: (1) A foreign firm is deemed not engaged in business in the Philippines if it transacts business through middlemen, acting in their own names, such as indebtors, commercial bookers commercial merchants. (2) A foreign corporation is deemed not "doing business" if its representative domiciled in the Philippines has an independent status in that it transacts business in its name and for its account. 20 Private respondent argues that a scrutiny of its Representative Agreement with the Petitioners will show that although ASPAC was named as representative of ITEC., ASPAC actually acted in its own name and for its own account. The following provisions are particularly mentioned: 3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC, REPRESENTATIVE will pay for its own account; all customs duties and import fees imposed on any ITEC products; all import expediting or handling charges and expenses imposed on ITEC products; and any stamp tax fees imposed on ITEC. xxx xxx xxx 4.1. As complete consideration and payment for acting as representative under this Agreement, REPRESENTATIVE shall receive a sales commission equivalent to a per centum of the FOB value of all ITEC equipment sold to customers within the territory as a direct result of REPRESENTATIVE's sales efforts. 21 More importantly, private respondent charges ASPAC of admitting its independence from ITEC by entering and ascribing to provision No. 6 of the Representative Agreement. 6.0 Representative as Independent Contractor 6.1. When performing any of its duties under this Agreement, REPRESENTATIVE shall act as an independent contractor and not as an employee, worker, laborer, partner, joint venturer of ITEC as these terms are defined by the laws, regulations, decrees or the like of any jurisdiction, including the jurisdiction of the United States, the state of Alabama and the Territory. 22 Although it admits that the Representative Agreement contains provisions which both support and belie the independence of ASPAC, private respondent echoes the respondent court's finding that the lower court did not commit

grave abuse of discretion nor acted in excess of jurisdiction when it found that the ground relied upon by the petitioners in their motion to dismiss does not appear to be indubitable. 23 The issues before us now are whether or not private respondent ITEC is an unlicensed corporation doing business in the Philippines, and if it is, whether or not this fact bars it from invoking the injunctive authority of our courts. Considering the above, it is necessary to state what is meant by "doing business" in the Philippines. Section 133 of the Corporation Code, provides that "No foreign corporation, transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine Courts or administrative tribunals on any valid cause of action recognized under Philippine laws." 24 Generally, a "foreign corporation" has no legal existence within the state in which it is foreign. This proceeds from the principle that juridical existence of a corporation is confined within the territory of the state under whose laws it was incorporated and organized, and it has no legal status beyond such territory. Such foreign corporation may be excluded by any other state from doing business within its limits, or conditions may be imposed on the exercise of such privileges. 25 Before a foreign corporation can transact business in this country, it must first obtain a license to transact business in the Philippines, and a certificate from the appropriate government agency. If it transacts business in the Philippines without such a license, it shall not be permitted to maintain or intervene in any action, suit, or proceeding in any court or administrative agency of the Philippines, but it may be sued on any valid cause of action recognized under Philippine laws. 26 In a long line of decisions, this Court has not altogether prohibited foreign corporation not licensed to do business in the Philippines from suing or maintaining an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing business in the Philippines without a licensed from gaining access to Philippine Courts. 27 The purpose of the law in requiring that foreign corporations doing business in the Philippines be licensed to do so and that they appoint an agent for service of process is to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. The object is 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 steps necessary to render it amenable to suit in the local courts. 28 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, and thus, in effect, to permit persons to avoid their contracts made with such foreign corporations. 29 There is no exact rule or governing principle as to what constitutes "doing" or "engaging" or "transacting" business. Indeed, such case must be judged in the light of its peculiar circumstances, upon its peculiar facts and upon the language of the statute applicable. The true test, however, seems to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized. 30 Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include: soliciting orders, purchases, service contracts, opening offices, whether called "liaison" offices or branches; appointing representatives or distributors who are domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any domestic business firm, entity or corporation in the Philippines, and any other act or acts that imply a continuity or commercial dealings or arrangements and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization. Thus, a foreign corporation with a settling agent in the Philippines which issued twelve marine policies covering different shipments to the Philippines 31 and a foreign corporation which had been collecting premiums on outstanding policies 32 were regarded as doing business here. The same rule was observed relating to a foreign corporation with an "exclusive distributing agent" in the Philippines, and which has been selling its products here since 1929, 33 and a foreign corporation engaged in the business of manufacturing and selling computers worldwide, and had installed at least 26 different products in several corporations in the Philippines, and allowed its registered logo and trademark to be used and made it known that there exists a designated distributor in the Philippines. 34 In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was held that the uninterrupted performance by a foreign corporation of acts pursuant to its primary purposes and functions as a regional area headquarters for its home office, qualifies such corporation as one doing business in the country.

These foregoing instances should be distinguished from a single or isolated transaction or occasional, incidental, or casual transactions, which do not come within the meaning of the law, 36 for in such case, the foreign corporation is deemed not engaged in business in the Philippines. Where a single act or transaction, however, is not merely incidental or casual but indicates the foreign corporation's intention to do other business in the Philippines, said single act or transaction constitutes "doing" or "engaging in" or "transacting" business in the Philippines. 37 In determining whether a corporation does business in the Philippines or not, aside from their activities within the forum, reference may be made to the contractual agreements entered into by it with other entities in the country. Thus, in the Top-Weld case (supra), the foreign corporation's LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT with their local contacts were made the basis of their being regarded by this Tribunal as corporations doing business in the country. Likewise, in Merill Lynch Futures, Inc. vs. Court of Appeals, etc. 38 the FUTURES CONTRACT entered into by the petitioner foreign corporation weighed heavily in the court's ruling. With the abovestated precedents in mind, we are persuaded to conclude that private respondent had been "engaged in" or "doing business" in the Philippines for some time now. This is the inevitable result after a scrutiny of the different contracts and agreements entered into by ITEC with its various business contacts in the country, particularly ASPAC and Telephone Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local electronics firm engaged by ITEC to be its local technical representative, and to create a service center for ITEC products sold locally. Its arrangements, with these entities indicate convincingly ITEC's purpose to bring about the situation among its customers and the general public that they are dealing directly with ITEC, and that ITEC is actively engaging in business in the country. In its Master Service Agreement 39 with TESSI, private respondent required its local technical representative to provide the employees of the technical and service center with ITEC identification cards and business cards, and to correspond only on ITEC, Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC Technical Assistance Center.", such telephone being listed in the telephone book under the heading of ITEC Technical Assistance Center, and all calls being recorded and forwarded to ITEC on a weekly basis. What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure and repair of ITEC products, and to requisition monthly the materials and components needed to replace stock consumed in the warranty repairs of the prior month. A perusal of the agreements between petitioner ASPAC and the respondents shows that there are provisions which are highly restrictive in nature, such as to reduce petitioner ASPAC to a mere extension or instrument of the private respondent. The "No Competing Product" provision of the Representative Agreement between ITEC and ASPAC provides: "The Representative shall not represent or offer for sale within the Territory any product which competes with an existing ITEC product or any product which ITEC has under active development." Likewise pertinent is the following provision: "When acting under this Agreement, REPRESENTATIVE is authorized to solicit sales within the Territory on ITEC's behalf but is authorized to bind ITEC only in its capacity as Representative and no other, and then only to specific customers and on terms and conditions expressly authorized by ITEC in writing." When ITEC entered into the disputed contracts with ASPAC and TESSI, they were carrying out the purposes for which it was created, i.e., to market electronics and communications products. The terms and conditions of the contracts as well as ITEC's conduct indicate that they established within our country a continuous business, and not merely one of a temporary character. 40 Notwithstanding such finding that ITEC is doing business in the country, petitioner is nonetheless estopped from raising this fact to bar ITEC from instituting this injunction case against it. A foreign corporation doing business in the Philippines may sue in Philippine Courts although not authorized to do business here against a Philippine citizen or entity who had contracted with and benefited by said corporation. 41 To put it in another way, a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a foreign as well as to domestic corporations. 42 One who has dealt with a corporation of foreign origin as a corporate entity is estopped to deny its corporate existence and capacity: The principle will be applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes chiefly in cases where such person has received the benefits of the contract. 43

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non habere debet no person ought to derive any advantage of his own wrong. This is as it should be for as mandated by law, "every person must in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." 44 Concededly, corporations act through agents, like directors and officers. Corporate dealings must be characterized by utmost good faith and fairness. Corporations cannot just feign ignorance of the legal rules as in most cases, they are manned by sophisticated officers with tried management skills and legal experts with practiced eye on legal problems. Each party to a corporate transaction is expected to act with utmost candor and fairness and, thereby allow a reasonable proportion between benefits and expected burdens. This is a norm which should be observed where one or the other is a foreign entity venturing in a global market. As observed by this Court in TOP-WELD (supra), viz: The parties are charged with knowledge of the existing law at the time they enter into a contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more knowledgeable about his own state law than his alien or foreign contemporary. In this case, the record shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at the time the contract was executed and at all times thereafter. This conclusion is compelled by the fact that the same statute is now being propounded by the petitioner to bolster its claim. We, therefore sustain the appellate court's view that "it was incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly authorized to engage in business in the Philippines when they entered into the licensing and distributorship agreements." The very purpose of the law was circumvented and evaded when the petitioner entered into said agreements despite the prohibition of R.A. No. 5455. The parties in this case being equally guilty of violating R.A. No. 5455, they are in pari delicto, in which case it follows as a consequence that petitioner is not entitled to the relief prayed for in this case. The doctrine of lack of capacity to sue based on the failure to acquire a local license is based on considerations of sound public policy. The license requirement was imposed to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. It was never intended to favor domestic corporations who enter into solitary transactions with unwary foreign firms and then repudiate their obligations simply because the latter are not licensed to do business in this country. 45 In Antam Consolidated Inc. vs. Court of Appeals, et al. 46 we expressed our chagrin over this commonly used scheme of defaulting local companies which are being sued by unlicensed foreign companies not engaged in business in the Philippines to invoke the lack of capacity to sue of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to prevent the injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly acquired in violation of fiduciary arrangements between the parties. By entering into the "Representative Agreement" with ITEC, Petitioner is charged with knowledge that ITEC was not licensed to engage in business activities in the country, and is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore or even presumptively take advantage of the same. In Top-Weld, we ruled that a foreign corporation may be exempted from the license requirement in order to institute an action in our courts if its representative in the country maintained an independent status during the existence of the disputed contract. Petitioner is deemed to have acceded to such independent character when it entered into the Representative Agreement with ITEC, particularly, provision 6.2 (supra). Petitioner's insistence on the dismissal of this action due to the application, or non application, of the private international law rule of forum non conveniens defies well-settled rules of fair play. According to petitioner, the Philippine Court has no venue to apply its discretion whether to give cognizance or not to the present action, because it has not acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly having no personality to sue before Philippine Courts. This argument is misplaced because the court has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original complaint. And as we have already observed, petitioner is not at liberty to question plaintiff's standing to sue, having already acceded to the same by virtue of its entry into the Representative Agreement referred to earlier. Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the case, whether to give due course to the suit or dismiss it, on the principle of forum non convenience. 47 Hence, the Philippine Court may refuse to assume jurisdiction in spite of its having acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: 1) That the Philippine Court is one to which the parties may conveniently resort to; 2) That the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, 3) That the Philippine Court has or is likely to have power to enforce its decision. 48

The aforesaid requirements having been met, and in view of the court's disposition to give due course to the questioned action, the matter of the present forum not being the "most convenient" as a ground for the suit's dismissal, deserves scant consideration. IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby DISMISSED. The decision of the Court of Appeals dated June 7, 1991, upholding the RTC Order dated February 22, 1991, denying the petitioners' Motion to Dismiss, and ordering the issuance of the Writ of Preliminary Injunction, is hereby affirmed in toto. SO ORDERED. Regalado, Romero, Puno and Mendoza, JJ., concur.
Footnotes
1 Annex "A", Complaint of Plaintiff ITEC, Inc., pp. 98-106, Rollo. 2 Ibid., p. 105. 3 Annex "B", Ibid., pp. 107-109, Rollo. 4 Annex "C", Ibid., pp. 110-123, Rollo. 5 Annex "E", Ibid., p. 127, Rollo. 6 Complaint of Plaintiff ITEC, Inc., p. 86, Rollo. 7 Motion to Dismiss, p. 216-233, Rollo. 8 Amended Complaint by plaintiff ITEC, Inc., pp. 260-289, Rollo. 9 Supplemental Motion to Dismiss, pp. 275-282, Rollo. 10 Order of RTC Judge Ignacio Capulong, Branch 164, pp. 283-286, Rollo. 11 Annex "D", Petition for Review, pp. 50-85, Rollo. 12 Court of Appeals Decision, dated June 7, 1991, penned by Associate Justice Lorna S. Lombos-dela Fuente, concurred in by Associate Justices Alfredo M. Marigomen and Jainal D. Rasul, pp. 40-46, Rollo. 13 Annex "K", Petition for Review, pp. 359-385, Rollo. 14 Court of Appeals Resolution, dated October 9, 1991, Associate Justice Lorna S. Lombos-Dela Fuente, JJ, concurred by Associate Justices Alfredo M. Marigomen and Jainal Rasul, p. 48, Rollo. 15 Petition for Review, pp. 2-38, Rollo. 16 G.R. No. L-44944, August 9, 1985, 138 SCRA 118. 17 Annex "A", Complaint of plaintiff ITEC, Inc., pp. 98-106, Rollo. 18 Petition for Review, p. 18, Rollo. 19 G.R. No. 72147, December 1, 1987, 156 SCRA 44. 20 Comment of private respondent ITEC, Inc., p. 402, Rollo. 21 Annex "A", Complaint of ITEC, Inc., p. 101, Rollo. 22 Ibid., p. 102. 23 Comment of private respondent ITEC, Inc., p. 405, Rollo.

24 Mentholatum Co., Inc., et al., vs. Mangaliman, et al., G.R. No. 47701, June 27, 1941, 72 Phil. 524. 25 See Secs. 123 and 133, Corporation Code of the Philippines. 26 See Secs. 123 and 133, Corporation Code of the Philippines. 27 Huang Lung Bank, Ltd. vs. Saulog, G.R. No. 73765, August 26, 1991, 210 SCRA 137. 28 Marshall-Wells Co. vs. Elser and Co., G.R. No. 22015, September 1, 1924, 46 Phil 71. 29 Central Republic Bank and Trust Co. vs. Bustamante, G.R. No. 47401, March 15, 1941, 71 Phil 359. 30 Mentholatum Co. Inc. vs. Mangaliman, supra. 31 General Corporation of the Philippines vs. Union Insurance Society of Canton, Ltd., G.R. No. L-2684, September 14, 1950, 87 Phil 313. 32 Manufacturing Life Insurance Co. vs. Meer, G.R. L-2410, June 28, 1951, 89 Phil 351. 33 Mentholatum Co. Inc., vs. Mangaliman, supra. 34 Wang Laboratories, Inc. vs. Mendoza, supra. 35 G.R. No. 109272, August 10, 1994, 235 SCRA 216. 36 Pacific Micronesian Line Inc. vs. Del Rosario, G.R. No. L-7154, October 23, 1954. 37 Far East International Import and Export Corporation vs. Nankai Kogyo Co., G.R. No. 13525, November 30, 1962, 6 SCRA 725. 38 G.R. No. 97816, July 24, 1992, 211 SCRA 824. 39 Rollo, p. 245. 40 Top-Weld Manufacturing, Inc. vs. ECED S.A. et al., supra. 41 Merill Lynch Futures vs. Court of Appeals, G.R. No. 97816. July 24, 1992, 211 SCRA 824. 42 Georg Grotjahn GMBH vs. Isnani (supra). 43 Merrill Lynch Futures vs. Court of Appeals, G.R. No. 97816. July 24, 1992, citing Sherwood vs. Alvis, 83 Ala. 115, 3 So 307, limited and distinguished in Dudley v. Collier, 84 Ala 431, 6 So. 304; Spinney v. Miller, 114 Iowa 210, 86 NW 317. 44 Article 19, Civil Code. 45 National Sugar Trading Corporation vs. Court of Appeals, et al., G.R. No. 110910, July 17, 1995, 246 SCRA 465. 46 G.R. No. L-61523, July 31, 1986, 143 SCRA 288. 47 Salonga, Private International Law, 1979 ed., p. 49. 48 Ibid., p. 47.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 162894

February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner, vs. STOCKTON W. ROUZIE, JR., respondent. DECISION TINGA, J.: Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against petitioner with the trial court. As culled from the records of the case, the following antecedents appear: Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws of the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of services in several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a service contract with the Republic of the Philippines on behalf of BMSI for the dredging of rivers affected by the Mt. Pinatubo eruption and mudflows.3 On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach of employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondents money claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter and dismissed respondents complaint on the ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a Resolution dated 26 November 1997. The Resolution became final and executory on 09 November 1998. On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor case. The complaint essentially reiterated the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of services in government projects and that respondent was not paid the commissions due him from the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself had combined and functioned as one company. In its Answer,8 petitioner alleged that contrary to respondents claim, it was a foreign corporation duly licensed to do business in the Philippines and denied entering into any arrangement with respondent or paying the latter any sum of money. Petitioner also denied combining with BMSI and RUST for the purpose of assuming the alleged obligation of the said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the written agreement between respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and obligations of the parties shall be governed by the laws of the State of Connecticut.10 Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages by way of compulsory counterclaim.11 On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for Summary Judgment12 seeking the dismissal of the complaint on grounds of forum non conveniens and failure to state a cause of action. Respondent opposed the same. Pending the resolution of the omnibus motion, the deposition of Walter Browning was taken before the Philippine Consulate General in Chicago.13 In an Order14 dated 13 September 2000, the RTC denied petitioners omnibus motion. The trial court held that the factual allegations in the complaint, assuming the same to be admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled that the principle of forum non conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a foreign corporation licensed to do business in the Philippines.15

Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioners motion. Thus, it filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari and a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and 31 July 2001 and to enjoin the trial court from conducting further proceedings.20 On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition for certiorari for lack of merit. It also denied petitioners motion for reconsideration in the assailed Resolution issued on 10 March 2004.22 The appellate court held that although the trial court should not have confined itself to the allegations in the complaint and should have also considered evidence aliunde in resolving petitioners omnibus motion, it found the evidence presented by petitioner, that is, the deposition of Walter Browning, insufficient for purposes of determining whether the complaint failed to state a cause of action. The appellate court also stated that it could not rule one way or the other on the issue of whether the corporations, including petitioner, named as defendants in the case had indeed merged together based solely on the evidence presented by respondent. Thus, it held that the issue should be threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of the principle of forum non conveniens. Hence, this petition raising the following issues: WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON INTERNATIONAL, INC. WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24 Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the filing of the instant petition and that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a comment. The instant petition lacks merit. Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of foreign elements in the dispute namely, the parties and witnesses involved are American corporations and citizens and the evidence to be presented is located outside the Philippines that renders our local courts inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate the immediate application of the doctrine of forum non conveniens. Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of conflicts-oflaws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus, in the instances27 where the Court held that the local judicial machinery was adequate to resolve controversies with a foreign element, the following requisites had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28 On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where the court has jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even if the rules of conflict-oflaws or the convenience of the parties point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is filed.29 Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action and the amount of damages prayed are within the jurisdiction of the RTC. As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was acquired by its voluntary appearance in court.32 That the subject contract included a stipulation that the same shall be governed by the laws of the State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to

this state; choice of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties.33 The choice of law stipulation will become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits proceeds before the trial court. Under the doctrine of forum non conveniens, a court, in conflicts-of-laws 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.34 Petitioners averments of the foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved. Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the courts desistance.35 Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to the sound discretion of the lower courts because their findings are binding on this Court. Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading.36 As a general rule, the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded.37 The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of Appeals is instructive, thus: x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a cause of action. Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project in General Santos City, after Rust International ceased to exist after being absorbed by REC. Other documents already submitted in evidence are likewise meager to preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined into one company, so much so that Raytheon International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid commissions. Neither these documents clearly speak otherwise.38 As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together requires the presentation of further evidence, which only a full-blown trial on the merits can afford. WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner. SO ORDERED. Footnotes
*

Acting Chairperson. As replacement of Justice Leonardo A. Quisumbing who inhibited himself per Administrative Circular No. 84-2007.

**

Rollo, pp. 42-46. Dated 28 August 2003; penned by Associate Justice Arsenio J. Magpale and concurred in by Associate Justices Bienvenido L. Reyes, Acting Chairperson of the Special Ninth Division, and Rebecca De Guia-Salvador.
2

Id. at 47. Dated 10 March 2004. Id. at 48-49. Id. at 61-62. Id. at 63-74. Id. at 75-90. Id. at 48-54. Id. at 91-99. Id. at 94.

10

Id. at 96. Id. at 97-98. Id. at 100-111. Records, Vol. I, pp. 180-238. Rollo, pp. 127-131. Id. at 130. Id. at 132-149. Id. at 150-151. Id. at 162. Id. at 163-192. Id. at 191. Supra note 1. Supra note 2. Id. at 44. Id. at 18. Id. at 318. G.R. No. 149177, 23 November 2007.

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27

Bank of America NT & SA v. Court of Appeals, 448 Phil. 181 (2003); Puyat v. Zabarte, 405 Phil. 413 (2001); Philsec Investment Corporation v. Court of Appeals, G.R. No. 103493, 19 June 1997, 274 SCRA 102.
28

The Manila Hotel Corp. v. NLRC, 397 Phil. 1, 16-17 (2000); Communication Materials and Design, Inc. v. CA, 329 Phil. 487, 510-511 (1996). Agpalo, Ruben E. CONFLICT OF LAWS (Private International Law), 2004 Ed., p. 491. Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz, G.R. No. 162890, 22 November 2005, 475 SCRA 743, 756. Laresma v. Abellana, G.R. No. 140973, 11 November 2004, 442 SCRA 156, 168. See Arcelona v. CA, 345 Phil. 250, 267 (1997). Hasegawa v. Kitamura, supra note 26. Bank of America NT & SA v. Court of Appeals, supra note 27. Philsec Investment Corporation v. Court of Appeals, supra note 27 at 113. Bank of America NT & SA v. Court of Appeals, supra note 27 at 194. Banco Filipino Savings and Mortgage Bank v. Court of Appeals, G.R. No. 143896, 8 July 2005, 463 SCRA 64, 73. Rollo, p. 44.

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