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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards

RECOGNITION AND ENFORCEMENT OF

FOREIGN JUDGMENT &
FOREIGN ARBITRAL AWARDS
General Concepts:
RECOGNITION

ENFORCEMENT

A foreign judgment is given the same effect that

it has in the State where it was
rendered with respect to the parties, the subject
matter and the issues involved
The extension to another State of the res judicata
effect of a judgment obtained in one
State

In addition to the recognition of a foreign

judgment, affirmative relief is given to a party
entitled to the same because of such judgment

Enforcement of the foreign judgment is not

necessarily implied

Recognition of the foreign judgment is necessarily

implied

INTERNATIONAL SETTING

PHILIPPINE SETTING

English Rule (creation of obligation):

Recognition and enforcement is not based merely
on comity. Foreign judgments create obligations
between the parties.
BUT..foreign judgments may still be reviewed in
exceptional cases (fraud, etc.)
American Rule (regularity of proceedings):
There is no reason to deny enforcement of
foreign judgment when the proceedings had in the
foreign country was fair and regular.
(note: the same is true in Italy)
French Rule:
Foreign judgments obtained by Frenchmen are
automatically enforced; but if obtained against
Frenchmen, they have to be subject to a new suit

Giving affirmative relief to a party entitled to it

because of such foreign judgment

The lex fori always governs recognition

and enforcement.
Theoretical Basis
Before: res judicata
Today: comity
Exception : the basis is an obligation which is given
rise to by a foreign judgment. It is assumed that the
parties willingly submit themselves to be bound by
the judgment. Thus, the obligation is created by the
will parties, not by the State (Perkins v. Benguet
Consolidated)

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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards
Requirements :
S.48, R.39, Rules of Court
Sec. 48 The effect of a judgment or final order of a tribunal of a foreign country, having
jurisdiction to render the judgment or final order is as follows
A. In case of a judgment or final order upon a specific thing, the judgment or final order conclusive
upon the title to the thing; and
B. In case of a judgment or final order against a person, the judgment or final order presumptive
evidence of a right as between the parties and their successors in interest by subsequent title.
In either case the judgment or final order may be repelled by evidence of want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact.
REQUISITES :
1.) the foreign tribunal must have had jurisdiction to render the judgment
2.) there must have been an observance of the fundamental principles of due process and fairness
3.) the proceedings must not have been tainted with fraud, prejudice or unfairness
EFFECTS OF FOREIGN JUDGMENT: Rule 39, Sec. 48 Rules of Court
Sec. 48 The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the
judgment or final order is as follows
A. In case of a judgment or final order upon a specific thing, the judgment or final order conclusive upon the
title to the thing; and
B. In case of a judgment or final order against a person, the judgment or final order presumptive evidence of a
right as between the parties and their successors in interest by subsequent title.

Paragraph (A) are judgments in Rem:

When the action affects personal status

When the action relates to, or the subject of which is property within the Philippines
When the relief demanded consists in excluding a party from any interest in property located
in the Philippines
When the non-residents property has been attached in the Philippines. Rule 14, Section 15

Effects of Judgments in Rem

Once a foreign judgment in rem is proved to be valid, the title adjudicated under such foreign
judgment is as good as if it had been adjudicated originally under a Philippine Court
Conclusive upon title to the thing
Thus, party can only present defenses concerning the judgment

Paragraph (B) are judgments in Personam:

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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards

Where the complaint does not involve the personal status of the plaintiff or any property in
the Philippines in which defendants have or claim an interest. Rule 14, Section 15
Presumptive evidence of a right as between the parties and their successors in interest by a
subsequent title
A party can question the right granted or the judgment itself
Judgment is not conclusive

WHEN FOREIGN JUDGMENT CANNOT BE GIVEN EFFECT

1.

Section 48, Rule 39 (last paragraph): In either case, the judgment or final order may be repelled by
evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of
law or fact.

Thus, both types of judgments are open to an inquiry as to the invalidity of the judgment, for
the existence of one of the many grounds specified

2.

When other defenses not included in the rules of court are available. Defenses under the rules of
court are not exclusive. Sources of other defenses = jurisprudence

FOREIGN JUDGMENTS MAY BE ENFORCED OR MAY BE PRESENTED AS A DEFENSE

ENFORCEMENT:

Where the judgment is in favor of the plaintiff, he may sue upon the judgment

DEFENSE

A foreign judgment in favor of the defendant operates as a bar to a suit on the original claim.
Defense involves the recognition of a foreign judgment

Perkins vs. Benguet Consolidated Mining Co. : One should not confuse the execution of a foreign
judgment with the exception of res judicata. There exists a difference between asking for the enforcement
of a foreign judgment and presenting the defense of res judicata. Ordering the enforcement of a foreign
judgment implies a direct act of sovereignty, recognizing res judicata merely requires the intervention of a
sentiment of justice

Res judicata is the same as recognition as to its effects

Enforcement of Foreign Judgment: The Plaintiff must File a Separate Action or Proceeding

Perkins vs. Benguet Consolidated Mining Co.:

The judgment of a foreign tribunal cannot be enforced by execution in the Philippines

Such judgment only creates a right of action and its non-satisfaction, a cause of action, and it
is necessary that a suit be brought upon said foreign judgment in our local courts

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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards

Thus, in conformity with our rules, a separate action or proceeding must be instituted in the
Philippine court based on the foreign judgment
Foreign Judgment presented as a Defense = No Action or Special Proceeding is needed
If the foreign judgment is presented as a defense to the claim of the plaintiff, what is involved
is the recognition of a foreign judgment.

According to Salonga: The party raising the foreign judgment as a defense must plead and prove the
foreign judgment in his favor.

The foreign judgment may be raised by the defendant as a defense by including it in his
answer. No action or special proceeding need be instituted. That purpose was perfectly
accomplished when the judgment was relied upon in an Answer as when an original action is
brought by the holder of the judgment. Gorayeb vs. Hashim

CONDITION FOR RECOGNITION OR ENFORCEMENT

Philsec Investment Corp. vs. Court of Appeals - For recognition and enforcement to properly operate,
there has to be a showing first that the grounds for its exclusion do not exist

Therefore, the adverse party must be given an opportunity to refute the judgment by the
grounds provided for in law or jurisprudence whether such foreign judgment is recognized
or enforced

DUTY OF THE COURT:

Philsec Investment Corp. vs. Court of Appeals: The remedy granted by the Supreme Court
was a remand of the case for the opportunity for a full dress hearing on the matter
Hang Lung Bank v. Saulog: The Court found it necessary to remand the case in order to
determine the issue of possibility of recognition and enforcement
Gorayeb v. Hashim: Philippine courts should have an opportunity to pass upon the
judgment. That purpose was perfectly accomplished when the judgment was relied upon in
an Answer as when an original action is brought by the holder of the judgment

Background (as to foreign arbitral award):

The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is, as the
name itself implies, a multi-lateral treaty signed in New York City on June 10, 1958. The Philippines was
among the original signers of the 1958 New York Convention, although, as a treaty, it was subject to
ratification by the Senate. This ratification was given on May 10, 1965 under Resolution No. 71 of the
Philippine Senate. The Philippines deposited itsratification of the Convention on July 6, 1967

Pertinent Provisions under Convention on the Recognition and the Enforcement of Foreign Arbitral
Awards of 1958:

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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards

Each Contracting State shall recognize an agreement in writing under which the
parties undertake to submit to arbitration all or any differences which have arisen or
which may arise between them in respect of a defined legal relationship, whether
contractual or not, concerning a subject matter capable of settlement by arbitration.
The term 'agreement in writing shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters or
telegrams.
The court of a Contracting State, when seized of an action in a matter in respect of
which the parties have made an agreement within the meaning of this article, shall, at
the request of one of the parties, refer the parties to arbitration, unless it finds that the
said agreement is null and void, inoperative or incapable of being performed."

CASE LAW

National Union Fire Insurance Co. of Pittsburg v. Stolt-Nielsen Phil., Inc.,

G.R. No. 87958, April 26, 1990
FACTS: United Coconut Chemicals, Inc. (SHIPPER) shipped 404.774 metric tons of distilled C6-C18
fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. (CARRIER), from
Bauan, Batangas, Philippines, consigned to"Nieuwe Matex" at Rotterdam, Netherlands, covered by a
Tanker Bill of Lading. The shipment was insured under a marine cargo policy with Petitioner National
Union Fire Insurance Company of Pittsburg (INSURER), through its settling agent in the Philippines, the
American International Underwriters (Philippines), Inc. It appears that the Bill of Lading issued by the
CARRIER contained a general statement of incorporation of the terms of a Charter Party between the
SHIPPER and Parcel Tankers, Inc., entered into in Greenwich, Connecticut, USA. Upon receipt of the
cargo by the CONSIGNEE in the Netherlands, it was found to be discolored and totally
contaminated. The claim filed by the SHIPPER-ASSURED having been denied, the INSURER indemnified
the SHIPPER and thereafter proceeded with its claim against the CARRIER.
Before RTC MAKATI, the CARRIER moved to dismiss or suspend the proceedings on the ground that the
RTC had no jurisdiction over the claim the same being an arbitrable one. It further claimed that as
subrogee of the SHIPPER-ASSURED, the INSURER is subject to the provisions of the Bill of Lading,
which includes a provision that the shipment is carried pursuant to the terms of the Charter Party
between the SHIPPER-ASSURED and Parcel Tankers, Inc. providing for arbitrator. The INSURER
opposed the dismissal/suspension on the ground that it was not legally bound to submit the claim
for arbitration inasmuch as the arbitration clause provided in the Charter Party was not incorporated into
the Bill of Lading, and that it is only raised when RTC initially denied the Motion but subsequently
reconsidered and suspended the proceedings. On appeal before the CA, the said court set aside the ruling
of RTC and ordered the INSURER to refer its claim for arbitration.
ISSUE: WON the terms Charter Party, particularly the provision on arbitration, are binding on the
INSURER

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RULING: YES. Since the right of action of the SHIPPER-ASSURED is governed by the provisions of the
Bill of Lading, which includes by reference to the terms of the Charter Party, necessarily a suit by the
INSURER is subject to the same agreements.
It is settled law that the charter may be made part of the contract under which the goods are carried by
an appropriate reference in the Bill of Lading. This should include the provision on arbitration even
without a specific stipulation to that effect. The entire contract must be read together and its clauses
interpreted in relation to one another and not by parts. As the respondent Appellate Court found, the
INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the
existence of the charter party due to an appropriate reference thereof in the bill of lading and, by the
exercise of ordinary diligence, it could have easily obtained a copy thereof either from the shipper or
the charterer."We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration
clause. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee, it stepped into the shoes of the SHIPPER-ASSURED and is subrogated
merely to the latter's rights. It can recover only the amount that is recoverable by the assured. And since
the right of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which
includes by reference the terms of the Charter Party, necessarily a suit by the INSURER is subject to
the same agreements.
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. Republic Act No. 876 (The Arbitration Law) also expressly authorizes arbitration
of domestic disputes. Foreign arbitration is a system of settling commercial disputes of an international
character was likewise recognized when the Philippines adhered to the United Nations "Convention on
the Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the Resolution No.71 of
the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a contracting state. It has not been shown that
the arbitral clause in question is null and void, inoperative, or incapable of being performed. Nor has any
conflict been pointed out between the Charter Party and the Bill of Lading. In fine, referral to arbitration
in New York pursuant to the arbitration clause, and the suspension of the proceedings, pending the
return of the arbitral award, is indeed called for.

Querubin v. Querubin
G.R. No. L-3693, July 29, 1950
FACTS: In 1934, Silvestre Querubin, a Filipino, married petitioner Margaret Querubin, in Albuquerque,
New Mexico. 'They had a daughter, Querubina. Margaret filed for divorce in 1948 alleging "mental cru elty." Silvestre filed a countersuit for divorce alleging Margaret's infidelity. In 1949, the Superior Court of
Los Angeles granted the divorce and awarded "joint custody" of the child. Querubina was to be kept in a
neutral home subject to reasonable visits by both parties. Both parents were restrained from taking
Querubina out of California without the permission of the Court.
On March that year, custody was granted to Silvestre under an interlocutory decree (although the child
was still kept in the neutral home) because at the time of the trial, Margaret was living with another man.
Upon Margaret's petition, the interlocutory decree was modified. Since she had then married the man she

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was living with and had a stable home, the Court granted custody to Margaret with reasonable
limitations on the part of the father.
Silvestre, together with Querubina, left San Francisco on November of the same year, went to the
Philippines and stayed in Cagayan, Ilocos Sur, with the intent of protecting the child from the effects of
her mother's scandalous conduct. He wanted the child to be raised in a better environment.
In 1950, Margaret, through counsel, presented to the CFI a petition for habeas corpus for the custody of
Querubina under the interlocutory decree of the California Court. She claims that under Art. 48 of Rule
39, the decree of the Los Angeles Court, granting her the child's custody, must be complied within the
Philippines.
ISSUE: WON the foreign decree may be implemented in the Philippines
RULING: "The decree is by no means final. It is subject to change with the circumstances. The first decree
awarded the custody of the child to the father, prohibiting the mother from taking the child to her
(Margaret's) home because of her adulterous relationship with another man. The decree was amended
when Margaret was not in Los Angeles.
Because the decree is interlocutory, it cannot be imple mented in the Philippines. Where the judgment is
merely interlocutory, the determination of the question by the Court which rendered it did not settle and
adjudge finally the rights of the parties.
In general, a decree of divorce awarding custody of the child to one of the spouses is respected by the
Courts of other states "at the time and under the circumstances of its rendition" but such a decree has no
controlling effects in another state as to facts and conditions occurring subsequently to the date of the
decree; and the Court of another state may, in proper proceedings, award custody otherwise upon proof
of matters subsequent to the decree which justify the decree to the interest of the child.
In the case at bar, the circumstances had changed. Querubina is not in Los Angeles, she is in Cagayan,
Ilocos Sur, under her father's care. It is a long way from one place to the other. Neither can Margaret prove
that she can pay the cost of passage for the minor. She is not a packet of cigarettes one can send by mail.
Neither can she answer for Querubina's support, care and education. In comparison, the father has shown
both interest in the child and capacity to provide for the needs of the child."#

Borthwick vs. CA
G.R. No. L-57338. July 23, 1987
FACTS: By action commenced in the Circuit Court of the First Circuit, State of Hawaii, U.S.A., Joseph E.
Scallon sought to Compel payment by William B. Borthwick on four (4) promissory notes in the amounts
of $32,408.95, $29,584.94, $2,832.59 and $40,000.00, plus stipulated interest. Scallon's complaint
alleged, inter alia, that Borthwick, an American citizen living in the Philippines, owned real property
interests in Hawaii where he last resided and transacted business therein; that business dealings which

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transpired in Honolulu, Hawaii had given rise to the promissory notes sued upon, and Borthwick had
failed to pay the sums thereunder owing upon maturity and despite demand.
Borthwick being then in Monterey, California, summons 5 was served upon him personally in that place,
pursuant to Hawaiian law allowing service of process on a person outside the territorial confines of the
State, if he had otherwise submitted himself to the jurisdiction of its courts as to causes of action arising
from, among others, the act of transacting any business within Hawaii alleged to consist as to
Borthwick in the negotiation and dealings regarding the promissory notes. Borthwick ignored the
summons.1avvphi1 Default was entered against him, and in due course a default judgment was rendered.
However, Scallon's attempts to have the judgment executed in Hawaii and California failed, because no
assets of Borthwick could be found in those states. 8 Scallon and his wife, Jewell, then came to the
Philippines and on March 15, 1980 brought suit against Borthwick in the Court of First Instance of Makati,
seeking enforcement of the default judgment of the Hawaii Court and asserting two other alternative
causes of action.
The sheriff's initial efforts to serve summons on Borthwick personally at his address at 861 Richmond St.,
Greenhills, Mandaluyong, Metro Manila having been unsuccessful Borthwick was "always out on
official business" the sheriff effected substituted service by leaving a copy of the summons and the
complaint with Borthwick's "house caretaker," a man named Fred Daniel.
No response from Borthwick was forthcoming until after the Court subsequently amended its judgment
so as to make the sums due under the Hawaii Court decision payable in their equivalent in Philippine
currency. Notice of this amendatory order was somehow personally accepted by Borthwick at this time.
Borthwick then moved for a new trial, claiming that it was by accident, mistake and excusable negligence
that his "off and on itinerant gardener," Daniel, failed to transmit the summons to him, which omission
consequently prevented Borthwick from knowing of the judicial proceedings against him. Alleging too
that "the promissory notes did not arise from business dealings in Hawaii," nor "did (he) own real estate"
therein,15 Borthwick contended that the judgment sought to be enforced was invalid for want of
jurisdiction of the Hawaii Court over the cause of action and over his person.
The motion for new trial was denied by the Trial Court. Hence he proceeded directly with the SC.
ISSUE: WON a foreign judgment against a person rendered without jurisdiction over the cause of action
and without proper summons to the defendant enforceable in the Philippines
RULING: It is true that a foreign judgment against a person is merely "presumptive evidence of a right as
between the parties," and rejection thereof may be justified, among others, by "evidence of a want of
jurisdiction" of the issuing authority, under Rule 39 of the Rules of Court. 22 In the case at bar, the
jurisdiction of the Circuit Court of Hawaii hinged entirely on the existence of either of two facts in
accordance with its State laws, i.e., either Borthwick owned real property in Hawaii, or the promissory
notes sued upon resulted from his business transactions therein. Scallon's complaint clearly alleged both
facts. Borthwick was accorded opportunity to answer the complaint and impugn those facts, but he failed
to appear and was in consequence declared in default. There thus exists no evidence in the record of the
Hawaii case upon which to lay a conclusion of lack of jurisdiction, as Borthwick now urges.

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The opportunity to negate the foreign court's competence by proving the non-existence of said
jurisdictional facts established in the original action, was again afforded to Borthwick in the Court of First
Instance of Makati, where enforcement of the Hawaii judgment was sought. This time it was the
summons of the domestic court which Borthwick chose to ignore, but with the same result: he was
declared in default. And in the default judgment subsequently promulgated, the Court a quo decreed
enforcement of the judgment affirming among others the jurisdictional facts, that Borthwick owned real
property in Hawaii and transacted business therein.
In the light of these antecedents, it is plain that what Borthwick seeks in essence is one more opportunity,
a third, to challenge the jurisdiction of the Hawaii Court and the merits of the cause of action which that
Court had adjudged to have been established against him. This he may obtain only if he succeed in
showing that the declaration of his default was incorrect. He has unfortunately not been able to do that;
hence, the verdict must go against him.

Philippine International Shipping Corp. (PISC) vs. CA

G.R. No. 77085. April 26, 1989

FACTS: Plaintiff [respondent Interpool, Ltd.] is a foreign corporation, duly organized and existing under
the laws of Bahamas Islands with office and business address at 630, 3rd Avenue, New York, New York,
and not licensed to do, and not doing business, in the Philippines.
Defendants Philippine International Shipping Corporation, Philippine Construction Consortium
Corporation, Pacific Mills Inc., and Universal Steel Smelting Company, Inc., are corporations duly
organized and existing under and by virtue of the laws of the Philippines. The other defendants, George
Lim Marcos Bautista, Carlos Laude, Tan Sing Lim, Antonio Liu Lao and Ong Teh are Philippine residents.
In 1979 to 1981, the defendant, Philippine International Shipping Corporation (PISC) leased from the
plaintiff and its wholly owned subsidiary, the Container Trading Corporation, several containers pursuant
to the Membership Agreement and Hiring Conditions.
Defendants Philippine Construction Consortium Corporation, Pacific Mills Inc. and Universal Steel
Smelting Company, guaranteed to pay (sic) all monies due, or to become due, to the plaintiff from (PISC)
and any liability of the latter arising out of the leasing or purchasing of equipment from the plaintiff or
any of its subsidiaries, affiliates and/or agents of I.S.C. dry cargo containers and/or chassis, including but
not limited, to per diem leasing charges, damages protection plan charges, damages charge and/or
replacement costs of constructively and/or totally lost containers as well as handling and drop-off
charges.
In 1979 to 1981, defendant Philippine International Shipping Corporation incurred outstanding and
unpaid obligations with the plaintiff, in the amount of $94,456.28, representing unpaid per diems, dropoff charges, interest and other agreed charges. The plaintiff sent letters to the defendants demanding
payment of their outstanding and unpaid obligations, but to no avail, so plaintiff was constrained to file a
case against the principal defendant, (PISC) before the United States District Court, Southern District of
New York.

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Plaintiff obtained a Default Judgment on July 3, 1983 against (PISC) ordering it to pay the plaintiff the
sum of $80,779.33, as liquidated damages, together with interest in the amount of $13,676.95 and costs in
the amount of $80.00. or for a total judgment of $94,456.28.
Because of the unjustifiable failure and refusal of PISC and its guarantors to jointly and severally pay their
obligations to the plaintiff, the latter filed on November 16, 1983 a complaint [docketed as Civil Case No.
Q-39927, Branch 93, Regional Trial Court of Quezon City] (Annex A) 7 to enforce the default judgment of
the U.S. District Court against the defendant PISC and also to enforce the individually executed
Continuing Guaranties of the other defendants. The defendants (herein petitioners) were duly
summoned, but they failed to answer the complaint. On motion of the plaintiff, they were declared in
default. Petitioners filed with the CA a petition to annul judgment but it was denied.
ISSUE: WON both the Default Judgment rendered by the U.S. District Court, Southern District of New
York, in 83 Civil 290 (EW), and the Decision of the Regional Trial Court of Quezon City, in Civil Case No.
Q-39927, are null and void essentially on jurisdictional grounds
RULING: The Petition must fail. To begin with, the evidence of record clearly shows that the U.S. District
Court had validly acquired jurisdiction over petitioner (PISC) under the procedural law applicable in that
forum i.e., the U.S. Federal Rules on Civil Procedure. Copies of the Summons and Complaint in 83 Civil
290 (EW) which were in fact attached to the Petition for Review filed with this Court, were
stamped "Received, 18 Jan 1983, PISC Manila." indicating that service thereof had been made upon and
acknowledged by the (PISC) office in Manila on, 18 January 1983, and that (PISC) had actual notice of
such Complaint and Summons. Moreover, copies of said Summons and Complaint had likewise been
served upon Prentice-Hall Corporation System, Inc. (New York), petitioner PISCs agent, expressly
designated by it in the Master Equipment Leasing Agreement with respondent Interpool. "for the
purpose of accepting service of any process within the State of New York, USA with respect to any claim
or controversy arising out of or relating to directly or indirectly, this Lease." The record also shows that
petitioner PISC, without, however, assailing the jurisdiction of the U.S. District Court over the person of
petitioner, had filed a Motion to Dismiss the Complaint in 83 Civil 290 (EW) which Motion was denied.
All of the foregoing matters, which were stated specifically in the U.S. District Court's disputed Default
Judgement, have not been disproven or otherwise overcome by petitioners, whose bare and
unsubstantiated allegations cannot prevail over clear and convincing evidence of record to the contrary.
That foreign judgment-which had become final and executory, no appeal having been taken therefrom
and perfected by petitioner PISC-is thus "presumptive evidence of a right as between the parties [i.e.,
PISC and Interpool] and their successors in interest by a subsequent title."
Petitioners' argument of lack or absence of jurisdiction on the part of the Quezon City Regional Trial
Court, on the alleged ground of non-service of notice or summons in Civil Case No. Q-39927, does not
persuade. But we do not need to address this specific argument. For even assuming (though
merely arguendo) that none of the ten (10) petitioner herein had been served with notice or summons
below, the record shows, however, that they did in fact file with the Regional Trial Court a Motion for
Extension of Time to file Answer (dated 9 December 1983) as well as Motion for Bill of Particulars (dated
15 December 1983), both addressing respondent Interpool's .Complaint in Civil Case No. Q-39927. In
those pleadings, petitioners not only manifested their intention to controvert the allegations in the
Complaint, but they neither questioned nor assailed the jurisdiction of the trial court, either over the case

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filed against them or over their individual persons, as defendants therein. There was here, in effect,
voluntary submission to the jurisdiction of the Quezon City trial court by petitioners, who are thereby
estopped from asserting otherwise before this Court.

Northwest Orient Airlines, Inc. vs. Court of Appeals and

C.F. Sharp & Company, Inc.
G.R. No. 112573 February 9, 1995
FACTS: Plaintiff Northwest Airlines and defendant C.F. Sharp & Company(Sharp for brevity), through
its Japan branch, entered into an International Passenger Sales Agency Agreement, whereby the former
authorized the latter to sell its air transportation tickets. Unable to remit the proceeds of the ticket sales
made by Sharp on behalf of the plaintiff under the said agreement, plaintiff sued Sharp in Tokyo, Japan,
for collection of the unremitted proceeds of the ticket sales.
A writ of summons was issued by the Tokyo District Court of Japan against Sharp at its office in
Yokohoma. The attempt to serve the summons was unsuccessful because the person believed to be
authorized to receive court processes was in Manila. The second attempt to serve summon was also
unsuccessful. The judge of the Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila so the Director of the Tokyo District Court
requested the Supreme Court of Japan to serve the summons through diplomatic channels upon the
defendant's head office in Manila. Sharp received the writ of summons but despite receipt of the same,
defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the
complaint and rendered judgment against Sharp.
Plaintiff was unable to execute the decision in Japan, hence, a suit for enforcement of the judgment was
filed by plaintiff before the Regional Trial Court of Manila. Sharp filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null and void and unenforceable in this
jurisdiction having been rendered without due and proper notice, the service of summon being improper.
The trial court ruled in favor of Sharp. On appeal, the Court of Appeals affirmed the decision of the trial
court relying on decision of the Supreme Court in Boudard vs. Tait wherein it was held that "the process
of the court has no extraterritorial effect and no jurisdiction is acquired over the person of the defendant
by serving him beyond the boundaries of the state." Hence, this petition.
ISSUE: WON District Court of Tokyo acquired jurisdiction over the person of Sharp by serving summon
in the latters office in Manila.
RULING: YES. It is settled that matters of remedy and procedure such as those relating to the service of
process upon a defendant are governed by the lex fori or the internal law of the forum. In this case, it
is the procedural law of Japan where the judgment was rendered that determines the validity of the
extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It may

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not be taken judicial notice of and must be pleaded and proved like any other fact. Sections 24 and 25,
Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or by a duly
attested or authenticated copy thereof. It was then incumbent upon SHARP to present evidence as to
what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is
invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and
the decision thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese law, the presumption of identity or
similarity or the so-called processual presumption may be invoked. Applying it, the Japanese law on the
matter is presumed to be similar with the Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if
the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its
resident agent designated in accordance with law for that purpose, or, (2) if there is no such resident
agent, on the government official designated by law to that effect; or (3) on any of its officers or agents
within the Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court
processes in Japan. This silence could only mean, or least create an impression, that it had none. Hence,
service on the designated government official Japan could be availed of. As found by the Court of
Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head
office in the Philippine's after the two attempts of service had failed. The Tokyo District Court requested
the Supreme Court of Japan to cause the delivery of the summons and other legal documents to the
Philippines. Acting on that request, the Supreme Court of Japan sent the summons together with the
other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to
the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the Ministry of
Foreign Affairs of the Philippines, then to the Executive Judge of the Court of First Instance of Manila,
who forthwith ordered Deputy Sheriff to serve the same on SHARP at its principal office in Manila. This
service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of
Court, in relation to Section 128 of the Corporation Code.
In as much as SHARP was admittedly doing business in Japan through its four duly registered branches
at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP
may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein
and may be deemed to have assented to the said courts' lawful methods of serving process.
Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under
the processual presumption but also because of the presumption of regularity of performance of official
duty.

PHILSEC vs. Court of Appeals

G.R. No. 103493 June 19, 1997
FACTS: Private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala
International Finance Limited (AYALA) and Philsec Investment Corporation (PHILSEC) in the sum of
US$2,500,000.00 secured by shares of stock owned by Ducat. To facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's obligation

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under an Agreement whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to
petitioner Athona Holdings, N.V. (ATHONA) a parcel of land in Harris County, Texas, U.S.A., while
PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00. The balance of
US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc.
Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released
Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession
belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the
note became due and demandable. Accordingly, private respondent 1488, Inc. sued petitioners PHILSEC,
AYALA, and ATHONA in the United States District Court for the Southern District of Texas. for payment
of the balance and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock delivered to 1488, Inc. While the said case was
pending in the United States, petitioners filed a complaint "For Sum of Money with Damages and Writ of
Preliminary Attachment" against private respondents in the Regional Trial Court of Makati. Petitioners
claimed that, as a result of private respondents' fraudulent misrepresentations, ATHONA, PHILSEC, and
AYALA were induced to enter into the Agreement and to purchase the Houston property. The trial court
issued a writ of preliminary attachment against the real and personal properties of private respondents.
Private respondent Ducat moved to dismiss the case on the grounds of (1) litis pendentia, vis-a-vis the
case filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners
PHILSEC and BPI-IFL to state a cause of action. On the other hand, private respondents 1488, Inc. and its
president Daic filed a joint "Special Appearance and Qualified Motion to Dismiss," contending that the
action being in personam, extraterritorial service of summons by publication was ineffectual and did not
vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who
is a non-resident alien. The trial court granted Ducat's motion to dismiss, A separate hearing was held
with regard to 1488, Inc. and Daic's motion to dismiss which was also granted.
On appeal, the Court of Appeals affirmed the decision of the trial court but while the case was pending
in the Court of Appeals, the United States District Court for the Southern District of Texas rendered
judgment in favor of private respondents. Hence, the present appeal.
ISSUES:
1) Whether the civil case filed by petitioners before the RTC is barred by the judgment of the U.S. court.
2) Whether the trial court's refusal to take cognizance of the case justifiable under the principle of forum
non conveniens.
RULING:
1) NO. While this Court has given the effect of res judicata to foreign judgments in several cases, it was
after the parties opposed to the judgment had been given ample opportunity to repel them on grounds
allowed under the law. It is not necessary for this purpose to initiate a separate action or proceeding for
enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the
foreign judgment, in order for the court to properly determine its efficacy. This is because in this
jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign
judgment merely constitutes prima facie evidence of the justness of the claim of a party and, as such, is
subject to proof to the contrary. This is pursuant to Sec.50, Rule 39 of the Rules of Court. In the case at bar,

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it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as
basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the
trial court were summary.
2) NO. First, a motion to dismiss is limited to the grounds under Rule 16, Section 1 of the Rules of Court,
which does not include forum non conveniens. The propriety of dismissing a case based on this principle
requires a factual determination. Hence, it is more properly considered a matter of defense. Second, while
it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should
do so only after "vital facts are established, to determine whether special circumstances" require the
court's desistance.

Philippine Aluminum Wheels vs FASGI Enterprises

GR 137378; 12 October 2000
FACTS: On 01 June 1978, FASGI Enterprises Incorporated (FASGI), a corporation organized and
existing under and by virtue of the laws of the State of California, United States of America, entered into a
distributorship arrangement with Philippine Aluminum Wheels, Incorporated (PAWI), a Philippine
corporation, and Fratelli Pedrini Sarezzo S.P.A. (FPS), an Italian corporation. The agreement provided
for the purchase, importation and distributorship in the United States of aluminium wheels manufactured
by PAWI. FASGI then paid PAWI the FOB value of the wheels. Unfortunately, FASGI later found the
shipment to be defective and in non-compliance with the contract.
On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and
recovery of damages in the amount of US$2,316,591.00 before the United States District Court for the
Central District of California. In the interim, two agreements were entered by the parties but PAWI kept
on failing to discharge its obligations therein. Irked by PAWIs persistent default, FASGI filed with the US
District Court of the Central District of California the agreements for judgment against PAWI.
On 24 August 1982, FASGI filed a notice of entry of judgment. Unable to obtain satisfaction of the final
judgment within the United States, FASGI filed a complaint for enforcement of foreign judgment,
before RTC Makati. The Makati court, however, dismissed the case, on the ground that the decree was
tainted with collusion, fraud, and clear mistake of law and fact. The lower court ruled that the foreign
judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered
the return by PAWI of the purchase amount, no similar order was made requiring FASGI to return to
PAWI the third and fourth containers of wheels. This situation amounted to an unjust enrichment on the
part of FASGI. Furthermore, the RTC said, agreements which the California court had based its judgment
were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latters
authorization. However, the Court of Appeals reversed this decision.
ISSUE: WON the Philippine Court may enforce the said foreign judgment.
RULING: In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar
as the immediate parties and the underlying cause of action are concerned so long as it is convincingly
shown that there has been an opportunity for a full and fair hearing before a court of competent

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jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary
appearance of the defendant and under a system of jurisprudence likely to secure an impartial
administration of justice; and that there is nothing to indicate either a prejudice in court and in the system
of laws under which it is sitting or fraud in procuring the judgment. PAWI claims that its counsel, Mr.
Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot,
without a clients authorization, settle the action or subject matter of the litigation even when he honestly
believes that such a settlement will best serve his clients interest. However, PAWI failed to substantiate
this complain with sufficient evidence. Hence, the foreign judgment must be enforced.
Even if PAWI assailed that fraud tainted the agreements which the US Court based its judgment, this
cannot prevent the enforcement of said judgment. PAWI claimed that there was collusion and fraud in the
signing of the agreements. Although the US Court already adjudicated on this matter, PAWI insisted on
raising it again in this Court. Fraud, to hinder the enforcement within this jurisdiction of a foreign
judgment, must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where
judgment is rendered, or that which would go to the jurisdiction of the court or would deprive the party
against whom judgment is rendered a chance to defend the action to which he has a meritorious case or
defense. In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action such
as fraud in obtaining the consent to a contract is deemed already adjudged, and it, therefore, cannot
militate against the recognition or enforcement of the foreign judgment.

Priscilla C. Mijares, et. al., vs. Hon. Santiago Javier Ranada et. al.,
G.R. No. 139325, April 12, 2005
FACTS: Invoking the Alien Tort Act, petitioners Mijares, et al.*, all of whom suffered human rights
violations during the Marcos era, obtained a Final Judgment in their favor against the Estate of the late
Ferdinand Marcos amounting to roughly $1.9B in compensatory and exemplary damages for tortuous
violations of international law in the US District Court of Hawaii. This Final Judgment was affirmed by
the US Court of Appeals.
As a consequence, Petitioners filed a Complaint with the RTC Makati for the enforcement of the Final
Judgment, paying P410 as docket and filing fees based on Rule 141, 7(b) where the value of the subject
matter is incapable of pecuniary estimation. The Estate of Marcos however, filed a MTD alleging the nonpayment of the correct filing fees. RTC Makati dismissed the Complaint stating that the subject matter
was capable of pecuniary estimation as it involved a judgment rendered by a foreign court ordering the
payment of a definite sum of money allowing for the easy determination of the value of the foreign
judgment. As such, the proper filing fee was P472M, which Petitioners had not paid.
ISSUE: WON the amount paid by the Petitioners is the proper filing fee.
RULING: Yes, but on a different basisamount merely corresponds to the same amount required for
other actions not involving property. RTC Makati erred in concluding that the filing fee should be
computed on the basis of the total sum claimed or the stated value of the property in litigation. The
Petitioners Complaint was lodged against the Estate of Marcos but it is clearly based on a judgment, the
Final Judgment of the US District Court. However, the Petitioners err in stating that the Final Judgment is
incapable of pecuniary estimation because it is so capable. On this point, Petitioners state that this might
lead to an instance wherein a first level court (MTC, MeTC, etc.) would have jurisdiction to enforce a

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foreign judgment. Under the B.P.129, such courts are not vested with such jurisdiction. 33 of B.P.129
refers to instances wherein the cause of action or subject matter pertains to an assertion of rights over
property or a sum of money. But here, the subject matter is the foreign judgment itself. 16 of B.P.129
reveals that the complaint for enforcement of judgment even if capable of pecuniary estimation would fall
under the jurisdiction of the RTCs. Thus, the Complaint to enforce the US District Court judgment is one
capable of pecuniary estimations but at the same time, it is also an action based on judgment against an
estate, thus placing it beyond the ambit of 7(a) of Rule 141. What governs the proper computation of the
filing fees over Complaints for the enforcement of foreign judgments is 7(b)(3), involving other actions
not involving property.

Asiavest Merchant Bankers vs. CA

G.R. No. 110263, July 20, 2001
FACTS: Petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of
Malaysia while private respondent Philippine National Construction Corporation is a corporation duly
incorporated and existing under Philippine laws.
Petitioner initiated a suit for collection against private respondent, then known as Construction and
Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur entitled
Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development
Corporation of the Philippines.
Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private
respondent to guarantee the completion of the Felda Project and the nonpayment of the loan it extended
to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan By Pass; Project.
The High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and
against the private respondent. Following unsuccessful attempts to secure payment from private
respondent under the judgment, petitioner initiated the complaint before RTC of Pasig, Metro Manila, to
enforce the judgment of the High Court of Malaya.
Private respondent sought the dismissal of the case via a Motion to Dismiss, contending that the alleged
judgment of the High Court of Malaya should be denied recognition or enforcement since on in face, it is
tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there
is a clear mistake of law or fact. Dismissal was, however, denied by the trial court considering that the
grounds relied upon are not the proper grounds in a motion to dismiss under Rule 16 of the Revised
Rules of Court.
Subsequently, private respondent filed its Answer with Compulsory Counter claims and therein raised
the grounds it brought up in its motion to dismiss. In its Reply filed, the petitioner contended that the
High Court of Malaya acquired jurisdiction over the person of private respondent by its voluntary

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submission the courts jurisdiction through its appointed counsel. Furthermore, private respondents
counsel waived any and all objections to the High Courts jurisdiction in a pleading filed before the court.
In due time, the trial court rendered its decision dismissing petitioners complaint. Petitioner interposed
an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the
decision of the trial court.
ISSUE: WON or not the CA erred in denying recognition and enforcement to the Malaysian Court
judgment.
RULING: Yes. Generally, in the absence of a special compact, no sovereign is bound to give effect within
its dominion to a judgment rendered by a tribunal of another country; however, the rules of comity, utility
and convenience of nations have established a usage among civilized states by which final judgments of
foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain
conditions that may vary in different countries.
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the
immediate parties and the underlying cause of action are concerned so long as it is convincingly shown
that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that
the trial upon regular proceedings has been conducted, following due citation or voluntary appearance of
the defendant and under a system of jurisprudence likely to secure an impartial administration of justice;
and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is
sitting or fraud in procuring the judgment.
A foreign judgment is presumed to be valid and binding in the country from which it comes, until a
contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice
in the foreign forum Under Section 50(b), Rule 39 of the Revised Rules of Court, which was the governing
law at the time the instant case was decided by the trial court and respondent appellate court, a judgment,
against a person, of a tribunal of a foreign country having jurisdiction to pronounce the same is
presumptive evidence of a right as between the parties and their successors in interest by a subsequent
title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact. In addition, under Section 3(n), Rule 131 of the
Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption that it
was acting in the lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is
proved, the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive
validity.
In the instant case, petitioner sufficiently established the existence of the money judgment of the High
Court of Malaya by the evidence it offered. Petitioners sole witness, testified to the effect that he is in
active practice of the law profession in Malaysia; that he was connected with Skrine and Company as
Legal Assistant up to 1981; that private respondent, then known as Construction and Development
Corporation of the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala
Lumpur; that the writ of summons were served on March 17, 1983 at the registered office of private
respondent and on March 21, 1983 on Cora S. Deala, a financial planning officer of private respondent for
Southeast Asia operations; that upon the filing of the case, Messrs. Allen and Gledhill, Advocates and
Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman, Kuala Lumpur, entered their

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conditional appearance for private respondent questioning the regularity of the service of the writ of
summons but subsequently withdrew the same when it realized that the writ was properly served; that
because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an
application for summary judgment and submitted affidavits and documentary evidence in support of its
claim; that the matter was then heard before the High Court of Kuala Lumpur in a series of dates where
private respondent was represented by counsel; and that the end result of all these proceedings is the
judgment sought to be enforced.
In addition to the said testimonial evidence, petitioner also offered the documentary evidence to support
their claim.
Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign
judgment, said foreign judgment enjoys presumptive validity and the burden then fell upon the party
who disputes its validity, herein private respondent, to prove otherwise. However, private respondent
failed to sufficiently discharge the burden that fell upon it to prove by clear and convincing evidence the
grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment.

Republic vs. Gingoyon

G.R. No. 166429; December 19, 2005
FACTS: In AGAN vs. PIATCO, the SC ruled that the contract between the Philippine Government and the
Philippine International Air Terminals Co., Inc. (PIATCO) to build a new international airport terminal
(NAIA 3), as well as a franchise to operate and maintain the said terminal during the concession period of
25 years, is null and void for being contrary to public policy. However, NAIA 3 facilities had already been
built by PIATCO and were nearing completion. The SC ruled that for the government to take over the
said facility, it has to compensate respondent PIATCO as builder of the said structures.
After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of
PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate
operation. The Government then filed an expropriation proceeding against PIATCO and filed the
necessary bond in the amount of 3 Billion Pesos. The lower court then issued a Writ of Possession
pursuant to Rule 67, Sec. 3. However, it was observed that RA No. 8974, otherwise known as "An Act to
Facilitate the Acquisition of Right-of-Way, Site or Location for National Government Infrastructure
Projects and For Other Purposes" amended Rule 67 in many respects. RA 8974 states that the
Government is required to make immediate payment to the property owner upon the filing of the
complaint to be entitled to a writ of possession.
The SC ruled that RA 8974 applies in this case that it requires the immediate payment by the Government
of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation standards
or methods for the determination of just compensation.
A Motion for reconsideration was filed by the Government in which it argues that claims relating to two
entities, Takenaka Corporation (Takenaka) and Asahikosan (Asahikosan) Corporation, who allegedly
claim "significant liens" on the terminal, arising from their alleged unpaid bills by virtue of an
Engineering, Procurement and Construction Contract they had with PIATCO. On account of these

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adverse claims, the Government now claims as controvertible the question of who is the builder of the
NAIA 3. The Government refers to a judgment rendered by a London court in favor of Takenaka and
Asahikosan against PIATCO in the amount of US$82 Million. the Government claims that if it paid
PIATCO the 3B Pesos payment, and PIATCO does not wish to settle its obligations directly to Takenaka,
Asahikosan and Fraport, the Republic may end up having expropriated a terminal with liens and claims
far in excess of its actual value, the liens remain unextinguished, and PIATCO on the other hand, ends up
with the Php3,0002,125,000 in its pockets gratuitously.
ISSUE: WON the claims of the government is valid.
RULING: NO. Whatever claims or purported liens Takenaka and Asahikosan against PIATCO or over the
NAIA 3 have not been judicially established. Neither Takenaka nor Asahikosan are parties to the present
action, and thus have not presented any claim which could be acted upon by this Court. The earlier
adjudications in Agan v. PIATCO made no mention of either Takenaka or Asahikosan, and certainly made
no declaration as to their rights to any form of compensation. If there is indeed any right to remuneration
due to these two entities arising from NAIA 3, they have not yet been established by the courts of the
land.
Further, the judgment made in the London Court in favor of Takenaka and Asahikosan against PIATCO in
is not yet binding on Philippine courts. It is entrenched in Section 48, Rule 39 of the Rules of Civil
Procedure that a foreign judgment on the mere strength of its promulgation is not yet conclusive, as it can
be annulled on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact. It is likewise recognized in Philippine jurisprudence and international law that a
foreign judgment may be barred from recognition if it runs counter to public policy.

Gonzales vs. Climax Mining

G.R. No. 161957; February 28, 2005
FACTS: Petitioner Jorge Gonzales, as claimowner of mineral deposits located within the Addendum Area
of Influence in Didipio, in Quirino and Nueva Vizcaya, entered into a joint venture with Geophilippines,
Inc, and Inmex Ltd. Under the agreement, petitioner, as claimowner, granted to Geophilippines, Inc. and
Inmex Ltd. collectively, the exclusive right to explore and survey the mining claims within which the
latter could decide to take an operating agreement on the mining claims. This is a consolidation of two
petitions rooted in the same disputed Addendum Contract entered into by the parties. In one case, the
Court held that the DENR Panel of Arbitrators had no jurisdiction over the complaint for the annulment
of the Addendum Contract on grounds of fraud and violation of the Constitution and that the action
should have been brought before the regular courts as it involved judicial issues. Gonzales averred that
the DENR Panel of Arbitrators Has jurisdiction because the case involves a mining dispute that properly
falls within the ambit of the Panels authority.
Respondents Climax Mining Ltd., et al., on the other hand, seek reconsideration/clarification on the
decision holding that the case should not be brought for arbitration under R.A. No. 876. They argued that
the arbitration clause in the Addendum Contract should be treated as an agreement independent of the
other terms of the contract, and that a claimed rescission of the main contract does not avoid the duty to
arbitrate. On another case, Gonzales challenged the order of the RTC requiring him to proceed with the
arbitration proceedings while the complaint for the nullification of the Addendum Contract was pending
before the DENR Panel of Arbitrators. He contended that any issue as to the nullity, inoperativeness, or

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incapability of performance of the arbitration clause raised by one of the parties to the alleged arbitration
agreement must be determined by the court prior to referring them to arbitration. While Climax-Arimco
contended that an application to compel arbitration under Sec. 6 of R.A. No. 876 confers on the trial court
only a limited and special jurisdiction, i.e. , a jurisdiction solely to determine (a) whether or not the
parties have a written contract to arbitrate, and (b) if the defendant has failed to comply with that
contract.
ISSUE: WON arbitration is proper even though issues of validity and nullity of the Addendum Contract
and, consequently, of the arbitration clause were raised.
RULING: In La Naval Drug Corporation v. CA, the Court held that R.A. No. 876 explicitly confines the
court's authority only to the determination of whether or not there is an agreement in writing providing
for arbitration. In the affirmative, the statute ordains that the court shall issue an order "summarily
directing the parties to proceed with the arbitration in accordance with the terms thereof." If the court,
upon the other hand, finds that no such agreement exists, "the proceeding shall be dismissed." The cited
case also stressed that the proceedings are summary in nature.
In this case, since there obtains herein a written provision for arbitration as well as failure on respondent's
part to comply therewith, the court a quo rightly ordered the parties to proceed to arbitration in
accordance with the terms of their agreement.
Implicit in the summary nature of the judicial proceedings is the separable or independent character of
the arbitration clause or agreement. The doctrine of separability or severability enunciates that an
arbitration agreement is independent of the main contract. The arbitration agreement is to be treated as a
separate agreement and the arbitration agreement does not automatically terminate when the contract of
which it is part comes to an end. The separability of the arbitration agreement is especially significant to
the determination of whether the invalidity of the main contract also nullifies the arbitration clause.
Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the container
contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main
contract is invalid, the arbitration clause/agreement still remains valid and enforceable. The validity of
the contract containing the agreement to submit to arbitration does not affect the applicability of the
arbitration clause itself.
There is reason, therefore, to rule against Gonzales when he alleges that Judge Pimentel acted with grave
abuse of discretion in ordering the parties to proceed with arbitration. Gonzaless argument that the
Addendum Contract is null and void and, therefore the arbitration clause therein is void as well, is not
tenable. First, the proceeding in a petition for arbitration under R.A. No. 876 is limited only to the
resolution of the question of whether the arbitration agreement exists. Second, the separability of the
arbitration clause from the Addendum Contract means that validity or invalidity of the Addendum
Contract will not affect the enforceability of the agreement to arbitrate. Thus, Gonzaless petition for
certiorari should be dismissed.

Korean Technologies vs. Lerma

G.R. No. 1433581; Januray 7, 2008

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FACTS: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the
supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private
respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. On March 5,
1997, PGSMC and KOGIES executed a Contract whereby KOGIES would set up an LPG Cylinder
Manufacturing Plant in Carmona, Cavite. The contract was executed in the Philippines. On April 7, 1997,
the parties executed, in Korea, an Amendment for Contract No. KLP-970301 dated March 5, 1997
amending the terms of payment.
On October 14, 1997, PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use
of Worths 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG
manufacturing plant. Subsequently, the machineries, equipment, and facilities for the manufacture of
LPG cylinders were shipped, delivered, and installed in the Carmona plant. PGSMC paid KOGIES USD
1,224,000.
After the installation of the plant, the initial operation could not be conducted as PGSMC encountered
financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would
be deemed to have completely complied with the terms and conditions of the contract. PGSMC issued
two postdated checks. However, when KOGIES deposited the checks, these were dishonored for the
reason "PAYMENT STOPPED." Thus, KOGIES sent a demand letter to PGSMC threatening criminal action
for violation of Batas Pambansa Blg. 22 in case of nonpayment. On May 14, 1998, PGSMC replied that the
two checks it issued KOGIES were fully funded but the payments were stopped for reasons that not only
did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered
several equipment parts already paid for.
PGSMC informed KOGIES that PGSMC was canceling their Contract on the ground that KOGIES had
altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC,
and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the
Carmona plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an AffidavitComplaint for Estafa.
KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor
dismantle and transfer the machineries and equipment on. It also insisted that their disputes should be
settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract. KOGIES
instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in
Seoul, Korea pursuant to Art. 15 of the Contract as amended.
KOGIES filed a Complaint for Specific Performance against PGSMC before the Muntinlupa RTC wherein
it averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally rescinding the
contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling
and transferring the machinery and equipment installed in the plant which the latter threatened to do so.
PGSMC filed an opposition arguing that Art. 15, the arbitration clause, was null and void for being
against public policy as it ousts the local courts of jurisdiction over the instant controversy. PGSMC filed
its Answer with Compulsory Counterclaim asserting that it had the full right to dismantle and transfer
the machineries and equipment because it had paid for them in full as stipulated in the contract.

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Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards
RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any
other court jurisdiction over any dispute that may arise between the parties.
ISSUE: WON the arbitration clause is null and void.
HELD: It is valid.
Article 15 of the contract provides:
"Article 15. Arbitration.All disputes, controversies, or differences which may arise between the parties,
out of or in relation to or in connection with this Contract or for the breach thereof, shall finally be settled
by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean
Commercial Arbitration Board. The award rendered by the arbitration(s) shall be final and binding upon
both parties concerned."
Established in this jurisdiction is the rule that the law of the place where the contract is made governs.
Lex loci contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws
ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed
arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation
that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and
2040." Arts. 2038, 2039, and 2040 refer to instances where a compromise or an arbitral award, as applied to
Art. 2044 pursuant to Art. 2043 may be voided, rescinded, or annulled, but these would not denigrate the
finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been shown to
be contrary to any law, or against morals, good customs, public order, or public policy. There has been no
showing that the parties have not dealt with each other on equal footing. We find no reason why the
arbitration clause should not be respected and complied with by both parties.
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is
not contrary to public policy.
Application of RA 9285:
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from
contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our
domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the
UNCITRAL Model Law on International Commercial Arbitratio1 of the United Nations Commission on
International Trade Law (UNCITRAL), the Philippines committed itself to be bound by the Model Law.
Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 entitled
An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to
Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2,
2004. KOGIES filed its application for arbitration before the KCAB on July 1, 1998 and it is still pending
because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the instant case. Wellsettled is the rule that procedural laws are construed to be applicable to actions pending and

CONFLICT OF LAWS
Chapter 13 Recognition & Enforcement of Foreign Judgment & Foreign Arbitral Awards
undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As
a general rule, the retroactive application of procedural laws does not violate any personal rights because
no vested right has yet attached nor arisen from them.
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the
following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration
pursuant to an arbitration clause, and mandates the referral to arbitration in such cases.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and
binding are not immediately enforceable or cannot be implemented immediately. Sec. 3543 of the
UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent
court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse recognition or
enforcement on the grounds provided for.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a
foreign court but as a foreign arbitral award, and when confirmed, are enforced as final and executory
decisions of our courts of law.
(3) The RTC has jurisdiction to review foreign arbitral awards
While the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set aside,
reject, or vacate it.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal and an
award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over
our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for
setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL
Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA
87644 and shall be recognized as final and executory decisions of the RTC, they may only be assailed
before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases
where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award. Thereafter, the CA
decision may further be appealed or reviewed before this Court through a petition for review under Rule
45 of the Rules of Court.