Case Digest: G.R. No.

92013 July 25, 1990

Salvador H. Laurel, petitioner, vs. Ramon Garcia, as head of the Asset Privatization Trust, Raul
Manglapus, as Secretary of Foreign Affairs, and Catalino Macaraig, as Executive
Secretary, respondents.
_______________________________________________________________________
Facts: The subject property in this case is one of the 4 properties in Japan acquired by the
Philippine government under the Reparations Agreement entered into with Japan, the Roppongi
property. The said property was acquired from the Japanese government through Reparations
Contract No. 300. It consists of the land and building for the Chancery of the Philippine
Embassy. As intended, it became the site of the Philippine Embassy until the latter was
transferred to Nampeidai when the Roppongi building needed major repairs. President Aquino
created a committee to study the disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan. The President issued EO 296 entitling non-Filipino citizens or entities to
avail of separations' capital goods and services in the event of sale, lease or disposition.

Issues: Whether or not the Chief Executive, her officers and agents, have the authority and
jurisdiction, to sell the Roppongi property.

Ruling: It is not for the President to convey valuable real property of the government on his or
her own sole will. Any such conveyance must be authorized and approved by a law enacted by
the Congress. It requires executive and legislative concurrence. It is indeed true that the
Roppongi property is valuable not so much because of the inflated prices fetched by real
property in Tokyo but more so because of its symbolic value to all Filipinos, veterans and
civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a
policy determination where both the President and Congress must concur. Considering the
properties' importance and value, the laws on conversion and disposition of property of public
dominion must be faithfully followed.

Laurel v. Garcia (G.R. No. 92013)

Ojeda v. Executive Secretary (G.R. No. 92047)

ROPPONGI PROPERTY

FACTS:

These two (2) petitions for prohibition seek to enjoin respondents from proceeding with the
bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chrome Minato-ku
Tokyo, Japan. The latter case also, prays for a writ of mandamus to fully disclose to the public
the basis of their decision to push through with the sale of the Roppongi property.

The Roppongi case is one of the four properties in Japan acquired by the Philippine government
under the Reparation Agreement entered into with Japan. The other three (3) properties include
Nampeidai Property (present site of the Philippine Embassy Chancery), Kobe Commercial
Property (commercial lot being used as a warehouse and parking lot for consulate staff) and
Kobe Residential Property (resident lot which is now vacant).
The Reparations Agreement provides that reparations valued at $550M would be payable in
twenty (20) years in accordance with annual schedules of procurements to be fixed by the
Philippine and Japanese governments. The procurements are to be divided into government
sector and those for private parties in projects, the latter shall be made available only to Filipino
citizens or to 100% Filipino-owned entities in national development projects.

The Roppongi property was acquired under the heading “Government Sector” for the Chancery
of the Philippine Embassy until the latter was transferred to Nampeida due to the need for major
repairs. However, the Roppongi property has remained underdeveloped since that time.

Although there was a proposal to lease the property with the provision to have buildings built at
the expense of the lessee, the same was not acted favorably upon by the government. Instead,
President Aquino issued EO No. 296 entitling non-Filipino citizens or entities to avail of
separations’ capital goods and services in the event of sale, lease or dispositions. Thereafter,
amidst the oppositions by various sectors, the Executive branch of the government pushed for the
sale of reparation properties, starting with the Roppongi lot. The property has twice been set for
bidding at a minimum floor price of $225M. The first was a failure, while the second has been
postponed and later restrained by the SC.

Amongst the arguments of the respondents is that the subject property is not governed by our
Civil Code, but rather by the laws of Japan where the property is located. They relied upon the
rule of lex situs which is used in determining the applicable law regarding the acquisition,
transfer and devolution of the title to a property.

ISSUES:

1. Can the Roppongi property and others of its kind be alienated by the Philippine
Government?

NO. There can be no doubt that the property is of public dominion and the respondents
have failed to show that it has become patrimonial.

The property is correctly classified under Art 420 of the Civil Code as property belonging
to the State and intended for some public service. The fact that it has not been used for
actual Embassy service does not automatically convert it to patrimonial property. Such
conversion happens only if property is withdrawn from public use, through an
abandonment of the intention to use the Roppongi property for public service and to
make it patrimonial property. Abandonment must be a certain and positive act based on
correct legal premises.

The EO does not declare that the properties lost their public character, merely intending
the properties to be made available to foreigners and not to Filipinos alone, in case of
sale, lease or other disposition. Furthermore, it is based on the wrong premise that the
Japan properties can be sold to end-users, when in fact it cannot.

Neither does the CARP Law re-classify the properties into patrimonial properties, merely
stating that sources of funds for its implementation be sourced from proceeds of the
 disposition of the Government in foreign countries, but not that the Roppongi property be
withdrawn from being classified as a property of public dominion.

CONFLICT OF LAW

Furthermore, the respondents’ argument that the Japanese law and not our Civil Code
shall apply is incorrect. There is no conflict of law in this situation. A conflict of law
arises only when:
a. There is a dispute over the title or ownership of an immovable, such that the capacity
to take and transfer immovables, the formalities of conveyance, the essential validity
and effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined.
b. A foreign law on land ownership and its conveyance is asserted to conflict with a
domestic law on the same matters.

Hence, the need to determine which law should apply. Both elements does not exist in the
case. The issues are not concerned with the validity of ownership or title. There is no
question that the property belongs to the Philippines. The issue is the authority of the
government officials to validly dispose of property belonging to the state and the validity
of the procedures adopted to effect the sale, which should be governed by Philippine law
The rule of lex situs does not apply.

2. Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to
sell the Roppongi property?

NO. A law or a formal declaration to withdraw the Roppongi property from public
domain to make it alienable and a need for legislative authority to allow the sale of the
property is needed. None has been enacted for this purpose.

3. W/N EO No. 296 is constitutional?

The SC did not anymore pass upon its constitutionality.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner,

vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as
Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.

G.R. No. 92047 July 25, 1990

DIONISIO S. OJEDA, petitioner,

vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST
CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES
IN JAPAN, respondents.

Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and
agents from proceeding with the bidding for the sale of the 3,179 square meters of land at 306
Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on February 21, 1990. We granted the
prayer for a temporary restraining order effective February 20, 1990. One of the petitioners (in
G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of the Roppongi
property inspire of strong public opposition and to explain the proceedings which effectively
prevent the participation of Filipino citizens and entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on
March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the
respondents were required to file a comment by the Court's resolution dated February 22, 1990.
The two petitions were consolidated on March 27, 1990 when the memoranda of the parties in
the Laurel case were deliberated upon.

The Court could not act on these cases immediately because the respondents filed a motion for
an extension of thirty (30) days to file comment in G.R. No. 92047, followed by a second motion
for an extension of another thirty (30) days which we granted on May 8, 1990, a third motion for
extension of time granted on May 24, 1990 and a fourth motion for extension of time which we
granted on June 5, 1990 but calling the attention of the respondents to the length of time the
petitions have been pending. After the comment was filed, the petitioner in G.R. No. 92047
asked for thirty (30) days to file a reply. We noted his motion and resolved to decide the two (2)
cases.

The subject property in this case is one of the four (4) properties in Japan acquired by the
Philippine government under the Reparations Agreement entered into with Japan on May 9,
1956, the other lots being:

(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy
Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around 764.72
square meters and categorized as a commercial lot now being used as a warehouse and parking
lot for the consulate staff; and

(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.

The properties and the capital goods and services procured from the Japanese government for
national development projects are part of the indemnification to the Filipino people for their
losses in life and property and their suffering during World War II.

The Reparations Agreement provides that reparations valued at $550 million would be payable
in twenty (20) years in accordance with annual schedules of procurements to be fixed by the
Philippine and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789,
the Reparations Law, prescribes the national policy on procurement and utilization of reparations
and development loans. The procurements are divided into those for use by the government
sector and those for private parties in projects as the then National Economic Council shall
determine. Those intended for the private sector shall be made available by sale to Filipino
citizens or to one hundred (100%) percent Filipino-owned entities in national development
projects.

The Roppongi property was acquired from the Japanese government under the Second Year
Schedule and listed under the heading "Government Sector", through Reparations Contract No.
300 dated June 27, 1958. The Roppongi property consists of the land and building "for the
Chancery of the Philippine Embassy" (Annex M-D to Memorandum for Petitioner, p. 503). As
intended, it became the site of the Philippine Embassy until the latter was transferred to
Nampeidai on July 22, 1976 when the Roppongi building needed major repairs. Due to the
failure of our government to provide necessary funds, the Roppongi property has remained
undeveloped since that time.

A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to

Japan, Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese
firm - Kajima Corporation — which shall construct two (2) buildings in Roppongi and one (1)
building in Nampeidai and renovate the present Philippine Chancery in Nampeidai. The
consideration of the construction would be the lease to the foreign corporation of one (1) of the
buildings to be constructed in Roppongi and the two (2) buildings in Nampeidai. The other
building in Roppongi shall then be used as the Philippine Embassy Chancery. At the end of the
lease period, all the three leased buildings shall be occupied and used by the Philippine
government. No change of ownership or title shall occur. (See Annex "B" to Reply to Comment)
The Philippine government retains the title all throughout the lease period and thereafter.
However, the government has not acted favorably on this proposal which is pending approval
and ratification between the parties. Instead, on August 11, 1986, President Aquino created a
committee to study the disposition/utilization of Philippine government properties in Tokyo and
Kobe, Japan through Administrative Order No. 3, followed by Administrative Orders Numbered
3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or
entities to avail of separations' capital goods and services in the event of sale, lease or
disposition. The four properties in Japan including the Roppongi were specifically mentioned in
the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government has been pushing,
with great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The
property has twice been set for bidding at a minimum floor price of $225 million. The first
bidding was a failure since only one bidder qualified. The second one, after postponements, has
not yet materialized. The last scheduled bidding on February 21, 1990 was restrained by his
Court. Later, the rules on bidding were changed such that the $225 million floor price became
merely a suggested floor price.

The Court finds that each of the herein petitions raises distinct issues. The petitioner in G.R. No.
92013 objects to the alienation of the Roppongi property to anyone while the petitioner in G.R.
No. 92047 adds as a principal objection the alleged unjustified bias of the Philippine government
in favor of selling the property to non-Filipino citizens and entities. These petitions have been
consolidated and are resolved at the same time for the objective is the same - to stop the sale of
the Roppongi property.

The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the Philippine
Government?; and

(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell
the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the
government to alienate the Roppongi property assails the constitutionality of Executive Order
No. 296 in making the property available for sale to non-Filipino citizens and entities. He also
questions the bidding procedures of the Committee on the Utilization or Disposition of
Philippine Government Properties in Japan for being discriminatory against Filipino citizens and
Filipino-owned entities by denying them the right to be informed about the bidding requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese government for diplomatic and consular use
by the Philippine government. Vice-President Laurel states that the Roppongi property is
classified as one of public dominion, and not of private ownership under Article 420 of the Civil
Code (See infra).

The petitioner submits that the Roppongi property comes under "property intended for public
service" in paragraph 2 of the above provision. He states that being one of public dominion, no
ownership by any one can attach to it, not even by the State. The Roppongi and related properties
were acquired for "sites for chancery, diplomatic, and consular quarters, buildings and other
improvements" (Second Year Reparations Schedule). The petitioner states that they continue to
be intended for a necessary service. They are held by the State in anticipation of an opportune
use. (Citing 3 Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of
man, or to put it in more simple terms, it cannot be alienated nor be the subject matter of
contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the
Roppongi property at the moment, the petitioner avers that the same remains property of public
dominion so long as the government has not used it for other purposes nor adopted any measure
constituting a removal of its original purpose or use.

The respondents, for their part, refute the petitioner's contention by saying that the subject
property is not governed by our Civil Code but by the laws of Japan where the property is
located. They rely upon the rule of lex situs which is used in determining the applicable law
regarding the acquisition, transfer and devolution of the title to a property. They also invoke
Opinion No. 21, Series of 1988, dated January 27, 1988 of the Secretary of Justice which used
the lex situs in explaining the inapplicability of Philippine law regarding a property situated in
Japan.

The respondents add that even assuming for the sake of argument that the Civil Code is
applicable, the Roppongi property has ceased to become property of public dominion. It has
become patrimonial property because it has not been used for public service or for diplomatic
purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and because
the intention by the Executive Department and the Congress to convert it to private use has been
manifested by overt acts, such as, among others: (1) the transfer of the Philippine Embassy to
Nampeidai (2) the issuance of administrative orders for the possibility of alienating the four
government properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment
by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on June 10,
1988 which contains a provision stating that funds may be taken from the sale of Philippine
properties in foreign countries; (5) the holding of the public bidding of the Roppongi property
but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future
date; thus an acknowledgment by the Senate of the government's intention to remove the
Roppongi property from the public service purpose; and (7) the resolution of this Court
dismissing the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to
enjoin the second bidding of the Roppongi property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
Executive Order No. 296. He had earlier filed a petition in G.R. No. 87478 which the Court
dismissed on August 1, 1989. He now avers that the executive order contravenes the
constitutional mandate to conserve and develop the national patrimony stated in the Preamble of
the 1987 Constitution. It also allegedly violates:

(1) The reservation of the ownership and acquisition of alienable lands of the public domain to
Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of
Commonwealth Act 141).i•t•c-aüsl

(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering
the national economy and patrimony (Section 10, Article VI, Constitution);

(3) The protection given to Filipino enterprises against unfair competition and trade practices;

(4) The guarantee of the right of the people to information on all matters of public concern
(Section 7, Article III, Constitution);

(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by
Filipino citizens of capital goods received by the Philippines under the Reparations Act (Sections
2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions involving
public interest (Section 28, Article III, Constitution).

Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional
executive order is a misapplication of public funds He states that since the details of the bidding
for the Roppongi property were never publicly disclosed until February 15, 1990 (or a few days
before the scheduled bidding), the bidding guidelines are available only in Tokyo, and the
accomplishment of requirements and the selection of qualified bidders should be done in Tokyo,
interested Filipino citizens or entities owned by them did not have the chance to comply with
Purchase Offer Requirements on the Roppongi. Worse, the Roppongi shall be sold for a
minimum price of $225 million from which price capital gains tax under Japanese law of about
50 to 70% of the floor price would still be deducted.

IV

The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and
the three related properties were through reparations agreements, that these were assigned to the
government sector and that the Roppongi property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.

The nature of the Roppongi lot as property for public service is expressly spelled out. It is
dictated by the terms of the Reparations Agreement and the corresponding contract of
procurement which bind both the Philippine government and the Japanese government.

There can be no doubt that it is of public dominion unless it is convincingly shown that the
property has become patrimonial. This, the respondents have failed to do.

As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
alienated. Its ownership is a special collective ownership for general use and enjoyment, an
application to the satisfaction of collective needs, and resides in the social group. The purpose is
not to serve the State as a juridical person, but the citizens; it is intended for the common and
public welfare and cannot be the object of appropration. (Taken from 3 Manresa, 66-69; cited in
Tolentino, Commentaries on the Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).

The applicable provisions of the Civil Code are:

ART. 419. Property is either of public dominion or of private ownership.

ART. 420. The following things are property of public dominion

 (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks shores roadsteads, and others of similar
character;

(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.

ART. 421. All other property of the State, which is not of the character stated in
the preceding article, is patrimonial property.

The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code
as property belonging to the State and intended for some public service.

Has the intention of the government regarding the use of the property been changed because the
lot has been Idle for some years? Has it become patrimonial?

The fact that the Roppongi site has not been used for a long time for actual Embassy service does
not automatically convert it to patrimonial property. Any such conversion happens only if the
property is withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA
481 [1975]). A property continues to be part of the public domain, not available for private
appropriation or ownership until there is a formal declaration on the part of the government to
withdraw it from being such (Ignacio v. Director of Lands, 108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public officials insinuating a

change of intention. We emphasize, however, that an abandonment of the intention to use the
Roppongi property for public service and to make it patrimonial property under Article 422 of
the Civil Code must be definiteAbandonment cannot be inferred from the non-use alone specially
if the non-use was attributable not to the government's own deliberate and indubitable will but to
a lack of financial support to repair and improve the property (See Heirs of Felino Santiago v.
Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and positive act based on
correct legal premises.

A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the
Roppongi property's original purpose. Even the failure by the government to repair the building
in Roppongi is not abandonment since as earlier stated, there simply was a shortage of
government funds. The recent Administrative Orders authorizing a study of the status and
conditions of government properties in Japan were merely directives for investigation but did not
in any way signify a clear intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not have a
provision in its text expressly authorizing the sale of the four properties procured from Japan for
the government sector. The executive order does not declare that the properties lost their public
character. It merely intends to make the properties available to foreigners and not to Filipinos
alone in case of a sale, lease or other disposition. It merely eliminates the restriction under Rep.
Act No. 1789 that reparations goods may be sold only to Filipino citizens and one hundred
(100%) percent Filipino-owned entities. The text of Executive Order No. 296 provides:

Section 1. The provisions of Republic Act No. 1789, as amended, and of other
laws to the contrary notwithstanding, the above-mentioned properties can be
made available for sale, lease or any other manner of disposition to non-Filipino
citizens or to entities owned by non-Filipino citizens.

Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the
three other properties were earlier converted into alienable real properties. As earlier stated, Rep.
Act No. 1789 differentiates the procurements for the government sector and the private sector
(Sections 2 and 12, Rep. Act No. 1789). Only the private sector properties can be sold to end-
users who must be Filipinos or entities owned by Filipinos. It is this nationality provision which
was amended by Executive Order No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the sources of
funds for its implementation, the proceeds of the disposition of the properties of the Government
in foreign countries, did not withdraw the Roppongi property from being classified as one of
public dominion when it mentions Philippine properties abroad. Section 63 (c) refers to
properties which are alienable and not to those reserved for public use or service. Rep Act No.
6657, therefore, does not authorize the Executive Department to sell the Roppongi property. It
merely enumerates possible sources of future funding to augment (as and when needed) the
Agrarian Reform Fund created under Executive Order No. 299. Obviously any property outside
of the commerce of man cannot be tapped as a source of funds.

The respondents try to get around the public dominion character of the Roppongi property by
insisting that Japanese law and not our Civil Code should apply.

It is exceedingly strange why our top government officials, of all people, should be the ones to
insist that in the sale of extremely valuable government property, Japanese law and not
Philippine law should prevail. The Japanese law - its coverage and effects, when enacted, and
exceptions to its provision — is not presented to the Court It is simply asserted that the lex loci
rei sitae or Japanese law should apply without stating what that law provides. It is a ed on faith
that Japanese law would allow the sale.

We see no reason why a conflict of law rule should apply when no conflict of law situation
exists. A conflict of law situation arises only when: (1) There is a dispute over the title or
ownership of an immovable, such that the capacity to take and transfer immovables, the
formalities of conveyance, the essential validity and effect of the transfer, or the interpretation
and effect of a conveyance, are to be determined (See Salonga, Private International Law, 1981
ed., pp. 377-383); and (2) A foreign law on land ownership and its conveyance is asserted to
conflict with a domestic law on the same matters. Hence, the need to determine which law
should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no question that the
property belongs to the Philippines. The issue is the authority of the respondent officials to
validly dispose of property belonging to the State. And the validity of the procedures adopted to
effect its sale. This is governed by Philippine Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex
situs rule is misplaced. The opinion does not tackle the alienability of the real properties
procured through reparations nor the existence in what body of the authority to sell them. In
discussing who are capable of acquiring the lots, the Secretary merely explains that it is the
foreign law which should determine who can acquire the properties so that the constitutional
limitation on acquisition of lands of the public domain to Filipino citizens and entities wholly
owned by Filipinos is inapplicable. We see no point in belaboring whether or not this opinion is
correct. Why should we discuss who can acquire the Roppongi lot when there is no showing that
it can be sold?

The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was premature or, at the very least,
conditioned on a valid change in the public character of the Roppongi property. Moreover, the
approval does not have the force and effect of law since the President already lost her legislative
powers. The Congress had already convened for more than a year.

Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.

There is no law authorizing its conveyance.

Section 79 (f) of the Revised Administrative Code of 1917 provides

 Section 79 (f ) Conveyances and contracts to which the Government is a party. —
In cases in which the Government of the Republic of the Philippines is a party to
any deed or other instrument conveying the title to real estate or to any other
property the value of which is in excess of one hundred thousand pesos, the
respective Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or contract shall
be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the Government of the Philippines unless
the authority therefor be expressly vested by law in another officer. (Emphasis
supplied)

The requirement has been retained in Section 48, Book I of the Administrative Code of 1987
(Executive Order No. 292).

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property
of the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality. (Emphasis supplied)

It is not for the President to convey valuable real property of the government on his or her own
sole will. Any such conveyance must be authorized and approved by a law enacted by the
Congress. It requires executive and legislative concurrence.

Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the
Roppongi property does not withdraw the property from public domain much less authorize its
sale. It is a mere resolution; it is not a formal declaration abandoning the public character of the
Roppongi property. In fact, the Senate Committee on Foreign Relations is conducting hearings
on Senate Resolution No. 734 which raises serious policy considerations and calls for a fact-
finding investigation of the circumstances behind the decision to sell the Philippine government
properties in Japan.

The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents' assertion, we did not
uphold the authority of the President to sell the Roppongi property. The Court stated that the
constitutionality of the executive order was not the real issue and that resolving the constitutional
question was "neither necessary nor finally determinative of the case." The Court noted that
"[W]hat petitioner ultimately questions is the use of the proceeds of the disposition of the
Roppongi property." In emphasizing that "the decision of the Executive to dispose of the
Roppongi property to finance the CARP ... cannot be questioned" in view of Section 63 (c) of
Rep. Act No. 6657, the Court did not acknowledge the fact that the property became alienable
nor did it indicate that the President was authorized to dispose of the Roppongi property. The
resolution should be read to mean that in case the Roppongi property is re-classified to be
patrimonial and alienable by authority of law, the proceeds of a sale may be used for national
economic development projects including the CARP.

Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed
1990 sale of the Roppongi property. We are resolving the issues raised in these petitions, not the
issues raised in 1989.

Having declared a need for a law or formal declaration to withdraw the Roppongi property from
public domain to make it alienable and a need for legislative authority to allow the sale of the
property, we see no compelling reason to tackle the constitutional issues raised by petitioner
Ojeda.

The Court does not ordinarily pass upon constitutional questions unless these questions are
properly raised in appropriate cases and their resolution is necessary for the determination of the
case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question
although properly presented by the record if the case can be disposed of on some other ground
such as the application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213
U.S. 175, [1909], Railroad Commission v. Pullman Co., 312 U.S. 496 [1941]).

The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:

The Roppongi property is not just like any piece of property. It was given to the
Filipino people in reparation for the lives and blood of Filipinos who died and
suffered during the Japanese military occupation, for the suffering of widows and
orphans who lost their loved ones and kindred, for the homes and other properties
lost by countless Filipinos during the war. The Tokyo properties are a monument
to the bravery and sacrifice of the Filipino people in the face of an invader; like
the monuments of Rizal, Quezon, and other Filipino heroes, we do not expect
economic or financial benefits from them. But who would think of selling these
monuments? Filipino honor and national dignity dictate that we keep our
properties in Japan as memorials to the countless Filipinos who died and suffered.
Even if we should become paupers we should not think of selling them. For it
would be as if we sold the lives and blood and tears of our countrymen. (Rollo-
G.R. No. 92013, p.147)

The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese government in

atonement for its past belligerence for the valiant sacrifice of life and limb and for
deaths, physical dislocation and economic devastation the whole Filipino people
endured in World War II.

It is for what it stands for, and for what it could never bring back to life, that its
significance today remains undimmed, inspire of the lapse of 45 years since the
war ended, inspire of the passage of 32 years since the property passed on to the
Philippine government.

Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-

92047, p. 9)

It is indeed true that the Roppongi property is valuable not so much because of the inflated prices
fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos —
veterans and civilians alike. Whether or not the Roppongi and related properties will eventually
be sold is a policy determination where both the President and Congress must concur.
Considering the properties' importance and value, the laws on conversion and disposition of
property of public dominion must be faithfully followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of

prohibition is issued enjoining the respondents from proceeding with the sale of the Roppongi
property in Tokyo, Japan. The February 20, 1990 Temporary Restraining Order is made
PERMANENT.

SO ORDERED.

Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the
following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General
was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that
there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of
thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such
authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our
properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55
was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to
stop the transaction altogether; and ill any case it is not a law. The sale of the said property may
be authorized only by Congress through a duly enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men,
where every public official, from the lowest to the highest, can act only by virtue of a valid
authorization. I am happy to note that in the several cases where this Court has ruled against her,
the President of the Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
observations which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays
down or determines policies. The President executes such policies. The policies determined by
Congress are embodied in legislative enactments that have to be approved by the President to
become law. The President, of course, recommends to Congress the approval of policies but, in
the final analysis, it is Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted
by Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this
property was acquired by the Philippine government for a specific purpose, namely, to serve as
the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of
public dominion and intended for public service, squarely falling within that class of property
under Art. 420 of the Civil Code, which provides:

Art. 420. The following things are property of public dominion :

(1) ...
 (2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
(339a)

Public dominion property intended for public service cannot be alienated unless the property is
first transformed into private property of the state otherwise known as patrimonial property of
the state. 1 The transformation of public dominion property to state patrimonial property
involves, to my mind, a policy decision. It is a policy decision because the treatment of the
property varies according to its classification. Consequently, it is Congress which can decide and
declare the conversion of Roppongi from a public dominion property to a state patrimonial
property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or
dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property
of the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the

Republic of the Philippines, by the President, unless the authority
therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but

titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is
likewise bare of any congressional authority extended to the President to sell Roppongi thru
public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from a
public dominion property to a state patrimonial property, and, second, authorizing the President
to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary
restraining order earlier issued by this Court.

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its
nature as property of public dominion, and hence, has become patrimonial property of the State. I
understand that the parties are agreed that it was property intended for "public service" within the
contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State
dominion, and beyond human commerce. The lone issue is, in the light of supervening
developments, that is non-user thereof by the National Government (for diplomatic purposes) for
the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian
Reform Law, making available for the program's financing, State assets sold; the approval by the
President of the recommendation of the investigating committee formed to study the property's
utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the
deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is
not, how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a question
our courts have debated early. In a 1906 decision, 1 it was held that property of the public
dominion, a public plaza in this instance, becomes patrimonial upon use thereof for purposes
other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been held that land,
originally private property, has become of public dominion upon its donation to the town and its
conversion and use as a public plaza. 3 It is notable that under these three cases, the character of
the property, and any change occurring therein, depends on the actual use to which it is
dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land . . .
is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to
be part of the public [dominion], not available for private expropriation or ownership." 5 So also,
it was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under
its charter) a city road abandoned and thereafter, to dispose of it. 6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a land for legislative authority to allow the
sale of the property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive
or legislative — is necessary to reclassify property of the public dominion, and (2) a legislative
decree is required to make it alienable. It also clears the uncertainties brought about by earlier
interpretations that the nature of property-whether public or patrimonial is predicated on the
manner it is actually used, or not used, and in the same breath, repudiates the Government's
position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic
purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things,
that: (1) Property is presumed to be State property in the absence of any showing to the
contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion
unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural
resources, under the Constitution, and subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-
Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be
characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil
Code:

[Property] which belong[s] to the State, without being for public use, and are
intended for some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property
for public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory of
another sovereign State, is not self-evident. The first item of the classification property intended
for public use — can scarcely be properly applied to property belonging to the Republic but
found within the territory of another State. The third item of the classification property intended
for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code
of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are
rarely, if ever, found within the territorial base of another sovereign State. The task of examining
in detail the applicability of the classification set out in Article 420 of our Civil Code to property
that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been
converted into patrimonial property or property of the private domain of the State; and (b)
assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the
Roppongi property.

Addressing the first issue of conversion of property of public dominion intended for some public
service, into property of the private domain of the Republic, it should be noted that the Civil
Code does not address the question of who has authority to effect such conversion. Neither does
the Civil Code set out or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice
Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils.
335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer necessary for public use or
public purposes and which would, therefore, have become disposable and available for private
ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore
is no longer washed by the waters of the sea and is not necessary for purposes of
public utility, or for the establishment of special industries, or for coast-guard
service, the government shall declare it to be the property of the owners of the
estates adjacent thereto and as an increment thereof. We believe that only the
executive and possibly the legislative departments have the authority and the
power to make the declaration that any land so gained by the sea, is not necessary
for purposes of public utility, or for the establishment of special industries, or for
coast-guard service. If no such declaration has been made by said departments,
the lot in question forms part of the public domain. (Natividad v. Director of
Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of
Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's
Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a
position to determine whether any public land are to be used for the purposes
specified in Article 4 of the Law of Waters. Consequently, until a formal
declaration on the part of the Government, through the executive department or
the Legislature, to the effect that the land in question is no longer needed for
coast-guard service, for public use or for special industries, they continue to be
part of the public domain not available for private appropriation or
ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert
property of the State of public dominion into patrimonial property of the State. No particular
formula or procedure of conversion is specified either in statute law or in case law. Article 422 of
the Civil Code simply states that: "Property of public dominion, when no longer intended
for public use or for public service, shall form part of the patrimonial property of the State". I
respectfully submit, therefore, that the only requirement which is legitimately imposable is that
the intent to convert must be reasonably clear from a consideration of the acts or acts of the
Executive Department or of the Legislative Department which are said to have effected such
conversion.

The same legal situation exists in respect of conversion of property of public dominion belonging
to municipal corporations, i.e., local governmental units, into patrimonial property of such
entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu
by resolution declared a certain portion of an existing street as an abandoned road, "the same not
being included in the city development plan". Subsequently, by another resolution, the City
Council of Cebu authorized the acting City Mayor to sell the land through public
bidding. Although there was no formal and explicit declaration of conversion of property for
public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(2) Since that portion of the city street subject of petitioner's application for
registration of title was withdrawn from public use, it follows that such withdrawn
portion becomes patrimonial property which can be the object of an ordinary
contract.

Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use of for public service, shall form
part of the patrimonial property of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear
and unequivocal terms, states that "Property thus withdrawn from public servitude
may be used or conveyed for any purpose for which other real property belonging
to the City may be lawfully used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its
subsequent sale to the petitioner is valid. Hence, the petitioner has a registrable
title over the lot in question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned
by municipal corporations simple non-use or the actual dedication of public property to some use
other than "public use" or some "public service", was sufficient legally to convert such property
into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of
Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City
of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal corporations
but also in respect of property of the State itself. Manresa in commenting on Article 341 of the
1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article
422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que

los bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad
competente legislative realizan qun acto en virtud del cual cesa el destino o uso
publico de los bienes de que se trata naturalmente la dificultad queda desde el
primer momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya
taldeclaracion expresa, legislativa or administrativa, y, sin embargo, cesar de
hecho el destino publico de los bienes; ahora bien, en este caso, y para los efectos
juridicos que resultan de entrar la cosa en el comercio de los hombres,' se
entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la
afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El destino de
las cosas no depende tanto de una declaracion expresa como del uso publico de
 las mismas, y cuanda el uso publico cese con respecto de determinados bienes,
cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se
abandona y no se repara, si un trozo de la via publica se abandona tambien por
constituir otro nuevo an mejores condiciones....ambos bienes cesan de estar
Codigo, y leyes especiales mas o memos administrativas. (3 Manresa,
Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property —
of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible of
disposition to and appropration by private persons. These executive acts, in their totality if not
each individual act, make crystal clear the intent of the Executive Department to effect such
conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of
officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to
Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization
Trust. On 19 September 1988, the Committee recommended to the President the sale of one of
the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the
President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese
Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi.
The Japanese Government through its Ministry of Foreign Affairs replied that it interposed no
objection to such disposition by the Republic. Subsequently, the President and the Committee
informed the leaders of the House of Representatives and of the Senate of the Philippines of the
proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that
the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize
the sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296
is more than sufficient to indicate an intention to convert the property previously devoted to
public service into patrimonial property that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert
the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with
the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial
property of the State. Actually, as already pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the actual dedication of public property to
some use other than public use or public service, was sufficient to convert such property into
patrimonial property of the local governmental entity concerned. Also as pointed out above,
Manresa reached the same conclusion in respect of conversion of property of the public domain
of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and indubitable
will but to lack of financial support to repair and improve the property" (Majority Opinion, p.
13). With respect, it may be stressed that there is no abandonment involved here, certainly no
abandonment of property or of property rights. What is involved is the charge of the
classification of the property from property of the public domain into property of the private
domain of the State. Moreover, if for fourteen (14) years, the Government did not see fit to
appropriate whatever funds were necessary to maintain the property in Roppongi in a condition
suitable for diplomatic representation purposes, such circumstance may, with equal logic, be
construed as a manifestation of the crystalizing intent to change the character of the property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does
not argue against an intent to convert the property involved into property that is disposable by
bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show
at least the intent on the part of the Executive Department (with the knowledge of the Legislative
Department) to convert the property involved into patrimonial property that is susceptible of
being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address the
second issue of whether or not there exists legal authority for the sale or disposition of the
Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which
reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. —

In cases in which the Government of the Republic of the Philippines is a party to
any deed or other instrument conveying the title to real estate or to any other
property the value of which is in excess of one hundred thousand pesos, the
respective Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or contract shall
be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the authority therefor be expressly vested
by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section
4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property
of the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of One
Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has
been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present
Administrative Code refers to is authorization by law for the conveyance. Section 48 does not
purport to be itself a source of legal authority for conveyance of real property of the
Government. For Section 48 merely specifies the official authorized to execute and sign on
behalf of the Government the deed of conveyance in case of such a conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both in the
form of (a) a general, standing authorization for disposition of patrimonial property of the
Government; and (b) specific legislation authorizing the disposition of particular pieces of the
Government's patrimonial property.
Standing legislative authority for the disposition of land of the private domain of the Philippines
is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and
Natural Resources to Sell or Lease Land of the Private Domain of the Government of the
Philippine Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of
this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in

Legislature assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary

of the Environment and Natural Resources) is hereby authorized to sell or lease
land of the private domain of the Government of the Philippine Islands, or any
part thereof, to such persons, corporations or associations as are, under the
provisions of Act Numbered Twenty-eight hundred and seventy-four, (now
Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled
to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if
such land is agricultural, be made in the manner and subject to the limitations
prescribed in chapters five and six, respectively, of said Public Land Act, and if it
be classified differently, in conformity with the provisions of chapter nine of said
Act: Provided, however, That the land necessary for the public service shall be
exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of
the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now
Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and that
both statutes refer to: "any tract of land of the public domain which being neither timber nor
mineral land, is intended to be used for residential purposes or for commercial or industrial
purposes other than agricultural" (Emphasis supplied).i•t•c-aüsl In other words, the statute
covers the sale or lease or residential, commercial or industrial land of the private domain of the
State.

Implementing regulations have been issued for the carrying out of the provisions of Act No.
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively:
"Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the
Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of
Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State
is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April
1904, which provided for the disposition of the friar lands, purchased by the Government from
the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons.
In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private
and patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized
the sale of the San Lazaro Estate located in the City of Manila, which had also been purchased
by the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended
Act No. 2360 by including therein all lands and buildings owned by the Hospital and the
Foundation of San Lazaro theretofor leased by private persons, and which were also acquired by
the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one
statute authorizing the President to dispose of a specific piece of property. This statute is
Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to
the National Press Club of the Philippines, and to other recognized national associations of
professionals with academic standing, for the nominal price of P1.00. It appears relevant to note
that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved-
it provided for reversion of the property to the National Government in case the National Press
Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really
a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization
for disposition of the Roppongi property which, in my view, has been converted into patrimonial
property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of the
State located in the Philippines but also to patrimonial property found outside the Philippines,
may appear strange or unusual. I respectfully submit that such position is not any more unusual
or strange than the assumption that Article 420 of the Civil Code applies not only to property of
the Republic located within Philippine territory but also to property found outside the boundaries
of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in
view of the constitutional power of control exercised by the President over department heads
(Article VII, Section 17,1987 Constitution), the President herself may carry out the function or
duty that is specifically lodged in the Secretary of the Department of Environment and Natural
Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains
the power to approve or disapprove the exercise of that function or duty when done by the
Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
austere question of existence of legal power or authority. They have nothing to do with much
debated questions of wisdom or propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the anticipated proceeds of the property
involved. These latter types of considerations He within the sphere of responsibility of the
political departments of government the Executive and the Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and
92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the
following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General
was at best ambiguous, although I must add in fairness that this was not his fault. The fact is that
there is -no such authority. Legal expertise alone cannot conjure that statutory permission out of
thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain such
authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our
properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55
was a mere request for the deferment of the scheduled sale of tile Roppongi property, possibly to
stop the transaction altogether; and ill any case it is not a law. The sale of the said property may
be authorized only by Congress through a duly enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of men,
where every public official, from the lowest to the highest, can act only by virtue of a valid
authorization. I am happy to note that in the several cases where this Court has ruled against her,
the President of the Philippines has submitted to this principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
observations which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is Congress that lays
down or determines policies. The President executes such policies. The policies determined by
Congress are embodied in legislative enactments that have to be approved by the President to
become law. The President, of course, recommends to Congress the approval of policies but, in
the final analysis, it is Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted
by Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this
property was acquired by the Philippine government for a specific purpose, namely, to serve as
the site of the Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of
public dominion and intended for public service, squarely falling within that class of property
under Art. 420 of the Civil Code, which provides:

Art. 420. The following things are property of public dominion :

(1) ...

(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
(339a)

Public dominion property intended for public service cannot be alienated unless the property is
first transformed into private property of the state otherwise known as patrimonial property of
the state. 1 The transformation of public dominion property to state patrimonial property
involves, to my mind, a policy decision. It is a policy decision because the treatment of the
property varies according to its classification. Consequently, it is Congress which can decide and
declare the conversion of Roppongi from a public dominion property to a state patrimonial
property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state patrimonial
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or
dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
 SEC. 48. Official Authorized to Convey Real Property. — Whenever real property
of the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the

Republic of the Philippines, by the President, unless the authority
therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but

titled in the name of any political subdivision or of any corporate
agency or instrumentality, by the executive head of the agency or
instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The record is
likewise bare of any congressional authority extended to the President to sell Roppongi thru
public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from a
public dominion property to a state patrimonial property, and, second, authorizing the President
to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary
restraining order earlier issued by this Court.

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost its
nature as property of public dominion, and hence, has become patrimonial property of the State. I
understand that the parties are agreed that it was property intended for "public service" within the
contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State
dominion, and beyond human commerce. The lone issue is, in the light of supervening
developments, that is non-user thereof by the National Government (for diplomatic purposes) for
the last thirteen years; the issuance of Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive Agrarian
Reform Law, making available for the program's financing, State assets sold; the approval by the
President of the recommendation of the investigating committee formed to study the property's
utilization; and the issuance of Resolution No. 55 of the Philippine Senate requesting for the
deferment of its disposition it, "Roppongi", is still property of the public dominion, and if it is
not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a question
our courts have debated early. In a 1906 decision, 1 it was held that property of the public
dominion, a public plaza in this instance, becomes patrimonial upon use thereof for purposes
other than a plaza. In a later case, 2 this ruling was reiterated. Likewise, it has been held that land,
originally private property, has become of public dominion upon its donation to the town and its
conversion and use as a public plaza. 3 It is notable that under these three cases, the character of
the property, and any change occurring therein, depends on the actual use to which it is
dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land . . .
is no longer needed for [public] service- for public use or for special industries, [it] continue[s] to
be part of the public [dominion], not available for private expropriation or ownership." 5 So also,
it was ruled that a political subdivision (the City of Cebu in this case) alone may declare (under
its charter) a city road abandoned and thereafter, to dispose of it. 6
In holding that there is "a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a land for legislative authority to allow the
sale of the property" 7 the majority lays stress to the fact that: (1) An affirmative act — executive
or legislative — is necessary to reclassify property of the public dominion, and (2) a legislative
decree is required to make it alienable. It also clears the uncertainties brought about by earlier
interpretations that the nature of property-whether public or patrimonial is predicated on the
manner it is actually used, or not used, and in the same breath, repudiates the Government's
position that the continuous non-use of "Roppongi", among other arguments, for "diplomatic
purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things,
that: (1) Property is presumed to be State property in the absence of any showing to the
contrary; 8 (2) With respect to forest lands, the same continue to be lands of the public dominion
unless and until reclassified by the Executive Branch of the Government; 9 and (3) All natural
resources, under the Constitution, and subject to exceptional cases, belong to the State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306 Roppongi, 5-
Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi property") may be
characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil
Code:

[Property] which belong[s] to the State, without being for public use, and are
intended for some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property
for public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory of
another sovereign State, is not self-evident. The first item of the classification property intended
for public use — can scarcely be properly applied to property belonging to the Republic but
found within the territory of another State. The third item of the classification property intended
for the development of the national wealth is illustrated, in Article 339 of the Spanish Civil Code
of 1889, by mines or mineral properties. Again, mineral lands owned by a sovereign State are
rarely, if ever, found within the territorial base of another sovereign State. The task of examining
in detail the applicability of the classification set out in Article 420 of our Civil Code to property
that the Philippines happens to own outside its own boundaries must, however, be left to
academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has been
converted into patrimonial property or property of the private domain of the State; and (b)
assuming an affirmative answer to (a), whether or not there is legal authority to dispose of the
Roppongi property.

I
Addressing the first issue of conversion of property of public dominion intended for some public
service, into property of the private domain of the Republic, it should be noted that the Civil
Code does not address the question of who has authority to effect such conversion. Neither does
the Civil Code set out or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as Justice
Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils.
335 [1960]), petitioner Ignacio argued that if the land in question formed part of the public
domain, the trial court should have declared the same no longer necessary for public use or
public purposes and which would, therefore, have become disposable and available for private
ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore
is no longer washed by the waters of the sea and is not necessary for purposes of
public utility, or for the establishment of special industries, or for coast-guard
service, the government shall declare it to be the property of the owners of the
estates adjacent thereto and as an increment thereof. We believe that only the
executive and possibly the legislative departments have the authority and the
power to make the declaration that any land so gained by the sea, is not necessary
for purposes of public utility, or for the establishment of special industries, or for
coast-guard service. If no such declaration has been made by said departments,
the lot in question forms part of the public domain. (Natividad v. Director of
Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of
Vicente Joven y Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's
Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a
position to determine whether any public land are to be used for the purposes
specified in Article 4 of the Law of Waters. Consequently, until a formal
declaration on the part of the Government, through the executive department or
the Legislature, to the effect that the land in question is no longer needed for
coast-guard service, for public use or for special industries, they continue to be
part of the public domain not available for private appropriation or
ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may convert
property of the State of public dominion into patrimonial property of the State. No particular
formula or procedure of conversion is specified either in statute law or in case law. Article 422 of
the Civil Code simply states that: "Property of public dominion, when no longer intended
for public use or for public service, shall form part of the patrimonial property of the State". I
respectfully submit, therefore, that the only requirement which is legitimately imposable is that
the intent to convert must be reasonably clear from a consideration of the acts or acts of the
Executive Department or of the Legislative Department which are said to have effected such
conversion.

The same legal situation exists in respect of conversion of property of public dominion belonging
to municipal corporations, i.e., local governmental units, into patrimonial property of such
entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu
by resolution declared a certain portion of an existing street as an abandoned road, "the same not
being included in the city development plan". Subsequently, by another resolution, the City
Council of Cebu authorized the acting City Mayor to sell the land through public
bidding. Although there was no formal and explicit declaration of conversion of property for
public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

 (2) Since that portion of the city street subject of petitioner's application for
registration of title was withdrawn from public use, it follows that such withdrawn
portion becomes patrimonial property which can be the object of an ordinary
contract.

Article 422 of the Civil Code expressly provides that "Property of public
dominion, when no longer intended for public use of for public service, shall form
part of the patrimonial property of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear
and unequivocal terms, states that "Property thus withdrawn from public servitude
may be used or conveyed for any purpose for which other real property belonging
to the City may be lawfully used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its
subsequent sale to the petitioner is valid. Hence, the petitioner has a registrable
title over the lot in question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property owned
by municipal corporations simple non-use or the actual dedication of public property to some use
other than "public use" or some "public service", was sufficient legally to convert such property
into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]- Municipality of
Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City
of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal corporations
but also in respect of property of the State itself. Manresa in commenting on Article 341 of the
1889 Spanish Civil Code which has been carried over verbatim into our Civil Code by Article
422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que

los bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad
competente legislative realizan qun acto en virtud del cual cesa el destino o uso
publico de los bienes de que se trata naturalmente la dificultad queda desde el
primer momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar Pero puede ocurrir que no haya
taldeclaracion expresa, legislativa or administrativa, y, sin embargo, cesar de
hecho el destino publico de los bienes; ahora bien, en este caso, y para los efectos
juridicos que resultan de entrar la cosa en el comercio de los hombres,' se
entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la
afirmativa, y por nuestra parte creemos que tal debe ser la soluciion. El destino de
las cosas no depende tanto de una declaracion expresa como del uso publico de
las mismas, y cuanda el uso publico cese con respecto de determinados bienes,
cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se
abandona y no se repara, si un trozo de la via publica se abandona tambien por
constituir otro nuevo an mejores condiciones....ambos bienes cesan de estar
Codigo, y leyes especiales mas o memos administrativas. (3 Manresa,
Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property —
of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible of
disposition to and appropration by private persons. These executive acts, in their totality if not
each individual act, make crystal clear the intent of the Executive Department to effect such
conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan, The Committee was composed of
officials of the Executive Department: the Executive Secretary; the Philippine Ambassador to
Japan; and representatives of the Department of Foreign Affairs and the Asset Privatization
Trust. On 19 September 1988, the Committee recommended to the President the sale of one of
the lots (the lot specifically in Roppongi) through public bidding. On 4 October 1988, the
President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese
Ministry of Foreign Affairs of the Republic's intention to dispose of the property in Roppongi.
The Japanese Government through its Ministry of Foreign Affairs replied that it interposed no
objection to such disposition by the Republic. Subsequently, the President and the Committee
informed the leaders of the House of Representatives and of the Senate of the Philippines of the
proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that
the majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize
the sale of the Roppongi property, it is here submitted with respect that Executive Order No. 296
is more than sufficient to indicate an intention to convert the property previously devoted to
public service into patrimonial property that is capable of being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically convert
the property into patrimonial property. I respectfully urge that prolonged non-use, conjoined with
the other factors here listed, was legally effective to convert the lot in Roppongi into patrimonial
property of the State. Actually, as already pointed out, case law involving property of municipal
corporations is to the effect that simple non-use or the actual dedication of public property to
some use other than public use or public service, was sufficient to convert such property into
patrimonial property of the local governmental entity concerned. Also as pointed out above,
Manresa reached the same conclusion in respect of conversion of property of the public domain
of the State into property of the private domain of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and indubitable
will but to lack of financial support to repair and improve the property" (Majority Opinion, p.
13). With respect, it may be stressed that there is no abandonment involved here, certainly no
abandonment of property or of property rights. What is involved is the charge of the
classification of the property from property of the public domain into property of the private
domain of the State. Moreover, if for fourteen (14) years, the Government did not see fit to
appropriate whatever funds were necessary to maintain the property in Roppongi in a condition
suitable for diplomatic representation purposes, such circumstance may, with equal logic, be
construed as a manifestation of the crystalizing intent to change the character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly does
not argue against an intent to convert the property involved into property that is disposable by
bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole, show
at least the intent on the part of the Executive Department (with the knowledge of the Legislative
Department) to convert the property involved into patrimonial property that is susceptible of
being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address the
second issue of whether or not there exists legal authority for the sale or disposition of the
Roppongi property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which
reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. —

In cases in which the Government of the Republic of the Philippines is a party to
any deed or other instrument conveying the title to real estate or to any other
property the value of which is in excess of one hundred thousand pesos, the
respective Department Secretary shall prepare the necessary papers which,
together with the proper recommendations, shall be submitted to the Congress of
the Philippines for approval by the same. Such deed, instrument, or contract shall
be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the authority therefor be expressly vested
by law in another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in Section
4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property
of the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality,
by the executive head of the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of One
Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has
been deleted from Section 48 of the 1987 Administrative Code. What Section 48 of the present
Administrative Code refers to is authorization by law for the conveyance. Section 48 does not
purport to be itself a source of legal authority for conveyance of real property of the
Government. For Section 48 merely specifies the official authorized to execute and sign on
behalf of the Government the deed of conveyance in case of such a conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both in the
form of (a) a general, standing authorization for disposition of patrimonial property of the
Government; and (b) specific legislation authorizing the disposition of particular pieces of the
Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the Philippines
is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and
Natural Resources to Sell or Lease Land of the Private Domain of the Government of the
Philippine Islands (now Republic of the Philippines)", enacted on 9 March 1922. The full text of
this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in

Legislature assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary

of the Environment and Natural Resources) is hereby authorized to sell or lease
land of the private domain of the Government of the Philippine Islands, or any
part thereof, to such persons, corporations or associations as are, under the
provisions of Act Numbered Twenty-eight hundred and seventy-four, (now
 Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled
to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if
such land is agricultural, be made in the manner and subject to the limitations
prescribed in chapters five and six, respectively, of said Public Land Act, and if it
be classified differently, in conformity with the provisions of chapter nine of said
Act: Provided, however, That the land necessary for the public service shall be
exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of
the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now
Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and that
both statutes refer to: "any tract of land of the public domain which being neither timber nor
mineral land, is intended to be used for residential purposes or for commercial or industrial
purposes other than agricultural" (Emphasis supplied). In other words, the statute covers the sale
or lease or residential, commercial or industrial land of the private domain of the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No.
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively:
"Supplementary Regulations Governing the Sale of the Lands of the Private Domain of the
Republic of the Philippines"; and "Supplementary Regulations Governing the Lease of Lands of
Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
effect and has not been repealed. 1

Specific legislative authorization for disposition of particular patrimonial properties of the State
is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April
1904, which provided for the disposition of the friar lands, purchased by the Government from
the Roman Catholic Church, to bona fide settlers and occupants thereof or to other persons.
In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands were held to be private
and patrimonial properties of the State. Act No. 2360, enacted on -28 February 1914, authorized
the sale of the San Lazaro Estate located in the City of Manila, which had also been purchased
by the Government from the Roman Catholic Church. In January 1916, Act No. 2555 amended
Act No. 2360 by including therein all lands and buildings owned by the Hospital and the
Foundation of San Lazaro theretofor leased by private persons, and which were also acquired by
the Philippine Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one
statute authorizing the President to dispose of a specific piece of property. This statute is
Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National Government to
the National Press Club of the Philippines, and to other recognized national associations of
professionals with academic standing, for the nominal price of P1.00. It appears relevant to note
that Republic Act No. 905 was not an outright disposition in perpetuity of the property involved-
it provided for reversion of the property to the National Government in case the National Press
Club stopped using it for its headquarters. What Republic Act No. 905 authorized was really
a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative authorization
for disposition of the Roppongi property which, in my view, has been converted into patrimonial
property of the Republic. 2
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the
State located in the Philippines but also to patrimonial property found outside the Philippines,
may appear strange or unusual. I respectfully submit that such position is not any more unusual
or strange than the assumption that Article 420 of the Civil Code applies not only to property of
the Republic located within Philippine territory but also to property found outside the boundaries
of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in
view of the constitutional power of control exercised by the President over department heads
(Article VII, Section 17,1987 Constitution), the President herself may carry out the function or
duty that is specifically lodged in the Secretary of the Department of Environment and Natural
Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the President retains
the power to approve or disapprove the exercise of that function or duty when done by the
Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
austere question of existence of legal power or authority. They have nothing to do with much
debated questions of wisdom or propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the anticipated proceeds of the property
involved. These latter types of considerations He within the sphere of responsibility of the
political departments of government the Executive and the Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and
92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Footnotes

Padilla, J.

1 Art. 422 of the Civil Code provides:

"Property of public dominion, when no longer intended for public use or public
service, shall form part of the patrimonial property of the State. (341a)

Sarmiento, J.

1 Municipality of Oas v. Roa, 7 Phil. 20 (1906).

2 Municipality of Hinunangan v. Director of Lands, 24 Phil. 124 (11913). The

property involved here was a fortress.

3 Harty v. Municipality of Victoria, 13 Phil. 152 (1909).

4 See also II TOLENTINO, CIVIL CODE OF THE PHILIPPINES 39 (1972 ed.),

citing 3 Manresa III. See also Province of Zamboanga del Norte v. City of
Zamboanga, No. L-24440, March 28, 1968, 22 SCRA 1334.

5 Ignacio v. Director of Lands, 108 Phil. 335, 339 (1960).

6 Cebu Oxygen & Acetylene Co., Inc. vs. Bercilles, No. L-40474, August 29,
1975, 66 SCRA 481.

7 G.R. Nos. 92013 & 92047, 21.

 8 Salas v. Jarencio, No. L-29788, August 30, 1972, 46 SCRA 734; Rabuco v.
Villegas, No.
L-24916, February 28, 1974, 55 SCRA 658.

9 See Lianga Bay Logging Co., Inc. v. Lopez Enage, No. L-30637, July 16, 1987,
152 SCRA 80.

10 CONST., art. XII, sec. 2.

Feliciano, J.

1 We are orally advised by the Office of the Director of Lands that Act No. 3038
is very much in effect and that the Bureau of Lands continues to date to act under
it. See also, in this connection, Sections 2 and 4 of Republic Act No. 477, enacted
9 June 1950 and as last amended by B.P. Blg 233. This statute government the
disposition of lands of the public domain and of the private domain of the State,
including lands previously vested in the United States Alien Property Custodian
and transferred to the Republic of the Philippines.

2 Since Act No. 3038 established certain qualifications for applicants for purchase
or lease of land of private domain of the government, it is relevant to note that
Executive Order No. 296, promulgated at a time when the President was still
exercising legislative authority, provides as follows:

"Sec. 1. The provisions of Republic Act No. 1789, as amended, and of other laws,
to the contrary notwithstanding, the above mentioned properties can be made
available for sale, lease or any other manner of disposition to non-Filipino
citizens." (Emphasis supplied)

FIRST DIVISION

G.R. No. 122191 October 8, 1998

SAUDI ARABIAN AIRLINES, petitioner,

vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his
capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon City, respondents.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside
the Resolution 1 dated September 27, 1995 and the Decision 2 dated April 10, 1996 of the Court
of Appeals 3 in CA-G.R. SP No. 36533, 4 and the Orders 5 dated August 29, 1994 6 and
February 2, 1995 7 that were issued by the trial court in Civil Case No. Q-93-18394. 8

The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned
Decision 9, are as follows:

On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines
based in Jeddah, Saudi Arabia. . . .
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with
fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because
it was almost morning when they returned to their hotels, they agreed to have breakfast together
at the room of Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after
he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel
heard her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer
and Allah Al-Gazzawi, the latter as an accomplice.

When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her
about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the
release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager
Baharini negotiated with the police for the immediate release of the detained crew members but
did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked
into something she did not want because of her inability to understand the local dialect. She also
declined to sign a blank paper and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta flights.

Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian
authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they
were again put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA
transferred plaintiff to Manila.

On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her,
her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah,
Saudi Arabia. When she saw him, he brought her to the police station where the police took her
passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police
put pressure on her to make a statement dropping the case against Thamer and Allah. Not until
she agreed to do so did the police return her passport and allowed her to catch the afternoon
flight out of Jeddah.

One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered
to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When
she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked
to sign a document written in Arabic. They told her that this was necessary to close the case
against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the
court on June 27, 1993. Plaintiff then returned to Manila.

Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and
see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance
from SAUDIA's Manila manager, Aslam Saleemi, that the investigation was routinary and that it
posed no danger to her.

In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993.
Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an
interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA officer told her that the
airline had forbidden her to take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at
the crew quarters, until further orders.

On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The
court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male crew, in contravention of
Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah
to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the
domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international
flights. 11

Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and
allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was terminated
from the service by SAUDIA, without her being informed of the cause.

On November 23, 1993, Morada filed a Complaint 13 for damages against SAUDIA, and Khaled
Al-Balawi ("Al-Balawi"), its country manager.

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the
following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2)
that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in
the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court
has no jurisdiction to try the case.

On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a
reply 16 thereto on March 3, 1994.

On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped as
party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss
Amended Complaint 18.

The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.

From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994. It
alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of
the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On
October 14, 1994, Morada filed her Opposition 22 (To Defendant's Motion for Reconsideration).

In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its
Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion
Rule does not apply, even if that ground is raised for the first time on appeal. Additionally,
SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of
the instant case, and hence, without jurisdiction to adjudicate the same.

Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as
follows:

Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru
counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on
October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru
counsel, on October 24, 1994, considering that a perusal of the plaintiffs Amended Complaint,
which is one for the recovery of actual, moral and exemplary damages plus attorney's fees, upon
the basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is,
clearly, within the jurisdiction of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of the order sought to be
reconsidered, the motion for reconsideration of the defendant, is DENIED.

SO ORDERED. 25

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition
with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order
26 with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order 27
dated February 23, 1995, prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.

In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate court
denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated February
18, 1995, to wit:

The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after
considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the
Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto (Unciano
Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second
Division).

SO ORDERED.

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition 29 for
Review with Prayer for Temporary Restraining Order dated October 13, 1995.

However, during the pendency of the instant Petition, respondent Court of Appeals rendered the
Decision 30 dated April 10, 1996, now also assailed. It ruled that the Philippines is an
appropriate forum considering that the Amended Complaint's basis for recovery of damages is
Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It
further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch
as the petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in
an appeal.

On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary
Restraining Order 31 dated April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda, 32 the instant case is now deemed submitted for decision.

Petitioner SAUDIA raised the following issues:

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21
of the New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia
inasmuch as this case involves what is known in private international law as a "conflicts
problem". Otherwise, the Republic of the Philippines will sit in judgment of the acts done by
another sovereign state which is abhorred.

II

Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides,
the matter as to absence of leave of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioner's April 30, 1996 Supplemental Petition For
Review With Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to
Section 2, Rule 1 thereof.

III

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533
entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and filed its April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7,
1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1,
Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has
not yet become final and executory and this Honorable Court can take cognizance of this case.
33
From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:

I.

WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE

REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY
CIVIL CASE NO. Q-93-18394 ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN
AIRLINES".

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS

CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It
maintains that private respondent's claim for alleged abuse of rights occurred in the Kingdom of
Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the
application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi
rule. 34

On the other hand, private respondent contends that since her Amended Complaint is based on
Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a matter of domestic
law. 37

Under the factual antecedents obtaining in this case, there is no dispute that the interplay of
events occurred in two states, the Philippines and Saudi Arabia.

As stated by private respondent in her Amended Complaint 38 dated June 23, 1994:

2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing

business in the Philippines. It may be served with summons and other court processes at Travel
Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo
Village, Makati, Metro Manila.

xxx xxx xxx

6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the
Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention.
Eventually, they were again put in service by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.

7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind
her, her superiors reauested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA in
Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police
took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the
police put pressure on her to make a statement dropping the case against Thamer and Allah. Not
until she agreed to do so did the police return her passport and allowed her to catch the afternoon
flight out of Jeddah.

8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before
the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead
ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA.
When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she
was asked to sigh a document written in Arabic. They told her that this was necessary to close
the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear
before the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and
see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance
from SAUDIA's Manila manger, Aslam Saleemi, that the investigation was routinary and that it
posed no danger to her.

10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27,
1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through
an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the
airport, however, just as her plane was about to take off, a SAUDIA officer told her that the
airline had forbidden her to take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah,
at the crew quarters, until further orders.

11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the
judge, to her astonishment and shock, rendered a decision, translated to her in English,
sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the
Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The
court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male crew, in contravention of
Islamic tradition.

12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the
Philippines Embassy in Jeddah. The latter helped her pursue an appeal from the decision of the
court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA while,
ironically, Thamer and Allah freely served the international flights. 39

Where the factual antecedents satisfactorily establish the existence of a foreign element, we
agree with petitioner that the problem herein could present a "conflicts" case.

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or
more states is said to contain a "foreign element". The presence of a foreign element is inevitable
since social and economic affairs of individuals and associations are rarely confined to the
geographic limits of their birth or conception. 40

The forms in which this foreign element may appear are many. 41 The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign domicile,
or that a contract between nationals of one State involves properties situated in another State. In
other cases, the foreign element may assume a complex form. 42

In the instant case, the foreign element consisted in the fact that private respondent Morada is a
resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also,
by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events
did transpire during her many occasions of travel across national borders, particularly from
Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to
arise.

We thus find private respondent's assertion that the case is purely domestic, imprecise. A
conflicts problem presents itself here, and the question of jurisdiction 43 confronts the court a
quo.

After a careful study of the private respondent's Amended Complaint, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New
Civil Code.

On one hand, Article 19 of the New Civil Code provides:

Art. 19. 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.

On the other hand, Article 21 of the New Civil Code provides:

Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for damages.

Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that:

The aforecited provisions on human relations were intended to expand the concept of torts in this
jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions.
Thus, we agree with private respondent's assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal forum.

Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of Court on
jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City possesses
jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the case is
provided for under Section 1 of Republic Act No. 7691, to wit:

Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby amended to read as follows:

Sec. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise exclusive
jurisdiction:

xxx xxx xxx

(8) In all other cases in which demand, exclusive of interest, damages of whatever kind,
attorney's fees, litigation expenses, and cots or the value of the property in controversy exceeds
One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the
demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos
(P200,000.00). (Emphasis ours)

xxx xxx xxx

And following Section 2 (b), Rule 4 of the Revised Rules of Court — the venue, Quezon City, is
appropriate:

Sec. 2 Venue in Courts of First Instance. — [Now Regional Trial Court]

(a) xxx xxx xxx

(b) Personal actions. — All other actions may be commenced and tried where the defendant or
any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff
resides, at the election of the plaintiff.

Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor
of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant.
Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and
obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient
forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him needless expense
or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice
of forum should rarely be disturbed. 49

Weighing the relative claims of the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where
she no longer maintains substantial connections. That would have caused a fundamental
unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience
have been shown by either of the parties. The choice of forum of the plaintiff (now private
respondent) should be upheld.

Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By
filing her Complaint and Amended Complaint with the trial court, private respondent has
voluntary submitted herself to the jurisdiction of the court.

The records show that petitioner SAUDIA has filed several motions 50 praying for the dismissal
of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam
dated February 20, 1995. What is very patent and explicit from the motions filed, is that
SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has
effectively submitted to the trial court's jurisdiction by praying for the dismissal of the Amended
Complaint on grounds other than lack of jurisdiction.

As held by this Court in Republic vs. Ker and Company, Ltd.: 51

We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower
court's jurisdiction over defendant's person, prayed for dismissal of the complaint on the ground
that plaintiff's cause of action has prescribed. By interposing such second ground in its motion to
dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the
court to resolve controversy in its favor. For the court to validly decide the said plea of defendant
Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latter's person, who, being the
proponent of the affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the court.

Similarly, the case of De Midgely vs. Ferandos, held that;

When the appearance is by motion for the purpose of objecting to the jurisdiction of the court
over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the
court. If his motion is for any other purpose than to object to the jurisdiction of the court over his
person, he thereby submits himself to the jurisdiction of the court. A special appearance by
motion made for the purpose of objecting to the jurisdiction of the court over the person will be
held to be a general appearance, if the party in said motion should, for example, ask for a
dismissal of the action upon the further ground that the court had no jurisdiction over the subject
matter. 52

Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City.
Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof,
justified.

As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen legal
system regulate the situation. 53

Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both
notions of justice and predictability, they do not always do so. The forum is then faced with the
problem of deciding which of these two important values should be stressed. 54

Before a choice can be made, it is necessary for us to determine under what category a certain set
of facts or rules fall. This process is known as "characterization", or the "doctrine of
qualification". It is the "process of deciding whether or not the facts relate to the kind of question
specified in a conflicts rule." 55 The purpose of "characterization" is to enable the forum to
select the proper law. 56

Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57 An essential element of conflict rules is the indication of a "test" or
"connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of contact,
such as the situs of the res, the place of celebration, the place of performance, or the place of
wrongdoing. 58

Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law. 59 These "test factors" or "points of contact" or "connecting
factors" could be any of the following:

(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;

(2) the seat of a legal or juridical person, such as a corporation;

(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In
particular, the lex situs is decisive when real rights are involved;

(4) the place where an act has been done, the locus actus, such as the place where a contract has
been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is
particularly important in contracts and torts;

(5) the place where an act is intended to come into effect, e.g., the place of performance of
contractual duties, or the place where a power of attorney is to be exercised;

(6) the intention of the contracting parties as to the law that should govern their agreement, the
lex loci intentionis;

(7) the place where judicial or administrative proceedings are instituted or done. The lex fori —
the law of the forum — is particularly important because, as we have seen earlier, matters of
"procedure" not going to the substance of the claim involved are governed by it; and because the
lex fori applies whenever the content of the otherwise applicable foreign law is excluded from
application in a given case for the reason that it falls under one of the exceptions to the
applications of foreign law; and

(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the
ship and of its master or owner as such. It also covers contractual relationships particularly
contracts of affreightment. 60 (Emphasis ours.)

After a careful study of the pleadings on record, including allegations in the Amended
Complaintdeemed admitted for purposes of the motion to dismiss, we are convinced that there is
reasonable basis for private respondent's assertion that although she was already working in
Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an
investigation of the charges she made against the two SAUDIA crew members for the attack on
her person while they were in Jakarta. As it turned out, she was the one made to face trial for
very serious charges, including adultery and violation of Islamic laws and tradition.

There is likewise logical basis on record for the claim that the "handing over" or "turning over"
of the person of private respondent to Jeddah officials, petitioner may have acted beyond its
duties as employer. Petitioner's purported act contributed to and amplified or even proximately
caused additional humiliation, misery and suffering of private respondent. Petitioner thereby
allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of
petitioner's authority as employer, taking advantage of the trust, confidence and faith she reposed
upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment
of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon
her person and reputation, for which petitioner could be liable as claimed, to provide
compensation or redress for the wrongs done, once duly proven.

Considering that the complaint in the court a quo is one involving torts, the "connecting factor"
or "point of contact" could be the place or places where the tortious conduct or lex loci actus
occurred. And applying the torts principle in a conflicts case, we find that the Philippines could
be said as a situs of the tort (the place where the alleged tortious conduct took place). This is
because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina
residing and working here. According to her, she had honestly believed that petitioner would, in
the exercise of its rights and in the performance of its duties, "act with justice, give her due and
observe honesty and good faith." Instead, petitioner failed to protect her, she claimed. That
certain acts or parts of the injury allegedly occurred in another country is of no moment. For in
our view what is important here is the place where the over-all harm or the totality of the alleged
injury to the person, reputation, social standing and human rights of complainant, had lodged,
according to the plaintiff below (herein private respondent). All told, it is not without basis to
identify the Philippines as the situs of the alleged tort.

Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi,
modern theories and rules on tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with the modern theories on tort liability,
we find here an occasion to apply the "State of the most significant relationship" rule, which in
our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the
following contacts are to be taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place where the injury occurred; (b) the
place where the conduct causing the injury occurred; (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties, and (d) the place where the
relationship, if any, between the parties is centered. 62

As already discussed, there is basis for the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent is a resident Filipina national,
working with petitioner, a resident foreign corporation engaged here in the business of
international air carriage. Thus, the "relationship" between the parties was centered here,
although it should be stressed that this suit is not based on mere labor law violations. From the
record, the claim that the Philippines has the most significant contact with the matter in this
dispute, 63 raised by private respondent as plaintiff below against defendant (herein petitioner),
in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complained of and the
place "having the most interest in the problem", we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application to and control in the resolution
of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial
Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philippine law. Moreover, we find
untenable petitioner's insistence that "[s]ince private respondent instituted this suit, she has the
burden of pleading and proving the applicable Saudi law on the matter." 64 As aptly said by
private respondent, she has "no obligation to plead and prove the law of the Kingdom of Saudi
Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code of the
Philippines. In her Amended Complaint and subsequent pleadings, she never alleged that Saudi
law should govern this case. 65 And as correctly held by the respondent appellate court,
"considering that it was the petitioner who was invoking the applicability of the law of Saudi
Arabia, then the burden was on it [petitioner] to plead and to establish what the law of Saudi
Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's
denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was jurisdiction in
order and venue properly laid, but appeal after trial was obviously available, and expeditious trial
itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state
intimately concerned with the ultimate outcome of the case below, not just for the benefit of all
the litigants, but also for the vindication of the country's system of law and justice in a
transnational setting. With these guidelines in mind, the trial court must proceed to try and
adjudge the case in the light of relevant Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of course, should be construed as prejudging
the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-
18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further proceedings.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 122191 October 8, 1998

SAUDI ARABIAN AIRLINES, petitioner,

vs.
COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his
capacity as Presiding Judge of Branch 89, Regional Trial Court of Quezon City, respondents.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside
the Resolution1dated September 27, 1995 and the Decision2 dated April 10, 1996 of the Court of
Appeals3 in CA-G.R. SP No. 36533,4 and the Orders5 dated August 29, 1994 6 and February 2,
19957 that were issued by the trial court in Civil Case No. Q-93-18394.8

The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned
Decision9, are as follows:

On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for
its airlines based in Jeddah, Saudi Arabia. . . .

On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a

disco dance with fellow crew members Thamer Al-Gazzawi and Allah Al-
Gazzawi, both Saudi nationals. Because it was almost morning when they
returned to their hotels, they agreed to have breakfast together at the room of
Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly
after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued her. Later, the
Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter as
an accomplice.

When plaintiff returned to Jeddah a few days later, several SAUDIA officials
interrogated her about the Jakarta incident. They then requested her to go back to
Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA
Legal Officer Sirah Akkad and base manager Baharini negotiated with the police
for the immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might be tricked
into something she did not want because of her inability to understand the local
dialect. She also declined to sign a blank paper and a document written in the
local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred
her from the Jakarta flights.
 Plaintiff learned that, through the intercession of the Saudi Arabian government,
the Indonesian authorities agreed to deport Thamer and Allah after two weeks of
detention. Eventually, they were again put in service by defendant SAUDI (sic).
In September 1990, defendant SAUDIA transferred plaintiff to Manila.

On January 14, 1992, just when plaintiff thought that the Jakarta incident was
already behind her, her superiors requested her to see Mr. Ali Meniewy, Chief
Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he
brought her to the police station where the police took her passport and
questioned her about the Jakarta incident. Miniewy simply stood by as the police
put pressure on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport and allowed
her to catch the afternoon flight out of Jeddah.

One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a few
minutes before the departure of her flight to Manila, plaintiff was not allowed to
board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of
the SAUDIA office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to close the
case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to
appear before the court on June 27, 1993. Plaintiff then returned to Manila.

Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah

once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff
did so after receiving assurance from SAUDIA's Manila manager, Aslam
Saleemi, that the investigation was routinary and that it posed no danger to her.

In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on
June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport, however, just as her plane
was about to take off, a SAUDIA officer told her that the airline had forbidden her
to take flight. At the Inflight Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her passport and told her to remain in
Jeddah, at the crew quarters, until further orders.

On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court
where the judge, to her astonishment and shock, rendered a decision, translated to
her in English, sentencing her to five months imprisonment and to 286 lashes.
Only then did she realize that the Saudi court had tried her, together with Thamer
and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1)
adultery; (2) going to a disco, dancing and listening to the music in violation of
Islamic laws; and (3) socializing with the male crew, in contravention of Islamic
tradition. 10

Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah
to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the
domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international
flights. 11

Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and
allowed her to leave Saudi Arabia. Shortly before her return to Manila, 12 she was terminated
from the service by SAUDIA, without her being informed of the cause.

On November 23, 1993, Morada filed a Complaint 13 for damages against SAUDIA, and Khaled
Al-Balawi ("Al-Balawi"), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the
following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2)
that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in
the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court
has no jurisdiction to try the case.

On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a
reply 16 thereto on March 3, 1994.

On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped as
party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss
Amended Complaint 18.

The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss
Amended Complaint filed by Saudia.

From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on
September 20, 1994, its Motion for Reconsideration 21 of the Order dated August 29, 1994. It
alleged that the trial court has no jurisdiction to hear and try the case on the basis of Article 21 of
the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On
October 14, 1994, Morada filed her Opposition 22(To Defendant's Motion for Reconsideration).

In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its
Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion
Rule does not apply, even if that ground is raised for the first time on appeal. Additionally,
SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of
the instant case, and hence, without jurisdiction to adjudicate the same.

Respondent Judge subsequently issued another Order 24 dated February 2, 1995, denying
SAUDIA's Motion for Reconsideration. The pertinent portion of the assailed Order reads as
follows:

Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines

filed, thru counsel, on September 20, 1994, and the Opposition thereto of the
plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith
of defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994,
considering that a perusal of the plaintiffs Amended Complaint, which is one for
the recovery of actual, moral and exemplary damages plus attorney's fees, upon
the basis of the applicable Philippine law, Article 21 of the New Civil Code of the
Philippines, is, clearly, within the jurisdiction of this Court as regards the subject
matter, and there being nothing new of substance which might cause the reversal
or modification of the order sought to be reconsidered, the motion for
reconsideration of the defendant, is DENIED.

SO ORDERED. 25

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition
with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining
Order 26 with the Court of Appeals.

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining

Order 27 dated February 23, 1995, prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.

In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate court
denied SAUDIA's Petition for the Issuance of a Writ of Preliminary Injunction dated February
18, 1995, to wit:
 The Petition for the Issuance of a Writ of Preliminary Injunction is hereby
DENIED, after considering the Answer, with Prayer to Deny Writ of Preliminary
Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein
petitioner is not clearly entitled thereto (Unciano Paramedical College, et. Al., v.
Court of Appeals, et. Al., 100335, April 7, 1993, Second Division).

SO ORDERED.

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition 29 for Review
with Prayer for Temporary Restraining Order dated October 13, 1995.

However, during the pendency of the instant Petition, respondent Court of Appeals rendered the
Decision 30dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate
forum considering that the Amended Complaint's basis for recovery of damages is Article 21 of
the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held
that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as the
petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an
appeal.

On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary
Restraining Order 31 dated April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda, 32 the instant case is now deemed submitted for decision.

Petitioner SAUDIA raised the following issues:

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394
based on Article 21 of the New Civil Code since the proper law applicable is the
law of the Kingdom of Saudi Arabia inasmuch as this case involves what is
known in private international law as a "conflicts problem". Otherwise, the
Republic of the Philippines will sit in judgment of the acts done by another
sovereign state which is abhorred.

II

Leave of court before filing a supplemental pleading is not a jurisdictional

requirement. Besides, the matter as to absence of leave of court is now moot and
academic when this Honorable Court required the respondents to comment on
petitioner's April 30, 1996 Supplemental Petition For Review With Prayer For A
Temporary Restraining Order Within Ten (10) Days From Notice Thereof.
Further, the Revised Rules of Court should be construed with liberality pursuant
to Section 2, Rule 1 thereof.

III

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP
NO. 36533 entitled "Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al." and
filed its April 30, 1996 Supplemental Petition For Review With Prayer For A
Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-day
reglementary period as provided for under Section 1, Rule 45 of the Revised
Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet
become final and executory and this Honorable Court can take cognizance of this
case. 33

From the foregoing factual and procedural antecedents, the following issues emerge for our
resolution:

I.
 WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING
THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS
JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394
ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES".

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT

IN THIS CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It
maintains that private respondent's claim for alleged abuse of rights occurred in the Kingdom of
Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the
application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti
commissi rule. 34

On the other hand, private respondent contends that since her Amended Complaint is based on
Articles 19 35 and 21 36 of the Civil Code, then the instant case is properly a matter of domestic
law. 37

Under the factual antecedents obtaining in this case, there is no dispute that the interplay of
events occurred in two states, the Philippines and Saudi Arabia.

As stated by private respondent in her Amended Complaint 38 dated June 23, 1994:

2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines

corporation doing business in the Philippines. It may be served with summons and
other court processes at Travel Wide Associated Sales (Phils.). Inc., 3rd Floor,
Cougar Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.

xxx xxx xxx

6. Plaintiff learned that, through the intercession of the Saudi Arabian

government, the Indonesian authorities agreed to deport Thamer and Allah after
two weeks of detention. Eventually, they were again put in service by defendant
SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila.

7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was
already behind her, her superiors reauested her to see MR. Ali Meniewy, Chief
Legal Officer of SAUDIA in Jeddah, Saudi Arabia. When she saw him, he brought
her to the police station where the police took her passport and questioned her
about the Jakarta incident. Miniewy simply stood by as the police put pressure on
her to make a statement dropping the case against Thamer and Allah. Not until
she agreed to do so did the police return her passport and allowed her to catch the
afternoon flight out of Jeddah.

8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few
minutes before the departure of her flight to Manila, plaintiff was not allowed to
board the plane and instead ordered to take a later flight to Jeddah to see Mr.
Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of
the SAUDIA office brought her to a Saudi court where she was asked to sigh a
document written in Arabic. They told her that this was necessary to close the
case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to
appear before the court on June 27, 1993. Plaintiff then returned to Manila.

9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah

once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff
did so after receiving assurance from SAUDIA's Manila manger, Aslam Saleemi,
that the investigation was routinary and that it posed no danger to her.
 10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court
on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge
interrogated plaintiff through an interpreter about the Jakarta incident. After one
hour of interrogation, they let her go. At the airport, however, just as her plane
was about to take off, a SAUDIA officer told her that the airline had forbidden her
to take that flight. At the Inflight Service Office where she was told to go, the
secretary of Mr. Yahya Saddick took away her passport and told her to remain in
Jeddah, at the crew quarters, until further orders.

11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same
court where the judge, to her astonishment and shock, rendered a decision,
translated to her in English, sentencing her to five months imprisonment and to
286 lashes. Only then did she realize that the Saudi court had tried her, together
with Thamer and Allah, for what happened in Jakarta. The court found plaintiff
guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in
violation of Islamic laws; (3) socializing with the male crew, in contravention of
Islamic tradition.

12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the
help of the Philippines Embassy in Jeddah. The latter helped her pursue an appeal
from the decision of the court. To pay for her upkeep, she worked on the domestic
flights of defendant SAUDIA while, ironically, Thamer and Allah freely served
the international flights. 39

Where the factual antecedents satisfactorily establish the existence of a foreign element, we
agree with petitioner that the problem herein could present a "conflicts" case.

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or
more states is said to contain a "foreign element". The presence of a foreign element is inevitable
since social and economic affairs of individuals and associations are rarely confined to the
geographic limits of their birth or conception. 40

The forms in which this foreign element may appear are many. 41 The foreign element may
simply consist in the fact that one of the parties to a contract is an alien or has a foreign domicile,
or that a contract between nationals of one State involves properties situated in another State. In
other cases, the foreign element may assume a complex form. 42

In the instant case, the foreign element consisted in the fact that private respondent Morada is a
resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also,
by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events
did transpire during her many occasions of travel across national borders, particularly from
Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to
arise.

We thus find private respondent's assertion that the case is purely domestic, imprecise.
A conflicts problem presents itself here, and the question of jurisdiction 43 confronts the court a
quo.

After a careful study of the private respondent's Amended Complaint, 44 and the Comment
thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New
Civil Code.

On one hand, Article 19 of the New Civil Code provides:

Art. 19. 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.

On the other hand, Article 21 of the New Civil Code provides:

 Art. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the
latter for damages.

Thus, in Philippine National Bank (PNB) vs. Court of Appeals, 45 this Court held that:

The aforecited provisions on human relations were intended to expand the

concept of torts in this jurisdiction by granting adequate legal remedy for the
untold number of moral wrongs which is impossible for human foresight to
specifically provide in the statutes.

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions.
Thus, we agree with private respondent's assertion that violations of Articles 19 and 21 are
actionable, with judicially enforceable remedies in the municipal forum.

Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of Court on
jurisdiction 47 we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit. 48 Its authority to try and hear the case is provided for under
Section 1 of Republic Act No. 7691, to wit:

Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980", is hereby amended to read as follows:

Sec. 19. Jurisdiction in Civil Cases. — Regional Trial Courts shall exercise
exclusive jurisdiction:

xxx xxx xxx

(8) In all other cases in which demand, exclusive of interest,

damages of whatever kind, attorney's fees, litigation expenses, and
cots or the value of the property in controversy exceeds One
hundred thousand pesos (P100,000.00) or, in such other cases in
Metro Manila, where the demand, exclusive of the above-
mentioned items exceeds Two hundred Thousand pesos
(P200,000.00). (Emphasis ours)

xxx xxx xxx

And following Section 2 (b), Rule 4 of the Revised Rules of Court — the venue, Quezon City, is
appropriate:

Sec. 2 Venue in Courts of First Instance. — [Now Regional Trial Court]

(a) xxx xxx xxx

(b) Personal actions. — All other actions may be commenced and tried where the
defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiff resides, at the election of the plaintiff.

Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor
of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant.
Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and
obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient
forum, "vex", "harass", or "oppress" the defendant, e.g. by inflicting upon him needless expense
or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiffs choice
of forum should rarely be disturbed. 49

Weighing the relative claims of the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where
she no longer maintains substantial connections. That would have caused a fundamental
unfairness to her.

Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience
have been shown by either of the parties. The choice of forum of the plaintiff (now private
respondent) should be upheld.

Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By
filing her Complaint and Amended Complaint with the trial court, private respondent has
voluntary submitted herself to the jurisdiction of the court.

The records show that petitioner SAUDIA has filed several motions 50 praying for the dismissal
of Morada's Amended Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is
that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has
effectively submitted to the trial court's jurisdiction by praying for the dismissal of the Amended
Complaint on grounds other than lack of jurisdiction.

As held by this Court in Republic vs. Ker and Company, Ltd.: 51

We observe that the motion to dismiss filed on April 14, 1962, aside from
disputing the lower court's jurisdiction over defendant's person, prayed for
dismissal of the complaint on the ground that plaintiff's cause of action has
prescribed. By interposing such second ground in its motion to dismiss, Ker and
Co., Ltd. availed of an affirmative defense on the basis of which it prayed the
court to resolve controversy in its favor. For the court to validly decide the said
plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon
the latter's person, who, being the proponent of the affirmative defense, should be
deemed to have abandoned its special appearance and voluntarily submitted itself
to the jurisdiction of the court.

Similarly, the case of De Midgely vs. Ferandos, held that;

When the appearance is by motion for the purpose of objecting to the jurisdiction
of the court over the person, it must be for the sole and separate purpose of
objecting to the jurisdiction of the court. If his motion is for any other purpose
than to object to the jurisdiction of the court over his person, he thereby submits
himself to the jurisdiction of the court. A special appearance by motion made for
the purpose of objecting to the jurisdiction of the court over the person will be
held to be a general appearance, if the party in said motion should, for example,
ask for a dismissal of the action upon the further ground that the court had no
jurisdiction over the subject matter. 52

Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City.
Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof,
justified.

As to the choice of applicable law, we note that choice-of-law problems seek to answer two
important questions: (1) What legal system should control a given situation where some of the
significant facts occurred in two or more states; and (2) to what extent should the chosen legal
system regulate the situation. 53

Several theories have been propounded in order to identify the legal system that should
ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both
notions of justice and predictability, they do not always do so. The forum is then faced with the
problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a certain set
of facts or rules fall. This process is known as "characterization", or the "doctrine of
qualification". It is the "process of deciding whether or not the facts relate to the kind of question
specified in a conflicts rule." 55The purpose of "characterization" is to enable the forum to select
the proper law. 56

Our starting point of analysis here is not a legal relation, but a factual situation, event, or
operative fact. 57An essential element of conflict rules is the indication of a "test" or "connecting
factor" or "point of contact". Choice-of-law rules invariably consist of a factual relationship
(such as property right, contract claim) and a connecting factor or point of contact, such as
the situs of the res, the place of celebration, the place of performance, or the place of
wrongdoing. 58

Note that one or more circumstances may be present to serve as the possible test for the
determination of the applicable law. 59 These "test factors" or "points of contact" or "connecting
factors" could be any of the following:

(1) The nationality of a person, his domicile, his residence, his place of sojourn, or
his origin;

(2) the seat of a legal or juridical person, such as a corporation;

(3) the situs of a thing, that is, the place where a thing is, or is deemed to be
situated. In particular, the lex situs is decisive when real rights are involved;

(4) the place where an act has been done, the locus actus, such as the place where
a contract has been made, a marriage celebrated, a will signed or a tort
committed. The lex loci actus is particularly important in contracts and torts;

(5) the place where an act is intended to come into effect, e.g., the place of
performance of contractual duties, or the place where a power of attorney is to be
exercised;

(6) the intention of the contracting parties as to the law that should govern their
agreement, thelex loci intentionis;

(7) the place where judicial or administrative proceedings are instituted or done.
The lex fori — the law of the forum — is particularly important because, as we
have seen earlier, matters of "procedure" not going to the substance of the claim
involved are governed by it; and because the lex fori applies whenever the content
of the otherwise applicable foreign law is excluded from application in a given
case for the reason that it falls under one of the exceptions to the applications of
foreign law; and

(8) the flag of a ship, which in many cases is decisive of practically all legal
relationships of the ship and of its master or owner as such. It also covers
contractual relationships particularly contracts of affreightment. 60 (Emphasis
ours.)

After a careful study of the pleadings on record, including allegations in the Amended Complaint
deemed admitted for purposes of the motion to dismiss, we are convinced that there is reasonable
basis for private respondent's assertion that although she was already working in Manila,
petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation
of the charges she made against the two SAUDIA crew members for the attack on her person
while they were in Jakarta. As it turned out, she was the one made to face trial for very serious
charges, including adultery and violation of Islamic laws and tradition.

There is likewise logical basis on record for the claim that the "handing over" or "turning over"
of the person of private respondent to Jeddah officials, petitioner may have acted beyond its
duties as employer. Petitioner's purported act contributed to and amplified or even proximately
caused additional humiliation, misery and suffering of private respondent. Petitioner thereby
allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of
petitioner's authority as employer, taking advantage of the trust, confidence and faith she reposed
upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment
of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon
her person and reputation, for which petitioner could be liable as claimed, to provide
compensation or redress for the wrongs done, once duly proven.

Considering that the complaint in the court a quo is one involving torts, the "connecting factor"
or "point of contact" could be the place or places where the tortious conduct or lex loci
actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines
could be said as a situs of the tort (the place where the alleged tortious conduct took place). This
is because it is in the Philippines where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she had honestly believed that petitioner
would, in the exercise of its rights and in the performance of its duties, "act with justice, give her
due and observe honesty and good faith." Instead, petitioner failed to protect her, she claimed.
That certain acts or parts of the injury allegedly occurred in another country is of no moment. For
in our view what is important here is the place where the over-all harm or the totality of the
alleged injury to the person, reputation, social standing and human rights of complainant, had
lodged, according to the plaintiff below (herein private respondent). All told, it is not without
basis to identify the Philippines as the situs of the alleged tort.

Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi,
modern theories and rules on tort liability 61 have been advanced to offer fresh judicial
approaches to arrive at just results. In keeping abreast with the modern theories on tort liability,
we find here an occasion to apply the "State of the most significant relationship" rule, which in
our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the
following contacts are to be taken into account and evaluated according to their relative
importance with respect to the particular issue: (a) the place where the injury occurred; (b) the
place where the conduct causing the injury occurred; (c) the domicile, residence, nationality,
place of incorporation and place of business of the parties, and (d) the place where the
relationship, if any, between the parties is centered. 62

As already discussed, there is basis for the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent is a resident Filipina national,
working with petitioner, a resident foreign corporation engaged here in the business of
international air carriage. Thus, the "relationship" between the parties was centered here,
although it should be stressed that this suit is not based on mere labor law violations. From the
record, the claim that the Philippines has the most significant contact with the matter in this
dispute, 63 raised by private respondent as plaintiff below against defendant (herein petitioner), in
our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complained of and the
place "having the most interest in the problem", we find, by way of recapitulation, that the
Philippine law on tort liability should have paramount application to and control in the resolution
of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial
Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate
venue is in Quezon City, which could properly apply Philippine law. Moreover, we find
untenable petitioner's insistence that "[s]ince private respondent instituted this suit, she has the
burden of pleading and proving the applicable Saudi law on the matter." 64As aptly said by
private respondent, she has "no obligation to plead and prove the law of the Kingdom of Saudi
Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code of the
Philippines. In her Amended Complaint and subsequent pleadings, she never alleged that Saudi
law should govern this case. 65 And as correctly held by the respondent appellate court,
"considering that it was the petitioner who was invoking the applicability of the law of Saudi
Arabia, then the burden was on it [petitioner] to plead and to establish what the law of Saudi
Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's
denial of defendant's (herein petitioner's) motion to dismiss the case. Not only was jurisdiction in
order and venue properly laid, but appeal after trial was obviously available, and expeditious trial
itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state
intimately concerned with the ultimate outcome of the case below, not just for the benefit of all
the litigants, but also for the vindication of the country's system of law and justice in a
transnational setting. With these guidelines in mind, the trial court must proceed to try and
adjudge the case in the light of relevant Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of course, should be construed as prejudging
the results of the case in any manner whatsoever.

WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-
18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further proceedings

G.R. No. 128845 June 1, 2000

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner,

vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and
Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of
Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of
International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.

KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent
School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than
their colleagues in other schools is, of course, beside the point. The point is that employees
should be given equal pay for work of equal value. That is a principle long honored in this
jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle
we uphold today.1âwphi1.nêt

Private respondent International School, Inc. (the School, for short), pursuant to Presidential
Decree 732, is a domestic educational institution established primarily for dependents of foreign
diplomatic personnel and other temporary residents.1 To enable the School to continue carrying
out its educational program and improve its standard of instruction, Section 2(c) of the same
decree authorizes the School to employ its own teaching and management personnel selected by
it either locally or abroad, from Philippine or other nationalities, such personnel being exempt
from otherwise applicable laws and regulations attending their employment, except laws that
have been or will be enacted for the protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty,
classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four
tests to determine whether a faculty member should be classified as a foreign-hire or a local hire:

a. What is one's domicile?

b. Where is one's home economy?

c. To which country does one owe economic allegiance?

 d. Was the individual hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines?2

Should the answer to any of these queries point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is deemed a foreign-hire.

The School grants foreign-hires certain benefits not accorded local-hires.1avvphi1 These include
housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are
also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the
difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a)
the "dislocation factor" and (b) limited tenure. The School explains:

A foreign-hire would necessarily have to uproot himself from his home country, leave his
family and friends, and take the risk of deviating from a promising career path — all for
the purpose of pursuing his profession as an educator, but this time in a foreign land. The
new foreign hire is faced with economic realities: decent abode for oneself and/or for
one's family, effective means of transportation, allowance for the education of one's
children, adequate insurance against illness and death, and of course the primary benefit
of a basic salary/retirement compensation.

Because of a limited tenure, the foreign hire is confronted again with the same economic
reality after his term: that he will eventually and inevitably return to his home country
where he will have to confront the uncertainty of obtaining suitable employment after
along period in a foreign land.

The compensation scheme is simply the School's adaptive measure to remain competitive
on an international level in terms of attracting competent professionals in the field of
international education.3

When negotiations for a new collective bargaining agreement were held on June 1995, petitioner
International School Alliance of Educators, "a legitimate labor union and the collective
bargaining representative of all faculty members"4 of the School, contested the difference in
salary rates between foreign and local-hires. This issue, as well as the question of whether
foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock
between the parties.

On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation
and Mediation Board to bring the parties to a compromise prompted the Department of Labor
and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE
Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and
representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing
subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997.
Petitioner now seeks relief in this Court.

Petitioner claims that the point-of-hire classification employed by the School is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination.

The School disputes these claims and gives a breakdown of its faculty members, numbering 38
in all, with nationalities other than Filipino, who have been hired locally and classified as local
hires.5 The Acting Secretary of Labor found that these non-Filipino local-hires received the same
benefits as the Filipino local-hires.

The compensation package given to local-hires has been shown to apply to all, regardless
of race. Truth to tell, there are foreigners who have been hired locally and who are paid
equally as Filipino local hires.6

The Acting secretary upheld the point-of-hire classification for the distinction in salary rates:
 The Principle "equal pay for equal work" does not find applications in the present case.
The international character of the School requires the hiring of foreign personnel to deal
with different nationalities and different cultures, among the student population.

We also take cognizance of the existence of a system of salaries and benefits accorded to
foreign hired personnel which system is universally recognized. We agree that certain
amenities have to be provided to these people in order to entice them to render their
services in the Philippines and in the process remain competitive in the international
market.

Furthermore, we took note of the fact that foreign hires have limited contract of
employment unlike the local hires who enjoy security of tenure. To apply parity
therefore, in wages and other benefits would also require parity in other terms and
conditions of employment which include the employment which include the employment
contract.

A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for
salary and professional compensation wherein the parties agree as follows:

All members of the bargaining unit shall be compensated only in accordance with
Appendix C hereof provided that the Superintendent of the School has the
discretion to recruit and hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international practice.

Appendix C of said CBA further provides:

The new salary schedule is deemed at equity with the Overseas Recruited Staff
(OSRS) salary schedule. The 25% differential is reflective of the agreed value of
system displacement and contracted status of the OSRS as differentiated from the
tenured status of Locally Recruited Staff (LRS).

To our mind, these provisions demonstrate the parties' recognition of the difference in the
status of two types of employees, hence, the difference in their salaries.

The Union cannot also invoke the equal protection clause to justify its claim of parity. It
is an established principle of constitutional law that the guarantee of equal protection of
the laws is not violated by legislation or private covenants based on reasonable
classification. A classification is reasonable if it is based on substantial distinctions and
apply to all members of the same class. Verily, there is a substantial distinction between
foreign hires and local hires, the former enjoying only a limited tenure, having no
amenities of their own in the Philippines and have to be given a good compensation
package in order to attract them to join the teaching faculty of the School.7

We cannot agree.

That public policy abhors inequality and discrimination is beyond contention. Our Constitution
and laws reflect the policy against these evils. The Constitution8 in the Article on Social Justice
and Human Rights exhorts Congress to "give highest priority to the enactment of measures that
protect and enhance the right of all people to human dignity, reduce social, economic, and
political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the
exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his
due, and observe honesty and good faith.

International law, which springs from general principles of law,9 likewise proscribes
discrimination. General principles of law include principles of equity, 10 i.e., the general
principles of fairness and justice, based on the test of what is reasonable. 11 The Universal
Declaration of Human Rights, 12 the International Covenant on Economic, Social, and Cultural
Rights, 13 the International Convention on the Elimination of All Forms of Racial
Discrimination, 14 the Convention against Discrimination in Education, 15 the Convention (No.
111) Concerning Discrimination in Respect of Employment and Occupation 16 — all embody the
general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national laws.

In the workplace, where the relations between capital and labor are often skewed in favor of
capital, inequality and discrimination by the employer are all the more reprehensible.

The Constitution 17 specifically provides that labor is entitled to "humane conditions of work."
These conditions are not restricted to the physical workplace — the factory, the office or the
field — but include as well the manner by which employers treat their employees.

The Constitution 18 also directs the State to promote "equality of employment opportunities for
all." Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities
regardless of sex, race or creed." It would be an affront to both the spirit and letter of these
provisions if the State, in spite of its primordial obligation to promote and ensure equal
employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of
employment. 20

Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135,
for example, prohibits and penalizes 21 the payment of lesser compensation to a female employee
as against a male employee for work of equal value. Article 248 declares it an unfair labor
practice for an employer to discriminate in regard to wages in order to encourage or discourage
membership in any labor organization.

Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article
7 thereof, provides:

The States Parties to the present Covenant recognize the right of everyone to the
enjoyment of just and favourable conditions of work, which ensure, in particular:

a. Remuneration which provides all workers, as a minimum, with:

(i) Fair wages and equal remuneration for work of equal value without
distinction of any kind, in particular women being guaranteed conditions
of work not inferior to those enjoyed by men, with equal pay for equal
work;

xxx xxx xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal
truism of "equal pay for equal work." Persons who work with substantially equal qualifications,
skill, effort and responsibility, under similar conditions, should be paid similar salaries. 22 This
rule applies to the School, its "international character" notwithstanding.

The School contends that petitioner has not adduced evidence that local-hires perform work
equal to that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer
accords employees the same position and rank, the presumption is that these employees perform
equal work. This presumption is borne by logic and human experience. If the employer pays one
employee less than the rest, it is not for that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The employer has discriminated
against that employee; it is for the employer to explain why the employee is treated unfairly.

The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have
similar functions and responsibilities, which they perform under similar working conditions.

The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize
the distinction in salary rates without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National
Labor Relations Commission, 24 we said that:

"salary" means a recompense or consideration made to a person for his pains or industry
in another man's business. Whether it be derived from "salarium," or more fancifully
from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of
compensation for services rendered. (Emphasis supplied.)

While we recognize the need of the School to attract foreign-hires, salaries should not be used as
an enticement to the prejudice of local-hires. The local-hires perform the same services as
foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the
"dislocation factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the
distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are
adequately compensated by certain benefits accorded them which are not enjoyed by local-hires,
such as housing, transportation, shipping costs, taxes and home leave travel allowances.

The Constitution enjoins the State to "protect the rights of workers and promote their
welfare," 25 "to afford labor full protection." 26 The State, therefore, has the right and duty to
regulate the relations between labor and capital. 27These relations are not merely contractual but
are so impressed with public interest that labor contracts, collective bargaining agreements
included, must yield to the common good. 28 Should such contracts contain stipulations that are
contrary to public policy, courts will not hesitate to strike down these stipulations.

In this case, we find the point-of-hire classification employed by respondent School to justify the
distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There
is no reasonable distinction between the services rendered by foreign-hires and local-hires. The
practice of the School of according higher salaries to foreign-hires contravenes public policy and,
certainly, does not deserve the sympathy of this Court.1avvphi1

We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-
hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all
of the entire body of employees, consistent with equity to the employer, indicate to be the best
suited to serve the reciprocal rights and duties of the parties under the collective bargaining
provisions of the law." 29 The factors in determining the appropriate collective bargaining unit
are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees'
interest, such as substantial similarity of work and duties, or similarity of compensation and
working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history;
and (4) similarity of employment status. 30 The basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining rights. 31

It does not appear that foreign-hires have indicated their intention to be grouped together with
local-hires for purposes of collective bargaining. The collective bargaining history in the School
also shows that these groups were always treated separately. Foreign-hires have limited tenure;
local-hires enjoy security of tenure. Although foreign-hires perform similar functions under the
same working conditions as the local-hires, foreign-hires are accorded certain benefits not
granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and
home leave travel allowance, are reasonably related to their status as foreign-hires, and justify
the exclusion of the former from the latter. To include foreign-hires in a bargaining unit with
local-hires would not assure either group the exercise of their respective collective bargaining
rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN
PART. The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March
19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of
respondent School of according foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno and Pardo, JJ., concur.

Davide, Jr., C.J., on official leave.
Ynares-Santiago, J., is on leave.

Footnotes
1
Issued on June 19, 1975 (Authorizing International School, Inc. to Donate Its Real
Properties to the Government of the Republic of the Philippines and Granting It Certain
Rights.)
2
Rollo, p. 328.
3
Id., at 324.
4
Id., at 8.
5
Id., at 325. The breakdown is as follows:

Americans — 17
Australian — 2
Belgian — 1
British — 2
Burmese — 1
Canadian — 2
Chinese — 2
French — 1
German — 1
Indian — 5
Japanese — 1
Malaysian — 1
New Zealander — 1
Spanish — 1

6
Id., at 39.
7
Id., at 38-39.
8
In Section 1, Article XII thereof.
9
Statute of the International Court of Justice, art. 38.
10
M. DEFENSOR-SANTIAGO, International Law 75 (1999), citing Judge Hudson in
River Meuse Case, (1937) Ser. A/B No. 70.
11
Ibid., citing Rann of Kutch Arbitration (India vs. Pakistan), 50 ILR 2 (1968).
12
Adopted by the General Assembly of the United Nations on December 10, 1948.
Article 1 thereof states: "All human beings are born free and equal in dignity and rights.
Article 2 provides, "1. Everyone is entitled to all the rights and freedoms set forth in this
Declaration, without distinction of any kind, such as race, colour, sex, language, religion,
political or other opinion, national or social origin, property, birth or other status."
13
Adopted by the General of the United Nations in Resolution 2200 (XXI) of 16
December 1966. Article 2 provides: "2. The States Parties to the present Covenant
undertake to guarantee that the rights enunciated in the present Covenant will be
exercised without discrimination of any kind as to race, colour, sex, language, religion,
political or other opinion, national or social origin, property, birth or other status."
14
Adopted by the General assembly of the United Nations in Resolution 2106 (XX) 21
December 1965. Article 2 of the Convention states: "States Parties condemn racial
discrimination and undertake to pursue by all appropriate means and without delay a
policy of eliminating racial discrimination in all its forms and promoting understanding
among all races . . . ."
15
Adopted at Paris, December 14, 1960. Under Article 3, the States Parties undertake,
among others, "to abrogate any statutory provisions and any administrative instructions
and to discontinue any administrative practices which involve discrimination in
education." Under Article 4, "The States Parties to this Convention undertake further
more to formulate, develop and apply a national policy which, by methods appropriate to
the circumstances and to national usage, will tend to promote equality of opportunity and
of treatment in the matter of education . . . ."
16
Adopted by the General Conference of the International Labor Organization at Geneva,
June 25, 1958. Article 2 provides that, "Each Member for which this Convention is in
force undertakes to declare and pursue a national policy designed to promote, by methods
appropriate to national condition and practice, equality of opportunity and treatment in
respect of employment and occupation, with a view to eliminating any discrimination in
respect thereof.
17
In Article XIII, Section 3 thereof.
18
Id.
19
In Article 3 thereof.
20
E.g., Article 135 of the Labor Code declares it unlawful for the employer to require, not
only as a condition of employment, but also as a condition for the continuation of
employment, that a woman shall not get married.
21
In relation to Articles 288 and 289 of the same Code.
22
Indeed, the government employs this rule in fixing the compensation of government
employees. Thus, Republic Act No. 6758 (An Act Prescribing a Revised Compensation
and Position Classification System in the Government and for Other Purposes) declares it
"the policy of the State to provide equal pay for substantially equal work and to base
differences in pay upon substantive differences in duties and responsibilities, and
qualification requirements of the positions. See also the Preamble of Presidential Decree
No. 985 (A Decree Revising the Position Classification and Compensation Systems in the
National Government, and Integrating the same).1âwphi1.nêt
 23
Rollo, p. 491.
24
183 SCRA 610 (1990).
25
In Section 18, Article II thereof.
26
In Section 3, Article XIII thereof. See also Article 3 of the Labor Code.
27
See Sec. 3, Article XIII, Constitution. Article 3 of the Labor Code.
28
Art. 1700, Civil Code.
29
Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Federation Labor
Union and the Secretary of Labor and Employment, 268 SCRA 573 (1997); San Miguel
Corporation vs. Laguesma, 236 SCRA 595 (1994).
30
San Miguel Corporation vs. Laguesma, supra.
31
Belyca Corporation vs. Ferrer-Calleja, 188 SCRA 184 (1988).

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-11759 March 16, 1917

CAYETANO LIM and MARCIANO LIM, petitioners-appellants,

vs.
THE INSULAR COLLECTOR OF CUSTOMS, respondent-appellee.

Williams, Ferrier and SyCip for appellants.

Attorney-General Avanceña for appellee.

CARSON, J.:

The real question raised on this appeal is whether the Insular Collector of Customs may lawfully
deny entry into the Philippine Islands to two children aged 8 and 14 years, respectively, under and
by authority of the Chinese Immigration, Laws, it appearing that the children arrived at the Port of
Manila accompanied by and in the custody of their mother, a Filipino woman; that they were born in
China, out of lawful wedlock; and that their father was a Chinese person.

It is contended, on behalf of the Insular Collector of Customs, that these children being Chinese
persons are denied the right of entrance into the Philippine Islands under the express terms of the
Chinese immigration laws. On the other hand, it is urged on behalf of the children that they are
entitled to enter, regardless of the provisions of the Chinese immigration laws, since the admitted
facts, as it is said, disclose that they are citizens of the Philippine Islands; and for the further reason,
that their mother, who is entitled to their custody and charged with their maintenance and education,
is clearly entitled to take up her residence in the Philippine Islands and should not be required, to
that end, to abandon her minor children.

Without discussing or deciding any of the contentions of the parties as to the rights of citizenship of
these children, actual or inchoate, we are of opinion that by analogous reasoning to that upon which
the Supreme Court of the United States held that the wives and minor children of Chinese
merchants domiciled in the United States may enter that country without certificates, these children
must be held to be entitled to enter the Philippine Islands with their mother, for the purpose of taking
up their residence here with her, it appearing that she is natural guardian, entitled to their custody
and charged with their maintenance and education. (U. S. vs. Gue Lim, 176 U. S. 459.)
In the case just cited the court said:

While the literal construction of the section would require a certificate, as therein stated, from
every Chinese person, other than a laborer, who should come into the country, yet such a
construction leads to what we think an absurd result, for it requires a certificate for a wife of a
merchant, among others, in regard to whom its would be impossible to give the particulars
which the statute requires shall be stated in such certificate.

"Nothing is better settled," says the present Chief Justice, in Lau Ow Bew vs. United States
(144 U. S., 59) "than that statutes should receive a sensible construction, such as will
effectuate the legislative intention, and, if possible, so as to avoid and unjust or an absurd
conclusion.

The purposes of the sixth section, requiring the certificate, was not to prevent the persons
named in the second article of the treaty from coming into the country, but to prevent
Chinese laborers from entering under the guise of being one of the classes permitted by the
treaty. It is the coming of Chinese laborers that the act is aimed against.

It was said in the opinion in the Lau Ow Bew case, in speaking of the provisions that the sole
evidence permissible should be the certificate: "This rule of evidence was evidently
prescribed by the amendment as a means of effectually preventing the violation or evasion of
the prohibition against the coming of Chinese laborers. It was designed as a safeguard to
prevent the unlawful entry of such laborers, under the pretense that they belong to the
merchant class or to some other of the admitted classes."

It was also held in that case that although the literal wording of the statute of 1884, section
six, would require a certificate in the case of a merchant already domiciled in the United
States and who had left the country for temporary purposes, animo revertendi, yet its true
and proper construction did not include his case, and the general terms used in the act were
limited to those persons to whom Congress manifestly intended to apply them, which would
be those who were about to come to the United States for the first time, and not to those
Chinese merchants already domiciled in the United States who had gone to China for
temporary purposes only, with the intention of returning. The case of Wan Shing vs. United
States (140 U. S., 24), was referred to, and attention called to the fact that the appellant
therein was not a merchant but a laborer, who had acquired no commercial domicile in this
county, and was clearly within the exception requiring him to procure and produce the
certificate specified in the act. The rule was approved, and the differences in the two cases
pointed out by the Chief Justice.

To hold that a certificate is required in this case is to decide that the woman cannot come
into this country at all, for it is not possible for her to comply with the act, because she cannot
in any event procure the certificate even by returning to China. She must come in as the wife
of her domiciled husband or not at all. The act was never meant to accomplish the result of
permanently excluding the wife under the circumstances of this case, and we think that,
properly and reasonably construed, it does not do so. If we hold that she is entitled to come
in as the wife, because the true construction of the treaty and the act permits it, there is no
provision which makes the certificate the only proof of the fact that she is such wife.

In the case of the minor children, the same result must follow as in that of the wife. All the
reasons which favor the construction of the statute as exempting the wife from the necessity
of procuring a certificate apply with equal force to the case of minor children of a member or
members of the admitted classes. They come in by reason of their relationship to the father,
and whether they accompany or follow him, a certificate is not necessary in either case.
When the fact is established to the satisfaction of the authorities that the person claiming to
enter, either as wife or minor child, is in fact the wife or minor child of one of the members of
the class mentioned in the treaty as entitled to enter, them that person in entitled to
admission without the certificate.

We are not advised of any provision of Chinese law which differentiates the status of infant children,
born out of lawful wedlock, from that of similar children under the laws in force in the Philippine
Islands. We assume, therefore, that in China as well as in the Philippine Islands such children have
the right to look to their mother for their maintenance and education, and that she is entitled to their
custody and control in fulfilling the obligations towards them which are imposed upon her, not only
by the natural impulses of love and affection, but also by the express mandate of the law. And it
having been held on the highest authority that the general terms of the Act were limited to those to
whom Congress manifestly intended to apply them as set forth in the foregoing opinion, and that
"nothing is better settled than that statutes should receive a sensible construction, such as will
effectuate the legislative intention, and, if possible, so as to avoid an unjust or an absurd
conclusion," we are of opinion that the Chinese Immigration Laws should not be construed so as to
exclude infant children of a Filipino mother, born out of lawful wedlock, seeking entrance to the
Philippine Islands for the purpose of taking up their residence with her in her native land.

It has been suggested that such a ruling opens the door to fraud and evasion, but we are not much
impressed with the force of this suggestion, knowing as we do that the immigration authorities have
been furnished by the law with peculiarly effective machinery for its enforcement, well calculated to
defeat any attempt to make an unauthorized or improper use of so manifestly reasonable an
exception from the literal construction and application of its general provisions.

Some confusion seems to have arisen in the court below as to the precise nature and effect of the
somewhat inartificial pleadings upon which these proceedings were submitted. The case appears to
have been submitted upon an answer to an order to show cause why a writ of habeas corpus should
not issue upon the petition filed on behalf of the infant children. In the form in which the answer is
couched, there is much in the contention of the appellee that the trial court should have treated the
answer as in substance and effect a demurrer to the petition, admitting the truth of the facts alleged
therein, but praying judgment as to whether it sets forth facts sufficient to constitute a cause of action
and to justify the issuance of the writ. We are inclined to think, however, that the understanding of
the parties and of the court below was that the answer should be treated rather as in the nature of a
return to a writ of habeas corpus, accepting as true the allegations of the petition but maintaining the
legality of the detention upon the facts thus submitted. Without considering at this time whether in
habeas corpus proceedings the respondent may, without consent of court, demur to, instead of
answering an order to show cause why the writ should not issue, and without considering or deciding
the course which should be pursued where a respondent attempts to file a demurrer to a petition for
a writ of habeas corpus in lieu of the return prescribed by the statute to the writ when actually issued;
we treat the answer to the order to show cause in the case at bar as we think the parties and the
court below understood it should be treated, that is to say, as in substance and effect the return
which the Insular Collector desired to make to the writ of habeas corpus issued or assumed to have
been issued in response to the petition on behalf of the children held in custody by him.

We conclude, therefore, that, it appearing that the respondent Collector of Customs is detaining the
petitioners under an erroneous construction of the immigration laws, and it appearing from the facts
disclosed by the administrative proceedings that these children are entitled to admission into the
Philippine Islands, the order entered in the court below should be reversed, and in lieu thereof an
order should be entered directing the discharge of these children from the custody of the Insular
Collector of Customs, with the costs in both instances, de officio. So ordered.

Torres, Moreland, Trent and Araullo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-37750 May 19, 1978

SWEET LINES, INC., petitioner,

vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis Oriental Branch VII, LEOVIGILDO
TANDOG, JR., and ROGELIO TIRO, respondents.

Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano for petitioner.

Leovigildo Vallar for private respondents.

SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed October 3, 1973 to restrain
respondent Judge from proceeding further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied petitioner's Motion to Dismiss the
complaint, and the Motion for Reconsideration of said order. 1

Briefly, the facts of record follow. Private respondents Atty. Leovigildo Tandog and Rogelio Tiro, a
contractor by professions, bought tickets Nos. 0011736 and 011737 for Voyage 90 on December 31,
1971 at the branch office of petitioner, a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. Respondents were to board petitioner's vessel, M/S "Sweet Hope"
bound for Tagbilaran City via the port of Cebu. Upon learning that the vessel was not proceeding to
Bohol, since many passengers were bound for Surigao, private respondents per advice, went to the
branch office for proper relocation to M/S "Sweet Town". Because the said vessel was already filled
to capacity, they were forced to agree "to hide at the cargo section to avoid inspection of the officers
of the Philippine Coastguard." Private respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the ship's cargo of corn grits," and that the
tickets they bought at Cagayan de Oro City for Tagbilaran were not honored and they were
constrained to pay for other tickets. In view thereof, private respondents sued petitioner for damages
and for breach of contract of carriage in the alleged sum of P10,000.00 before respondents Court of
First Instance of Misamis Oriental. 2

Petitioner moved to dismiss the complaint on the ground of improper venue. This motion was
premised on the condition printed at the back of the tickets, i.e., Condition No. 14, which reads:

14. It is hereby agreed and understood that any and all actions arising out of the
conditions and provisions of this ticket, irrespective of where it is issued, shall be filed
in the competent courts in the City of Cebu. 3

The motion was denied by the trial court. 4 Petitioner moved to reconnsider the order of denial, but
no avail. 5 Hence, this instant petition for prohibition for preliminary injunction, 'alleging that the
respondent judge has departed from the accepted and usual course of judicial preoceeding" and
"had acted without or in excess or in error of his jurisdicton or in gross abuse of discretion. 6

In Our resolution of November 20, 1973, We restrained respondent Judge from proceeding further
with the case and required respondent to comment. 7 On January 18, 1974, We gave due course to
the petition and required respondent to answer. 8 Thereafter, the parties submitted their respesctive
memoranda in support of their respective contentions. 9

Presented thus for Our resolution is a question is aquestion which, to all appearances, is one of first
impression, to wit — Is Condition No. 14 printed at the back of the petitioner's passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract of
carriage to theCourt of First Instance of Cebu, valid and enforceable? Otherwise stated, may a
common carrier engaged in inter-island shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out of the ocntract of carriage should be
filed only in a particular province or city, in this case the City of Cebu, to the exclusion of all others?

Petitioner contends thaty Condition No. 14 is valid and enforceable, since private respndents
acceded to tit when they purchased passage tickets at its Cagayan de Oro branch office and took its
vessel M/S "Sweet Town" for passage to Tagbilaran, Bohol — that the condition of the venue of
actions in the City of Cebu is proper since venue may be validly waived, citing cases; 10 that is an
effective waiver of venue, valid and binding as such, since it is printed in bold and capital letters and
not in fine print and merely assigns the place where the action sing from the contract is institution
likewise citing cases; 11 and that condition No. 14 is unequivocal and mandatory, the words and
phrases "any and all", "irrespective of where it is issued," and "shag" leave no doubt that the
intention of Condition No. 14 is to fix the venue in the City of Cebu, to the exclusion of other places;
that the orders of the respondent Judge are an unwarranted departure from established
jurisprudence governing the case; and that he acted without or in excess of his jurisdiction in is the
orders complained of. 12

On the other hand, private respondents claim that Condition No. 14 is not valid, that the same is not
an essential element of the contract of carriage, being in itself a different agreement which requires
the mutual consent of the parties to it; that they had no say in its preparation, the existence of which
they could not refuse, hence, they had no choice but to pay for the tickets and to avail of petitioner's
shipping facilities out of necessity; that the carrier "has been exacting too much from the public by
inserting impositions in the passage tickets too burdensome to bear," that the condition which was
printed in fine letters is an imposition on the riding public and does not bind respondents, citing
cases; 13 that while venue 6f actions may be transferred from one province to another, such
arrangement requires the "written agreement of the parties", not to be imposed unilaterally; and that
assuming that the condition is valid, it is not exclusive and does not, therefore, exclude the filing of
the action in Misamis Oriental, 14

There is no question that there was a valid contract of carriage entered into by petitioner and private
respondents and that the passage tickets, upon which the latter based their complaint, are the best
evidence thereof. All the essential elements of a valid contract, i.e., consent, cause or consideration
and object, are present. As held in Peralta de Guerrero, et al. v. Madrigal Shipping Co., Inc., 15

It is a matter of common knowledge that whenever a passenger boards a ship for

transportation from one place to another he is issued a ticket by the shipper which
has all the elements of a written contract, Namely: (1) the consent of the contracting
parties manifested by the fact that the passenger boards the ship and the shipper
consents or accepts him in the ship for transportation; (2) cause or consideration
which is the fare paid by the passenger as stated in the ticket; (3) object, which is the
transportation of the passenger from the place of departure to the place of
destination which are stated in the ticket.

It should be borne in mind, however, that with respect to the fourteen (14) conditions — one of which
is "Condition No. 14" which is in issue in this case — printed at the back of the passage tickets,
these are commonly known as "contracts of adhesion," the validity and/or enforceability of which will
have to be determined by the peculiar circumstances obtaining in each case and the nature of the
conditions or terms sought to be enforced. For, "(W)hile generally, stipulations in a contract come
about after deliberate drafting by the parties thereto, ... there are certain contracts almost all the
provisions of which have been drafted only by one party, usually a corporation. Such contracts are
called contracts of adhesion, because the only participation of the party is the signing of his
signature or his 'adhesion' thereto. Insurance contracts, bills of lading, contracts of make of lots on
the installment plan fall into this category" 16

By the peculiar circumstances under which contracts of adhesion are entered into — namely, that it
is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by
the other party, in this instance the passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or leave it" basis — certain guidelines in the
determination of their validity and/or enforceability have been formulated in order to that justice and
fan play characterize the relationship of the contracting parties. Thus, this Court speaking through
Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock Insurance Co., 17 and later through
Justice Fernando in Fieldman Insurance v. Vargas, 18 held —

The courts cannot ignore that nowadays, monopolies, cartels and concentration of
capital endowed with overwhelm economic power, manage to impose upon parties d
with them y prepared 'agreements' that the weaker party may not change one whit
his participation in the 'agreement' being reduced to the alternative 'to take it or leave
it,' labelled since Raymond Saleilles 'contracts by adherence' (contracts d' adhesion)
in contrast to those entered into by parties bargaining on an equal footing. Such
contracts (of which policies of insurance and international bill of lading are prime
examples) obviously cap for greater strictness and vigilance on the part of the courts
of justice with a view to protecting the weaker party from abuses and imposition, and
prevent their becoming traps for the unwary.

To the same effect and import, and, in recognition of the character of contracts of this kind, the
protection of the disadvantaged is expressly enjoined by the New Civil Code —

In all contractual property or other relations, when one of the parties is at a

disadvantage on account of his moral dependence, ignorance indigence, mental
weakness, tender age and other handicap, the courts must be vigilant for his
protection. 19

Considered in the light Of the foregoing norms and in the context Of circumstances Prevailing in the
inter-island ship. ping industry in the country today, We find and hold that Condition No. 14 printed at
the back of the passage tickets should be held as void and unenforceable for the following reasons
first, under circumstances obligation in the inter-island ship. ping industry, it is not just and fair to
bind passengers to the terms of the conditions printed at the back of the passage tickets, on which
Condition No. 14 is Printed in fine letters, and second, Condition No. 14 subverts the public policy on
transfer of venue of proceedings of this nature, since the same will prejudice rights and interests of
innumerable passengers in different s of the country who, under Condition No. 14, will have to file
suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take judicial notice, that there is a dearth of
and acute shortage in inter- island vessels plying between the country's several islands, and the
facilities they offer leave much to be desired. Thus, even under ordinary circumstances, the piers are
congested with passengers and their cargo waiting to be transported. The conditions are even worse
at peak and/or the rainy seasons, when Passengers literally scramble to whatever accommodations
may be availed of, even through circuitous routes, and/or at the risk of their safety — their immediate
concern, for the moment, being to be able to board vessels with the hope of reaching their
destinations. The schedules are — as often as not if not more so — delayed or altered. This was
precisely the experience of private respondents when they were relocated to M/S "Sweet Town" from
M/S "Sweet Hope" and then any to the scorching heat of the sun and the dust coming from the ship's
cargo of corn grits, " because even the latter was filed to capacity.

Under these circumstances, it is hardly just and proper to expect the passengers to examine their
tickets received from crowded/congested counters, more often than not during rush hours, for
conditions that may be printed much charge them with having consented to the conditions, so
printed, especially if there are a number of such conditions m fine print, as in this case. 20

Again, it should be noted that Condition No. 14 was prepared solely at the ms of the petitioner,
respondents had no say in its preparation. Neither did the latter have the opportunity to take the into
account prior to the purpose chase of their tickets. For, unlike the small print provisions of contracts
— the common example of contracts of adherence — which are entered into by the insured in his
awareness of said conditions, since the insured is afforded the op to and co the same, passengers
of inter-island v do not have the same chance, since their alleged adhesion is presumed only from
the fact that they purpose chased the tickets.

It should also be stressed that slapping companies are franchise holders of certificates of public
convenience and therefore, posses a virtual monopoly over the business of transporting passengers
between the ports covered by their franchise. This being so, shipping companies, like petitioner,
engaged in inter-island shipping, have a virtual monopoly of the business of transporting passengers
and may thus dictate their terms of passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the
bulk of those who board these inter-island vested come from the low-income groups and are less
literate, and who have little or no choice but to avail of petitioner's vessels.

2. Condition No. 14 is subversive of public policy on transfers of venue of actions. For, although
venue may be changed or transferred from one province to another by agreement of the parties in
writing t to Rule 4, Section 3, of the Rules of Court, such an agreement will not be held valid where it
practically negates the action of the claimants, such as the private respondents herein. The
philosophy underlying the provisions on transfer of venue of actions is the convenience of the
plaintiffs as well as his witnesses and to promote 21 the ends of justice. Considering the expense and
trouble a passenger residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all. The condition will thus defeat,
instead of enhance, the ends of justice. Upon the other hand, petitioner has branches or offices in
the respective ports of call of its vessels and can afford to litigate in any of these places. Hence, the
filing of the suit in the CFI of Misamis Oriental, as was done in the instant case, will not cause
inconvenience to, much less prejudice, petitioner.

Public policy is ". . . that principle of the law which holds that no subject or citizen can lawfully do that
which has a tendency to be injurious to the public or against the public good ... 22 Under this
principle" ... freedom of contract or private dealing is restricted by law for the good of the
public. 23 Clearly, Condition No. 14, if enforced, will be subversive of the public good or interest, since
it will frustrate in meritorious cases, actions of passenger cants outside of Cebu City, thus placing
petitioner company at a decided advantage over said persons, who may have perfectly legitimate
claims against it. The said condition should, therefore, be declared void and unenforceable, as
contrary to public policy — to make the courts accessible to all who may have need of their services.

WHEREFORE, the petition for prohibition is DISMISS. ED. The restraining order issued on
November 20, 1973, is hereby LIFTED and SET ASIDE. Costs against petitioner.

Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.

Antonio, J., reserves his vote.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding change
of venue are enforceable, there may be instances where for equitable considerations and in the
better interest of justice, a court may justify the laying of, the venue in the place fixed by the rules
instead of following written stipulation of the parties.

In the particular case at bar, there is actually no written agreement as to venue between the parties
in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that the
importance that a stipulation regarding change of the venue fixed by law entails is such that nothing
less than mutually conscious agreement as to it must be what the rule means. In the instant case, as
well pointed out in the main opinion, the ticket issued to private respondents by petitioner constitutes
at best a "contract of adhesion". In other words, it is not that kind of a contract where the parties sit
down to deliberate, discuss and agree specifically on all its terms, but rather, one which respondents
took no part at all in preparing, since it was just imposed upon them when they paid for the fare for
the freight they wanted to ship. It is common knowledge that individuals who avail of common
carriers hardly read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.

Under these circumstances, it would seem that, since this case is already in respondent court and
there is no showing that, with its more or less known resources as owner of several inter-island
vessels plying between the different ports of the Philippines for sometime already, petitioner would
be greatly inconvenienced by submitting to the jurisdiction of said respondent court, it is best to allow
the proceedings therein to continue. I cannot conceive of any juridical injury such a step can cause
to anyone concerned. I vote to dismiss the petition.

Separate Opinions

BARREDO, J., concurring:

I concur in the dismissal of the instant petition.

Only a few days ago, in Hoechst Philippines, Inc. vs. Francisco Torres, et al., G. R. No. L-44351,
promulgated May 18, 1978, We made it clear that although generally, agreements regarding change
of venue are enforceable, there may be instances where for equitable considerations and in the
better interest of justice, a court may justify the laying of, the venue in the place fixed by the rules
instead of following written stipulation of the parties.

In the particular case at bar, there is actually no written agreement as to venue between the parties
in the sense contemplated in Section 3 of Rule 4, which governs the matter. I take it that the
importance that a stipulation regarding change of the venue fixed by law entails is such that nothing
less than mutually conscious agreement as to it must be what the rule means. In the instant case, as
well pointed out in the main opinion, the ticket issued to private respondents by petitioner constitutes
at best a "contract of adhesion". In other words, it is not that kind of a contract where the parties sit
down to deliberate, discuss and agree specifically on all its terms, but rather, one which respondents
took no part at all in preparing, since it was just imposed upon them when they paid for the fare for
the freight they wanted to ship. It is common knowledge that individuals who avail of common
carriers hardly read the fine prints on such tickets to note anything more than the price thereof and
the destination designated therein.

Under these circumstances, it would seem that, since this case is already in respondent court and
there is no showing that, with its more or less known resources as owner of several inter-island
vessels plying between the different ports of the Philippines for sometime already, petitioner would
be greatly inconvenienced by submitting to the jurisdiction of said respondent court, it is best to allow
the proceedings therein to continue. I cannot conceive of any juridical injury such a step can cause
to anyone concerned. I vote to dismiss the petition.

Footnotes

1 Rollo, p. 2.

2 Id, P. 12, Annex "B",

3 Id., p. 18, Annex "C".

4 Id., p. 20, Annex "D".

5 Id., pp. 21 an d 26, Annexes "E" and "F"

6 Rollo, p. 5; Petition, paars. 8, 9 &10.

7 Id., p. 30.

8 Id., p. 47.

9 Id., pp. 66 and 76.

10 Manila Company vs. Attorney General 20 Phil 523; Central Azucarera de Tarlac
vs. de Loon, 56 Phil 129; Marquez Lain Cay vs. Del Rosario, 55 Phil 622; Abuton vs.
Paler, 54 Phil 519, De la Rosa vs. De Borja, 53 Phil 990; Samson vs. Carra 50 Phil
647, See Rollo, p. 77.

11 Central Azucarera de Tarlac vs. de Leon, supra; Air France v C , 18 SCRA, (Sept.
28, 1966), p. 155, Id, pp. 77 and 80.

12 Rollo, pp. 81-81, Memorandum of Petitioner.

13 Shewaram v PAL Inc., G.R. No. L-20099, July 7, 1966, 17 SCRA 606-612;
Mirasol vs. Robert Dollar and Company, 53 Phil 124, See Rollo, p. 79.

14 Rollo. pp- 66-70, Memorandum of Respondents, citing Polytrade Corporation v.

Blanco, 30 SCRA 187-191.

15 106 Phil 485 (1959).

16 Paras, Civil Code of the Philippines, Seventh ed., Vol. 1, p. 80.

17 98 Phil 95 (1955).

18 L-24833. 25 SCRA 70 (1968).

19 Civil Code, Art. 24.

20 Condition No. 14 is the last condition printed at the back of the 4 x 6 inches pa
tickets.

21 See Nicolas v. Reparations Commission et al G. R. No. L-28649 (21 May 1975),

64 SCRA 111, 116.

22 Ferrazini v. Gsell, 34 Phil 711-712 (1916).

23 Id., p. 712.

Republic of the Philippines

SUPREME COURT
Manila
 FIRST DIVISION

G.R. No. 72494 August 11, 1989

HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,

vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE APPELLATE
COURT, respondents.

Quiason, Makalintal, Barot & Torres for petitioner.

Alejandro, Aranzaso & Associates for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate Appellate Court (now
Court of Appeals) dated August 2, 1985, which reversed the order of the Regional Trial Court dated
February 28,1985 denying the Motion to Dismiss filed by private respondents Jack Robert Sherman
and Deodato Reloj.

A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by petitioner Hongkong and
Shanghai Banking Corporation (hereinafter referred to as petitioner BANK) against private
respondents Jack Robert Sherman and Deodato Reloj, docketed as Civil Case No. Q-42850 before
the Regional Trial Court of Quezon City, Branch 84.

It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (hereinafter referred to as
COMPANY), a company incorporated in Singapore applied with, and was granted by, the Singapore
branch of petitioner BANK an overdraft facility in the maximum amount of Singapore dollars
200,000.00 (which amount was subsequently increased to Singapore dollars 375,000.00) with
interest at 3% over petitioner BANK prime rate, payable monthly, on amounts due under said
overdraft facility; as a security for the repayment by the COMPANY of sums advanced by petitioner
BANK to it through the aforesaid overdraft facility, on October 7, 1982, both private respondents and
a certain Robin de Clive Lowe, all of whom were directors of the COMPANY at such time, executed
a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner BANK whereby private
respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by the
COMPANY to petitioner BANK under the aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:

This guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws
of the Republic of Singapore. We hereby agree that the Courts of Singapore shall
have jurisdiction over all disputes arising under this guarantee. ... (p. 33-A, Rollo).

The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded payment of the
obligation from private respondents, conformably with the provisions of the Joint and Several
Guarantee. Inasmuch as the private respondents still failed to pay, petitioner BANK filed the above-
mentioned complaint.

On December 14,1984, private respondents filed a motion to dismiss (pp 54-56, Rollo) which was
opposed by petitioner BANK (pp. 58-62, Rollo). Acting on the motion, the trial court issued an order
dated February 28, 1985 (pp, 64-65, Rollo), which read as follows:

In a Motion to Dismiss filed on December 14, 1984, the defendants seek the
dismissal of the complaint on two grounds, namely:

1. That the court has no jurisdiction over the subject matter of the complaint; and

2. That the court has no jurisdiction over the persons of the defendants.

In the light of the Opposition thereto filed by plaintiff, the Court finds no merit in the
motion. "On the first ground, defendants claim that by virtue of the provision in the
Guarantee (the actionable document) which reads —
 This guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be
enforced in accordance with the laws of the Republic of Singapore.
We hereby agree that the courts in Singapore shall have jurisdiction
over all disputes arising under this guarantee,

the Court has no jurisdiction over the subject matter of the case. The Court finds and
concludes otherwise. There is nothing in the Guarantee which says that the courts of
Singapore shall have jurisdiction to the exclusion of the courts of other countries or
nations. Also, it has long been established in law and jurisprudence that jurisdiction
of courts is fixed by law; it cannot be conferred by the will, submission or consent of
the parties.

On the second ground, it is asserted that defendant Robert' , Sherman is not a citizen
nor a resident of the Philippines. This argument holds no water. Jurisdiction over the
persons of defendants is acquired by service of summons and copy of the complaint
on them. There has been a valid service of summons on both defendants and in fact
the same is admitted when said defendants filed a 'Motion for Extension of Time to
File Responsive Pleading on December 5, 1984.

WHEREFORE, the Motion to Dismiss is hereby DENIED.

SO ORDERED.

A motion for reconsideration of the said order was filed by private respondents which was, however,
denied (p. 66,Rollo).

Private respondents then filed before the respondent Intermediate Appellate Court (now Court of
Appeals) a petition for prohibition with preliminary injunction and/or prayer for a restraining order (pp.
39-48, Rollo). On August 2, 1985, the respondent Court rendered a decision (p. 37, Rollo), the
dispositive portion of which reads:

WHEREFORE, the petition for prohibition with preliminary injuction is hereby

GRANTED. The respondent Court is enjoined from taking further cognizance of the
case and to dismiss the same for filing with the proper court of Singapore which is
the proper forum. No costs.

SO ORDERED.

The motion for reconsideration was denied (p. 38, Rollo), hence, the present petition.

The main issue is whether or not Philippine courts have jurisdiction over the suit.

The controversy stems from the interpretation of a provision in the Joint and Several Guarantee, to
wit:

(14) This guarantee and all rights, obligations and liabilites arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws
of the Republic of Singapore. We hereby agree that the Courts in Singapore shall
have jurisdiction over all disputes arising under this guarantee. ... (p. 53-A, Rollo)

In rendering the decision in favor of private respondents, the Court of Appeals made, the following
observations (pp. 35-36, Rollo):

There are significant aspects of the case to which our attention is invited. The loan
was obtained by Eastern Book Service PTE, Ltd., a company incorporated
in Singapore. The loan was granted by the Singapore Branch of Hongkong and
Shanghai Banking Corporation. The Joint and Several Guarantee was also
concluded in Singapore. The loan was in Singaporean dollars and the repayment
thereof also in the same currency. The transaction, to say the least, took place in
Singporean setting in which the law of that country is the measure by which that
relationship of the parties will be governed.

xxx xxx xxx

 Contrary to the position taken by respondents, the guarantee agreement compliance
that any litigation will be before the courts of Singapore and that the rights and
obligations of the parties shall be construed and determined in accordance with the
laws of the Republic of Singapore. A closer examination of paragraph 14 of the
Guarantee Agreement upon which the motion to dismiss is based, employs in clear
and unmistakeable (sic) terms the word 'shall' which under statutory construction is
mandatory.

Thus it was ruled that:

... the word 'shall' is imperative, operating to impose a duty which may be enforced
(Dizon vs. Encarnacion, 9 SCRA 714). lâwphî1.ñèt

There is nothing more imperative and restrictive than what the agreement
categorically commands that 'all rights, obligations, and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore.'

While it is true that "the transaction took place in Singaporean setting" and that the Joint and Several
Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the
stipulation that "[t]his guarantee and all rights, obligations and liabilities arising hereunder shall be
construed and determined under and may be enforced in accordance with the laws of the Republic
of Singapore. We hereby agree that the Courts in Singapore shall have jurisdiction over all disputes
arising under this guarantee" be liberally construed. One basic principle underlies all rules of
jurisdiction in International Law: a State does not have jurisdiction in the absence of some
reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam.
To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend
traditional notions of fair play and substantial justice (J. Salonga, Private International Law, 1981, p.
46). Indeed, as pointed-out by petitioner BANK at the outset, the instant case presents a very odd
situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign
tribunal, with more reason as a defendant. However, in this case, private respondents are Philippine
residents (a fact which was not disputed by them) who would rather face a complaint against them
before a foreign court and in the process incur considerable expenses, not to mention
inconvenience, than to have a Philippine court try and resolve the case. Private respondents' stance
is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a
just obligation.

The defense of private respondents that the complaint should have been filed in Singapore is based
merely on technicality. They did not even claim, much less prove, that the filing of the action here will
cause them any unnecessary trouble, damage, or expense. On the other hand, there is no showing
that petitioner BANK filed the action here just to harass private respondents.

In the case of Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31, 1969, 30 SCRA 187,
it was ruled:

... An accurate reading, however, of the stipulation, 'The parties agree to sue and be
sued in the Courts of Manila,' does not preclude the filing of suits in the residence of
plaintiff or defendant. The plain meaning is that the parties merely consented to be
sued in Manila. Qualifying or restrictive words which would indicate that Manila and
Manila alone is the venue are totally absent therefrom. We cannot read into that
clause that plaintiff and defendant bound themselves to file suits with respect to the
last two transactions in question only or exclusively in Manila. For, that agreement
did not change or transfer venue. It simply is permissive. The parties solely agreed to
add the courts of Manila as tribunals to which they may resort. They did not waive
their right to pursue remedy in the courts specifically mentioned in Section 2(b) of
Rule 4. Renuntiatio non praesumitur.

This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., et al., G.R.
No. 57250, October 30, 1981, 108 SCRA 740, where the stipulation was "[i]n case of litigation,
jurisdiction shall be vested in the Court of Davao City." We held:

Anent the claim that Davao City had been stipulated as the venue, suffice it to say
that a stipulation as to venue does not preclude the filing of suits in the residence of
plaintiff or defendant under Section 2 (b), Rule 4, Rules of Court, in the absence of
qualifying or restrictive words in the agreement which would indicate that the place
named is the only venue agreed upon by the parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate
to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the light
of a State to exercise authority over persons and things within its boundaries subject to certain
exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and
diplomatic representatives of other States, and foreign military units stationed in or marching through
State territory with the permission of the latter's authorities. This authority, which finds its source in
the concept of sovereignty, is exclusive within and throughout the domain of the State. A State is
competent to take hold of any judicial matter it sees fit by making its courts and agencies assume
jurisdiction over all kinds of cases brought before them (J. Salonga, Private International Law, 1981,
pp. 37-38). lâwphî1.ñèt

As regards the issue on improper venue, petitioner BANK avers that the objection to improper venue
has been waived. However, We agree with the ruling of the respondent Court that:

While in the main, the motion to dismiss fails to categorically use with exactitude the
words 'improper venue' it can be perceived from the general thrust and context of the
motion that what is meant is improper venue, The use of the word 'jurisdiction' was
merely an attempt to copy-cat the same word employed in the guarantee agreement
but conveys the concept of venue. Brushing aside all technicalities, it would appear
that jurisdiction was used loosely as to be synonymous with venue. It is in this spirit
that this Court must view the motion to dismiss. ... (p. 35, Rollo).

At any rate, this issue is now of no moment because We hold that venue here was properly laid for
the same reasons discussed above.

The respondent Court likewise ruled that (pp. 36-37, Rollo):

... In a conflict problem, a court will simply refuse to entertain the case if it is not
authorized by law to exercise jurisdiction. And even if it is so authorized, it may still
refuse to entertain the case by applying the principle of forum non conveniens. ...

However, whether a suit should be entertained or dismissed on the basis of the principle of forum
non conveniensdepends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial court (J. Salonga, Private International Law, 1981, p. 49). Thus, the respondent
lâwphî1.ñèt

Court should not have relied on such principle.

Although the Joint and Several Guarantee prepared by petitioner BANK is a contract of adhesion
and that consequently, it cannot be permitted to take a stand contrary to the stipulations of the
contract, substantial bases exist for petitioner Bank's choice of forum, as discussed earlier.

Lastly, private respondents allege that neither the petitioner based at Hongkong nor its Philippine
branch is involved in the transaction sued upon. This is a vain attempt on their part to further thwart
the proceedings below inasmuch as well-known is the rule that a defendant cannot plead any
defense that has not been interposed in the court below.

ACCORDINGLY, the decision of the respondent Court is hereby REVERSED and the decision of the
Regional Trial Court is REINSTATED, with costs against private respondents. This decision is
immediately executory.

SO ORDERED.

Narvasa, Cruz, Gancayco and Griñ;o-Aquino, JJ., concur.

HONGKONG SHANGAI BANKING CORPORATION v. SHERMAN

G.R. No. 72494 August 11, 1989

FACTS
In 1981, Eastern Book Supply Service PTE, Ltd., (Eastern) a company incorporated in Singapore applied w/, & was
granted by the Singapore branch of HSBC an overdraft facility in the max amount of Singapore $200,000 (w/c
amount was subsequently increased to Singapore $375,000) w/ interest at 3% over HSBC prime rate, payable
monthly, on amounts due under said overdraft facility. As a security for the repayment by Eastern of sums
advanced by HSBC to it through the aforesaid overdraft facility, in 1982, Jack Sherman, Dodato Reloj, and a Robin
de Clive Lowe, all of whom were directors of Eastern at such time, executed a Joint and Several Guarantee in favor
of HSBC whereby Sherman, Reloj and Lowe agreed to pay, jointly and severally, on demand all sums owed by
Eastern to HSBC under the aforestated overdraft facility.
The Joint and Several Guarantee provides that: “This guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in accordance with the laws of the
Republic of Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes
arising under this guarantee.”

Eastern failed to pay its obligation. Thus, HSBC demanded payment of the obligation from Sherman & Reloj,
conformably w/ the provisions of the Joint and Several Guarantee. Inasmuch as Sherman & Reloj still failed to pay,
HSBC filed a complaint for collection of a sum of money against them. Sherman & Reloj filed a motion to dismiss
on the grounds that (1) the court has no jurisdiction over the subject matter of the complaint, and (2) the court
has no jurisdiction over the person of the defendants.

ISSUE
W/N Philippine courts should have jurisdiction over the suit.

RULING
YES. While it is true that "the transaction took place in Singaporean setting" and that the Joint and Several
Guarantee contains a choice-of-forum clause, the very essence of due process dictates that the stipulation that
"this guarantee and all rights, obligations & liabilities arising hereunder shall be construed & determined under &
may be enforced in accordance w/ the laws of the Republic of Singapore. We hereby agree that the Courts in
Singapore shall have jurisdiction over all disputes arising under this guarantee" be liberally construed. One basic
principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction in the absence of
some reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam. To be
reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair
play and substantial justice. Indeed, as pointed-out by HSBC at the outset, the instant case presents a very odd
situation. In the ordinary habits of life, anyone would be disinclined to litigate before a foreign tribunal, w/ more
reason as a defendant. However, in this case, Sherman & Reloj are Philippine residents (a fact which was not
disputed by them) who would rather face a complaint against them before a foreign court and in the process incur
considerable expenses, not to mention inconvenience, than to have a Philippine court try and resolve the case.
Their stance is hardly comprehensible, unless their ultimate intent is to evade, or at least delay, the payment of a
just obligation.

The defense of Sherman & Reloj that the complaint should have been filed in Singapore is based merely on
technicality. They did not even claim, much less prove, that the filing of the action here will cause them any
unnecessary trouble, damage, or expense. On the other hand, there is no showing that petitioner BANK filed the
action here just to harass Sherman & Reloj.

The parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has
jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In International
Law, jurisdiction is often defined as the light of a State to exercise authority over persons and things w/in its
boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns,
ambassadors and diplomatic representatives of other States, and foreign military units stationed in or marching
through State territory w/ the permission of the latter's authorities. This authority, which finds its source in the
concept of sovereignty, is exclusive w/in and throughout the domain of the State. A State is competent to take
hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases
brought before them.

PHILSEC VS. CA

MARCH 28, 2013 ~ VBDIAZ

PHILSEC INVESTMENT et al vs.CA et al

G.R. No. 103493
June 19, 1997
FACTS: Private respondent Ducat obtained separate loans from petitioners Ayala
International Finance Limited (AYALA) and Philsec Investment Corp (PHILSEC),
secured by shares of stock owned by Ducat.
In order to facilitate the payment of the loans, private respondent 1488, Inc., through
its president, private respondent Daic, assumed Ducat’s obligation 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
Texas, U.S.A., while PHILSEC and AYALA extended a loan to ATHONA as initial
payment of the purchase price. The balance was to be paid by means of a promissory
note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of
the money 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, 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 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. under the Agreement.

While the Civil 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 RTC Makati. The complaint reiterated the allegation of
petitioners in their respective counterclaims in the Civil Action in the United States
District Court of Southern Texas that private respondents committed fraud by selling
the property at a price 400 percent more than its true value.

Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of (1) litis
pendentia, vis-a-vis the Civil Action in the U.S., (2) forum non conveniens, and (3)
failure of petitioners PHILSEC and BPI-IFL to state a cause of action.

The trial court granted Ducat’s MTD, stating that “the evidentiary requirements of the
controversy may be more suitably tried before the forum of the litis pendentia in the
U.S., under the principle in private international law of forum non conveniens,” even
as it noted that Ducat was not a party in the U.S. case.

Petitioners appealed to the CA, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens.

The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and Daic on
the ground of litis pendentia.

ISSUE: is the Civil Case in the RTC-Makati barred by the judgment of the U.S.
court?
HELD: CA reversed. Case remanded to RTC-Makati
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. This is because in this
jurisdiction, with respect to actions in personam, as distinguished from actions in rem,
a foreign judgment merely constitutes prima facie evidence of the justness of the
claim of a party and, as such, is subject to proof to the contrary. Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a
right as between the parties and their successors in interest by a subsequent title; but
the judgment may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.

In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The proceedings in the trial court were
summary. Neither the trial court nor the appellate court was even furnished copies of
the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure
a proper determination of whether the issues then being litigated in the U.S. court
were exactly the issues raised in this case such that the judgment that might be
rendered would constitute res judicata.

Second. Nor is the trial court’s refusal to take cognizance of the case justifiable under
the principle of forum non conveniens:

First, a MTD is limited to the grounds under Rule 16, sec.1, which does not include
forum non conveniens. The propriety of dismissing a case based on this principle
requires a factual determination, hence, it is more properly considered a matter of
defense.
Second, while it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after “vital facts are established, to
determine whether special circumstances” require the court’s desistance.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 103493 June 19, 1997

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and

ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights of the
parties under the same cause of action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of
the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition
to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review
on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners
Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by
Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty
Deed with Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called
ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC
and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the
purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered
by the note became due and demandable. Accordingly, on October 17, 1985, private respondent
1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the
balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to
1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was
later transferred to the United States District Court for the Southern District of Texas, where 1488,
Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an
answer with counterclaim, impleading private respondents herein as counterdefendants, for
allegedly conspiring in selling the property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA
sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion
to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied,
they later filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the
U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay
damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed
a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private
respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563.
The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action
No. H-86-440 of the United States District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and
to purchase the Houston property. Petitioners prayed that private respondents be ordered to return
to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the
trial court issued a writ of preliminary attachment against the real and personal properties of private
respondents. 2

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis
pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non
conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer,
but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to
extend financial accommodation to ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified
Motion to Dismiss," contending that the action being in personam, extraterritorial service of
summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc.,
which is a non-resident foreign corporation, and Daic, who is a non-resident alien.

On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary
requirements of the controversy may be more suitably tried before the forum of the litis pendentia in
the U.S., under the principle in private international law of forum non conveniens," even as it noted
that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9,
1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that

the "main factual element" of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date
of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were
non-residents and the action was not an action in rem or quasi in rem, so that extraterritorial
service of summons was ineffective. The trial court subsequently lifted the writ of attachment
it had earlier issued against the shares of stocks of 1488, Inc. and Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against
Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction
sued upon by the parties, in both cases is the Warranty Deed executed by and
between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducat's securities given in exchange for
the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty
Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the
recovery of a sum of money for alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The
dismissal of Civil Case No. 16563 on the ground offorum non conveniens was likewise
affirmed by the Court of Appeals on the ground that the case can be better tried and decided
by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in
Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
 although the buyer, Athona Holdings, a foreign corporation which does not claim to
be doing business in the Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4)
the Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME

PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE
CIVIL ACTION IS NOT APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE

COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF

APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS
EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS
(WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN
THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the present case was pending
in the Court of Appeals, the United States District Court for the Southern District of Texas rendered
judgment 5 in the case before it. The judgment, which was in favor of private respondents, was
affirmed on appeal by the Circuit Court of Appeals. 6Thus, the principal issue to be resolved in this
case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court.

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment
admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it
on grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign
judgments in several cases, 7 it was after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 8 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. 9 Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of

a right as between the parties and their successors in interest by a subsequent title;
but the judgment may be repelled by evidence of a want of jurisdiction, want of notice
to the party, collusion, fraud, or clear mistake of law or fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton,
Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign judgment in
their favor, the foreign judgment was considered res judicata because this Court found "from the
evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear
mistake of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or
collusion by the defendants. Trial had been previously held in the lower court and only afterward was
a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same vein, in Philippines
International Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was
valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice
to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the
Rule had not been rebutted.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the
judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary. Neither the trial court nor the
appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper determination of whether the issues then being
litigated in the U.S. court were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata. As the trial court stated in its disputed order dated
March 9, 1988.

On the plaintiff's claim in its Opposition that the causes of action of this case and the
pending case in the United States are not identical, precisely the Order of January
26, 1988 never found that the causes of action of this case and the case pending
before the USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners' action is
barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the
U.S. court over their persons, but their claim was brushed aside by both the trial court and
the Court of Appeals. 13

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the
enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case
No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the
pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes
res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from
repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment
is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim
as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be
enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore
that:

[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the Hongkong
judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. 14

Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070
should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati,
albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while
Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings,
petitioners should have the burden of impeaching the foreign judgment and only in the event they
succeed in doing so may they proceed with their action against private respondents.

Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the principle
of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, §1,
which does not include forum non conveniens. 16 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. 17

In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed
by private respondents in connection with the motion to dismiss. It failed to consider that one of the
plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a
Filipino, and that it was the extinguishment of the latter's debt which was the object of the transaction
under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a
party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over
1488, Inc. and Daic could not be obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, §17 on extraterritorial service provides that service of
summons on a non-resident defendant may be effected out of the Philippines by leave of Court
where, among others, "the property of the defendant has been attached within the Philippines." 18 It is
not disputed that the properties, real and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court dated April 20, 1987. 19

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the
proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11
sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The
separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings
that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence,
the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is
REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and
for further proceedings in accordance with this decision. The temporary restraining order issued on
June 29, 1994 is hereby LIFTED.

SO ORDERED.

Regalado, Romero, Puno and Torres, Jr., JJ., concur.

Footnotes

1 Now BPI-International Finance Ltd. (hereafter called BPI-IFL).

2 Records, p. 58.

3 Per Judge Fernando V. Gorospe, Jr.

4 Per Associate Justice Consuelo Ynares-Santiago with Associate Justices Ricardo

L. Pronove, Jr. and Nicolas P. Lapeña, Jr., concurring.

5 C.A. Rollo, pp. 205-206.

6 Rollo, p. 303.

7 Philippine International Shipping Corp. v. Court of Appeals, 172 SCRA 810 (1989);
Nagarmull v. Binalbagan-Isabela Sugar Co., Inc., 33 SCRA 46 (1970); General
Corporation of the Philippines v. Union Insurance Society of Canton Ltd., G.R. No. L-
2303, Dec. 29, 1951 (unreported); Boudard v. Tait, 67 Phil. 170 (1939).

8 Hang Lung Bank v. Saulog, 201 SCRA 137 (1991).

9 Boudard v. Tait, 67 Phil. 170.

10 G.R. No. L-2303, Dec. 29, 1951.

11 Id., p.6.

12 172 SCRA 810.

13 C.A. Decision, p. 6; Rollo, p. 52.

14 Hang Lung Bank v. Saulog, 201 SCRA 137.

15 Borromeo v. Intermediate Appellate Court, 255 SCRA 75 (1995).

16 Development Bank of the Philippines v. Pundogar, 218 SCRA 118 (1993).

 17 K.K. Shell Sekiyu Osaka Hatsubaisho v. Court of Appeals, 188 SCRA 145 at 153
(1990); Hongkong and Shanghai Banking Corp. v. Sherban, 176 SCRA 331 at 339
(1987).

18 Rule 14, §17.

Sec. 17. Extraterritorial service. — When the defendant does not reside and is not
found in the Philippines and the action affects the personal status of the plaintiff or
relates to, or the subject of which is, property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant from any interest
therein, or the property of the defendant from any interest therein, or the property of
the defendant has been attached within the Philippines, service may, by leave of
court, be effected out of the Philippines by personal service as under section 7; or by
publication in a newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order of the court
shall be sent by registered mail to the last known address of the defendant, or in any
other manner the court may deem sufficient. Any order granting such leave shall
specify a reasonable time, which shall not be less than sixty (60) days after notice,
within which the defendant must answer. (emphasis added)

19 Records, pp. 58, 80 and 100. (Sheriff's Report, Record, p. 100).

20 Rollo, p. 353.

21 Edgardo V. Guevarra was impleaded as party defendant in petitioners' amended

complaint on March 31, 1992.

Republic of the Philippines

SUPREME COURT
Manila

SPECIAL SECOND DIVISION

G.R. No. 161957 January 22, 2007

JORGE GONZALES and PANEL OF ARBITRATORS, Petitioners,

vs.
CLIMAX MINING LTD., CLIMAX-ARIMCO MINING CORP., and AUSTRALASIAN PHILIPPINES
MINING INC.,Respondents.

x--------------------------------------------------------------------------------- x

G.R. No. 167994 January 22, 2007

JORGE GONZALES, Petitioner,

vs.
HON. OSCAR B. PIMENTEL, in his capacity as PRESIDING JUDGE of BR. 148 of the
REGIONAL TRIAL COURT of MAKATI CITY, and CLIMAX-ARIMCO MINING
CORPORATION, Respondents.

RESOLUTION

TINGA, J.:

This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into
by the parties. In G.R. No. 161957, the Court in its Decision of 28 February 20051 denied the Rule 45
petition of petitioner Jorge Gonzales (Gonzales). It 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. Both parties filed separate motions for reconsideration. Gonzales avers
in his Motion for Reconsideration2 that the Court erred in holding that the DENR Panel of Arbitrators
was bereft of jurisdiction, reiterating its argument that the case involves a mining dispute that
properly falls within the ambit of the Panel’s authority. Gonzales adds that the Court failed to rule on
other issues he raised relating to the sufficiency of his complaint before the DENR Panel of
Arbitrators and the timeliness of its filing.

Respondents Climax Mining Ltd., et al., (respondents) filed their Motion for Partial Reconsideration
and/or Clarification3 seeking reconsideration of that part of the Decision holding that the case should
not be brought for arbitration under Republic Act (R.A.) No. 876, also known as the Arbitration
Law.4 Respondents, citing American jurisprudence5 and the UNCITRAL Model Law,6 argue 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. Respondents add that Gonzales’s argument relating to the alleged invalidity of the
Addendum Contract still has to be proven and adjudicated on in a proper proceeding; that is, an
action separate from the motion to compel arbitration. Pending judgment in such separate action, the
Addendum Contract remains valid and binding and so does the arbitration clause therein.
Respondents add that the holding in the Decision that "the case should not be brought under the
ambit of the Arbitration Law" appears to be premised on Gonzales’s having "impugn[ed] the
existence or validity" of the addendum contract. If so, it supposedly conveys the idea that Gonzales’s
unilateral repudiation of the contract or mere allegation of its invalidity is all it takes to avoid
arbitration. Hence, respondents submit that the court’s holding that "the case should not be brought
under the ambit of the Arbitration Law" be understood or clarified as operative only where the
challenge to the arbitration agreement has been sustained by final judgment.

Both parties were required to file their respective comments to the other party’s motion for
reconsideration/clarification.7 Respondents filed their Comment on 17 August 2005,8 while Gonzales
filed his only on 25 July 2006.9

On the other hand, G.R. No. 167994 is a Rule 65 petition filed on 6 May 2005, or while the motions
for reconsideration in G.R. No. 16195710 were pending, wherein Gonzales challenged the orders of
the Regional Trial Court (RTC) requiring him to proceed with the arbitration proceedings as sought
by Climax-Arimco Mining Corporation (Climax-Arimco).

On 5 June 2006, the two cases, G.R. Nos. 161957 and 167994, were consolidated upon the
recommendation of the Assistant Division Clerk of Court since the cases are rooted in the same
Addendum Contract.

We first tackle the more recent case which is G.R. No. 167994. It stemmed from the petition to
compel arbitration filed by respondent Climax-Arimco before the RTC of Makati City on 31 March
2000 while the complaint for the nullification of the Addendum Contract was pending before the
DENR Panel of Arbitrators. On 23 March 2000, Climax-Arimco had sent Gonzales a Demand for
Arbitration pursuant to Clause 19.111 of the Addendum Contract and also in accordance with Sec. 5
of R.A. No. 876. The petition for arbitration was subsequently filed and Climax-Arimco sought an
order to compel the parties to arbitrate pursuant to the said arbitration clause. The case, docketed as
Civil Case No. 00-444, was initially raffled to Br. 132 of the RTC of Makati City, with Judge Herminio
I. Benito as Presiding Judge. Respondent Climax-Arimco filed on 5 April 2000 a motion to set the
application to compel arbitration for hearing.

On 14 April 2000, Gonzales filed a motion to dismiss which he however failed to set for hearing. On
15 May 2000, he filed an Answer with Counterclaim,12 questioning the validity of the Addendum
Contract containing the arbitration clause. Gonzales alleged that the Addendum Contract containing
the arbitration clause is void in view of Climax-Arimco’s acts of fraud, oppression and violation of the
Constitution. Thus, the arbitration clause, Clause 19.1, contained in the Addendum Contract is also
null and void ab initio and legally inexistent.
1awphi1.net

On 18 May 2000, the RTC issued an order declaring Gonzales’s motion to dismiss moot and
academic in view of the filing of his Answer with Counterclaim.13

On 31 May 2000, Gonzales asked the RTC to set the case for pre-trial.14 This the RTC denied on 16
June 2000, holding that the petition for arbitration is a special proceeding that is summary in
nature.15 However, on 7 July 2000, the RTC granted Gonzales’s motion for reconsideration of the 16
June 2000 Order and set the case for pre-trial on 10 August 2000, it being of the view that Gonzales
had raised in his answer the issue of the making of the arbitration agreement.16

Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC
denied the same in its 24 July 2000 order.

On 28 July 2000, Climax-Arimco filed a Motion to Inhibit Judge Herminio I. Benito for "not
possessing the cold neutrality of an impartial judge."17 On 5 August 2000, Judge Benito issued an
Order granting the Motion to Inhibit and ordered the re-raffling of the petition for arbitration.18 The
case was raffled to the sala of public respondent Judge Oscar B. Pimentel of Branch 148.

On 23 August 2000, Climax-Arimco filed a motion for reconsideration of the 24 July 2000
Order.19 Climax-Arimco argued that R.A. No. 876 does not authorize a pre-trial or trial for a motion to
compel arbitration but directs the court to hear the motion summarily and resolve it within ten days
from hearing. Judge Pimentel granted the motion and directed the parties to arbitration. On 13
February 2001, Judge Pimentel issued the first assailed order requiring Gonzales to proceed with
arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole arbitrator.20

Gonzales moved for reconsideration on 20 March 2001 but this was denied in the Order dated 7
March 2005.21

Gonzales thus filed the Rule 65 petition assailing the Orders dated 13 February 2001 and 7 March
2005 of Judge Pimentel. Gonzales contends that public respondent Judge Pimentel acted with grave
abuse of discretion in immediately ordering the parties to proceed with arbitration despite the proper,
valid, and timely raised argument in his Answer with Counterclaim that the Addendum Contract,
containing the arbitration clause, is null and void. Gonzales has also sought a temporary restraining
order to prevent the enforcement of the assailed orders directing the parties to arbitrate, and to direct
Judge Pimentel to hold a pre-trial conference and the necessary hearings on the determination of
the nullity of the Addendum Contract.

In support of his argument, Gonzales invokes Sec. 6 of R.A. No. 876:

Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform
under an agreement in writing providing for arbitration may petition the court for an order directing
that such arbitration proceed in the manner provided for in such agreement. Five days notice in
writing of the hearing of such application shall be served either personally or by registered mail upon
the party in default. The court shall hear the parties, and upon being satisfied that the making of the
agreement or such failure to comply therewith is not in issue, shall make an order directing the
parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the
agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding
be that no agreement in writing providing for arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision
for arbitration was made and there is a default in proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act,
within ten (10) days after such motions, petitions, or applications have been heard by it.

Gonzales also cites Sec. 24 of R.A. No. 9285 or the "Alternative Dispute Resolution Act of 2004:"

Sec. 24. Referral to Arbitration.—A court before which an action is brought in a matter which is the
subject matter of an arbitration agreement shall, if at least one party so requests not later than the
pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration
unless it finds that the arbitration agreement is null and void, inoperative or incapable of being
performed.

According to Gonzales, the above-quoted provisions of law outline the procedure to be followed in
petitions to compel arbitration, which the RTC did not follow. Thus, referral of the parties to
arbitration by Judge Pimentel despite the timely and properly raised issue of nullity of the Addendum
Contract was misplaced and without legal basis. Both R.A. No. 876 and R.A. No. 9285 mandate that
any issue as to the nullity, inoperativeness, or incapability of performance of the arbitration
clause/agreement raised by one of the parties to the alleged arbitration agreement must be
determined by the court prior to referring them to arbitration. They require that the trial court first
determine or resolve the issue of nullity, and there is no other venue for this determination other than
a pre-trial and hearing on the issue by the trial court which has jurisdiction over the case. Gonzales
adds that the assailed 13 February 2001 Order also violated his right to procedural due process
when the trial court erroneously ruled on the existence of the arbitration agreement despite the
absence of a hearing for the presentation of evidence on the nullity of the Addendum Contract.

Respondent Climax-Arimco, on the other hand, assails the mode of review availed of by Gonzales.
Climax-Arimco cites Sec. 29 of R.A. No. 876:

Sec. 29. Appeals.—An appeal may be taken from an order made in a proceeding under this Act, or
from a judgment entered upon an award through certiorari proceedings, but such appeals shall be
limited to questions of law. The proceedings upon such an appeal, including the judgment thereon
shall be governed by the Rules of Court in so far as they are applicable.

Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available
only where there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of
law against the challenged orders or acts. Climax-Arimco then points out that R.A. No. 876 provides
for an appeal from such orders, which, under the Rules of Court, must be filed within 15 days from
notice of the final order or resolution appealed from or of the denial of the motion for reconsideration
filed in due time. Gonzales has not denied that the relevant 15-day period for an appeal had elapsed
long before he filed this petition for certiorari. He cannot use the special civil action of certiorari as a
remedy for a lost appeal.

Climax-Arimco adds 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. Respondent cites La Naval Drug Corporation v. Court of Appeals,22 which
holds that in a proceeding to compel arbitration, "[t]he arbitration law explicitly confines the court’s
authority only to pass upon the issue of whether there is or there is no agreement in writing providing
for arbitration," and "[i]n 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.’"23Climax-Arimco argues that R.A. No. 876 gives no room for any other issue to be dealt with
in such a proceeding, and that the court presented with an application to compel arbitration may
order arbitration or dismiss the same, depending solely on its finding as to those two limited issues.
If either of these matters is disputed, the court is required to conduct a summary hearing on it.
Gonzales’s proposition contradicts both the trial court’s limited jurisdiction and the summary nature
of the proceeding itself.

Climax-Arimco further notes that Gonzales’s attack on or repudiation of the Addendum Contract also
is not a ground to deny effect to the arbitration clause in the Contract. The arbitration agreement is
separate and severable from the contract evidencing the parties’ commercial or economic
transaction, it stresses. Hence, the alleged defect or failure of the main contract is not a ground to
deny enforcement of the parties’ arbitration agreement. Even the party who has repudiated the main
contract is not prevented from enforcing its arbitration provision. R.A. No. 876 itself treats the
arbitration clause or agreement as a contract separate from the commercial, economic or other
transaction to be arbitrated. The statute, in particular paragraph 1 of Sec. 2 thereof, considers the
arbitration stipulation an independent contract in its own right whose enforcement may be prevented
only on grounds which legally make the arbitration agreement itself revocable, thus:

Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may submit to
the arbitration of one or more arbitrators any controversy existing, between them at the time of the
submission and which may be the subject of an action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.

xxxx

The grounds Gonzales invokes for the revocation of the Addendum Contract—fraud and oppression
in the execution thereof—are also not grounds for the revocation of the arbitration clause in the
Contract, Climax-Arimco notes. Such grounds may only be raised by way of defense in the
arbitration itself and cannot be used to frustrate or delay the conduct of arbitration proceedings.
Instead, these should be raised in a separate action for rescission, it continues.

Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of R.A.
No. 876 should not be confused with the procedure in Sec. 24 of R.A. No. 9285. Sec. 6 of R.A. No.
876 refers to an application to compel arbitration where the court’s authority is limited to resolving
the issue of whether there is or there is no agreement in writing providing for arbitration, while Sec.
24 of R.A. No. 9285 refers to an ordinary action which covers a matter that appears to be arbitrable
or subject to arbitration under the arbitration agreement. In the latter case, the statute is clear that
the court, instead of trying the case, may, on request of either or both parties, refer the parties to
arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of
being performed. Arbitration may even be ordered in the same suit brought upon a matter covered
by an arbitration agreement even without waiting for the outcome of the issue of the validity of the
arbitration agreement. Art. 8 of the UNCITRAL Model Law24 states that where a court before which
an action is brought in a matter which is subject of an arbitration agreement refers the parties to
arbitration, the arbitral proceedings may proceed even while the action is pending.
Thus, the main issue raised in the Petition for Certiorari is whether it was proper for the RTC, in the
proceeding to compel arbitration under R.A. No. 876, to order the parties to arbitrate even though
the defendant therein has raised the twin issues of validity and nullity of the Addendum Contract
and, consequently, of the arbitration clause therein as well. The resolution of both Climax-Arimco’s
Motion for Partial Reconsideration and/or Clarification in G.R. No. 161957 and Gonzales’s Petition
for Certiorari in G.R. No. 167994 essentially turns on whether the question of validity of the
Addendum Contract bears upon the applicability or enforceability of the arbitration clause contained
therein. The two pending matters shall thus be jointly resolved.

We address the Rule 65 petition in G.R. No. 167994 first from the remedial law perspective. It
deserves to be dismissed on procedural grounds, as it was filed in lieu of appeal which is the
prescribed remedy and at that far beyond the reglementary period. It is elementary in remedial law
that the use of an erroneous mode of appeal is cause for dismissal of the petition for certiorari and it
has been repeatedly stressed that a petition for certiorari is not a substitute for a lost appeal. As its
nature, a petition for certiorari lies only where there is "no appeal," and "no plain, speedy and
adequate remedy in the ordinary course of law."25 The Arbitration Law specifically provides for an
appeal by certiorari, i.e., a petition for review under certiorari under Rule 45 of the Rules of Court
that raises pure questions of law.26 There is no merit to Gonzales’s argument that the use of the
permissive term "may" in Sec. 29, R.A. No. 876 in the filing of appeals does not prohibit nor discount
the filing of a petition for certiorari under Rule 65.27 Proper interpretation of the aforesaid provision of
law shows that the term "may" refers only to the filing of an appeal, not to the mode of review to be
employed. Indeed, the use of "may" merely reiterates the principle that the right to appeal is not part
of due process of law but is a mere statutory privilege to be exercised only in the manner and in
accordance with law.

Neither can BF Corporation v. Court of Appeals28 cited by Gonzales support his theory. Gonzales
argues that said case recognized and allowed a petition for certiorari under Rule 65 "appealing the
order of the Regional Trial Court disregarding the arbitration agreement as an acceptable
remedy."29 The BF Corporation case had its origins in a complaint for collection of sum of money
filed by therein petitioner BF Corporation against Shangri-la Properties, Inc. (SPI). SPI moved to
suspend the proceedings alleging that the construction agreement or the Articles of Agreement
between the parties contained a clause requiring prior resort to arbitration before judicial
intervention. The trial court found that an arbitration clause was incorporated in the Conditions of
Contract appended to and deemed an integral part of the Articles of Agreement. Still, the trial court
denied the motion to suspend proceedings upon a finding that the Conditions of Contract were not
duly executed and signed by the parties. The trial court also found that SPI had failed to file any
written notice of demand for arbitration within the period specified in the arbitration clause. The trial
court denied SPI's motion for reconsideration and ordered it to file its responsive pleading. Instead of
filing an answer, SPI filed a petition for certiorari under Rule 65, which the Court of Appeals,
favorably acted upon. In a petition for review before this Court, BF Corporation alleged, among
others, that the Court of Appeals should have dismissed the petition for certiorari since the order of
the trial court denying the motion to suspend proceedings "is a resolution of an incident on the
merits" and upon the continuation of the proceedings, the trial court would eventually render a
decision on the merits, which decision could then be elevated to a higher court "in an ordinary
appeal."30

The Court did not uphold BF Corporation’s argument. The issue raised before the Court was
whether SPI had taken the proper mode of appeal before the Court of Appeals. The question before
the Court of Appeals was whether the trial court had prematurely assumed jurisdiction over the
controversy. The question of jurisdiction in turn depended on the question of existence of the
arbitration clause which is one of fact. While on its face the question of existence of the arbitration
clause is a question of fact that is not proper in a petition for certiorari, yet since the determination of
the question obliged the Court of Appeals as it did to interpret the contract documents in accordance
with R.A. No. 876 and existing jurisprudence, the question is likewise a question of law which may
be properly taken cognizance of in a petition for certiorari under Rule 65, so the Court held.31

The situation in B.F. Corporation is not availing in the present petition. The disquisition in B.F.
Corporation led to the conclusion that in order that the question of jurisdiction may be resolved, the
appellate court had to deal first with a question of law which could be addressed in a certiorari
proceeding. In the present case, Gonzales’s petition raises a question of law, but not a question of
jurisdiction. Judge Pimentel acted in accordance with the procedure prescribed in R.A. No. 876
when he ordered Gonzales to proceed with arbitration and appointed a sole arbitrator after making
the determination that there was indeed an arbitration agreement. It has been held that as long as a
court acts within its jurisdiction and does not gravely abuse its discretion in the exercise thereof, any
supposed error committed by it will amount to nothing more than an error of judgment reviewable by
a timely appeal and not assailable by a special civil action of certiorari.32 Even if we overlook the
employment of the wrong remedy in the broader interests of justice, the petition would nevertheless
be dismissed for failure of Gonzalez to show grave abuse of discretion.

Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. The Civil Code is explicit on the matter.33 R.A. No. 876 also expressly authorizes
arbitration of domestic disputes. Foreign arbitration, as 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 10 May 1965 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.34 The enactment of R.A. No. 9285 on 2 April 2004 further institutionalized
the use of alternative dispute resolution systems, including arbitration, in the settlement of disputes.

Disputes do not go to arbitration unless and until the parties have agreed to abide by the arbitrator’s
decision. Necessarily, a contract is required for arbitration to take place and to be binding. R.A. No.
876 recognizes the contractual nature of the arbitration agreement, thus:

Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may submit to
the arbitration of one or more arbitrators any controversy existing, between them at the time of the
submission and which may be the subject of an action, or the parties to any contract may in such
contract agree to settle by arbitration a controversy thereafter arising between them. Such
submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist
at law for the revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or other
controversies which may be collateral, incidental, precedent or subsequent to any issue between the
parties.

A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a
person judicially declared to be incompetent, unless the appropriate court having jurisdiction approve
a petition for permission to submit such controversy to arbitration made by the general guardian or
guardian ad litem of the infant or of the incompetent. [Emphasis added.]

Thus, we held in Manila Electric Co. v. Pasay Transportation Co.35 that a submission to arbitration is
a contract. A clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract,36 and in Del Monte Corporation-USA v. Court of Appeals37 that
"[t]he provision to submit to arbitration any dispute arising therefrom and the relationship of the
parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between them, their assigns and heirs."38

The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration
clauses or agreements. It provides:

Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another to perform
under an agreement in writing providing for arbitration may petition the court for an order directing
that such arbitration proceed in the manner provided for in such agreement. Five days notice in
writing of the hearing of such application shall be served either personally or by registered mail upon
the party in default. The court shall hear the parties, and upon being satisfied that the making of the
agreement or such failure to comply therewith is not in issue, shall make an order directing the
parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the
agreement or default be in issue the court shall proceed to summarily hear such issue. If the finding
be that no agreement in writing providing for arbitration was made, or that there is no default in the
proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision
for arbitration was made and there is a default in proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under the provisions of this Act,
within ten days after such motions, petitions, or applications have been heard by it. [Emphasis
added.]

This special proceeding is the procedural mechanism for the enforcement of the contract to arbitrate.
The jurisdiction of the courts in relation to Sec. 6 of R.A. No. 876 as well as the nature of the
proceedings therein was expounded upon in La Naval Drug Corporation v. Court of Appeals.39 There
it was 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."40 The cited case also stressed that the
proceedings are summary in nature.41 The same thrust was made in the earlier case of Mindanao
Portland Cement Corp. v. McDonough Construction Co. of Florida42 which held, thus:

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 (Sec. 6, Republic Act 876). Respondent's arguments touching
upon the merits of the dispute are improperly raised herein. They should be addressed to the
arbitrators. This proceeding is merely a summary remedy to enforce the agreement to arbitrate. The
duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if
they should proceed to arbitration or not. x x x x43

Implicit in the summary nature of the judicial proceedings is the separable or independent character
of the arbitration clause or agreement. This was highlighted in the cases of Manila Electric Co. v.
Pasay Trans. Co.44 and Del Monte Corporation-USA v. Court of Appeals.45

The doctrine of separability, or severability as other writers call it, 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.46

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.47

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model Law and
Art. 21(2) of the UNCITRAL Arbitration Rules.48

The separability doctrine was dwelt upon at length in the U.S. case of Prima Paint Corp. v. Flood &
Conklin Manufacturing Co.49 In that case, Prima Paint and Flood and Conklin (F & C) entered into a
consulting agreement whereby F & C undertook to act as consultant to Prima Paint for six years,
sold to Prima Paint a list of its customers and promised not to sell paint to these customers during
the same period. The consulting agreement contained an arbitration clause. Prima Paint did not
make payments as provided in the consulting agreement, contending that F & C had fraudulently
misrepresented that it was solvent and able for perform its contract when in fact it was not and had
even intended to file for bankruptcy after executing the consultancy agreement. Thus, F & C served
Prima Paint with a notice of intention to arbitrate. Prima Paint sued in court for rescission of the
consulting agreement on the ground of fraudulent misrepresentation and asked for the issuance of
an order enjoining F & C from proceeding with arbitration. F & C moved to stay the suit pending
arbitration. The trial court granted F & C’s motion, and the U.S. Supreme Court affirmed.

The U.S. Supreme Court did not address Prima Paint’s argument that it had been fraudulently
induced by F & C to sign the consulting agreement and held that no court should address this
argument. Relying on Sec. 4 of the Federal Arbitration Act—which provides that "if a party [claims to
be] aggrieved by the alleged failure x x x of another to arbitrate x x x, [t]he court shall hear the
parties, and upon being satisfied that the making of the agreement for arbitration or the failure to
comply therewith is not in issue, the court shall make an order directing the parties to proceed to
arbitration x x x. If the making of the arbitration agreement or the failure, neglect, or refusal to
perform the same be in issue, the court shall proceed summarily to the trial thereof"—the U.S. High
Court held that the court should not order the parties to arbitrate if the making of the arbitration
agreement is in issue. The parties should be ordered to arbitration if, and only if, they have
contracted to submit to arbitration. Prima Paint was not entitled to trial on the question of whether an
arbitration agreement was made because its allegations of fraudulent inducement were not directed
to the arbitration clause itself, but only to the consulting agreement which contained the arbitration
agreement.50 Prima Paint held that "arbitration clauses are ‘separable’ from the contracts in which
they are embedded, and that where no claim is made that fraud was directed to the arbitration
clause itself, a broad arbitration clause will be held to encompass arbitration of the claim that the
contract itself was induced by fraud."51

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. Gonzales’s 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,
Gonzales’s petition for certiorari should be dismissed.

This brings us back to G.R. No. 161957. The adjudication of the petition in G.R. No. 167994
effectively modifies part of the Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now
hold that the validity of the contract containing the agreement to submit to arbitration does not affect
the applicability of the arbitration clause itself. A contrary ruling would suggest that a party’s mere
repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that the
separability doctrine, as well as jurisprudence applying it, seeks to avoid. We add that when it was
declared in G.R. No. 161957 that the case should not be brought for arbitration, it should be clarified
that the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators,
which was for the nullification of the main contract on the ground of fraud, as it had already been
determined that the case should have been brought before the regular courts involving as it did
judicial issues.

The Motion for Reconsideration of Gonzales in G.R. No. 161957 should also be denied. In the
motion, Gonzales raises the same question of jurisdiction, more particularly that the complaint for
nullification of the Addendum Contract pertained to the DENR Panel of Arbitrators, not the regular
courts. He insists that the subject of his complaint is a mining dispute since it involves a dispute
concerning rights to mining areas, the Financial and Technical Assistance Agreement (FTAA)
between the parties, and it also involves claimowners. He adds that the Court failed to rule on other
issues he raised, such as whether he had ceded his claims over the mineral deposits located within
the Addendum Area of Influence; whether the complaint filed before the DENR Panel of Arbitrators
alleged ultimate facts of fraud; and whether the action to declare the nullity of the Addendum
Contract on the ground of fraud has prescribed. 1avvphi1.net

These are the same issues that Gonzales raised in his Rule 45 petition in G.R. No. 161957 which
were resolved against him in the Decision of 28 February 2005. Gonzales does not raise any new
argument that would sway the Court even a bit to alter its holding that the complaint filed before the
DENR Panel of Arbitrators involves judicial issues which should properly be resolved by the regular
courts. He alleged fraud or misrepresentation in the execution of the Addendum Contract which is a
ground for the annulment of a voidable contract. Clearly, such allegations entail legal questions
which are within the jurisdiction of the courts.

The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum
Area of Influence is a factual question which is not proper for determination before this Court. At all
events, moreover, the question is irrelevant to the issue of jurisdiction of the DENR Panel of
Arbitrators. It should be pointed out that the DENR Panel of Arbitrators made a factual finding in its
Order dated 18 October 2001, which it reiterated in its Order dated 25 June 2002, that Gonzales
had, "through the various agreements, assigned his interest over the mineral claims all in favor of
[Climax-Arimco]" as well as that without the complainant [Gonzales] assigning his interest over the
mineral claims in favor of [Climax-Arimco], there would be no FTAA to speak of."52 This finding was
affirmed by the Court of Appeals in its Decision dated 30 July 2003 resolving the petition for
certiorari filed by Climax-Arimco in regard to the 18 October 2001 Order of the DENR Panel.53

The Court of Appeals likewise found that Gonzales’s complaint alleged fraud but did not provide any
particulars to substantiate it. The complaint repeatedly mentioned fraud, oppression, violation of the
Constitution and similar conclusions but nowhere did it give any ultimate facts or particulars relative
to the allegations.54

Sec. 5, Rule 8 of the Rules of Court specifically provides that in all averments of fraud, the
circumstances constituting fraud must be stated with particularity. This is to enable the opposing
party to controvert the particular facts allegedly constituting the same. Perusal of the complaint
indeed shows that it failed to state with particularity the ultimate facts and circumstances constituting
the alleged fraud. It does not state what particulars about Climax-Arimco’s financial or technical
capability were misrepresented, or how the misrepresentation was done. Incorporated in the body of
the complaint are verbatim reproductions of the contracts, correspondence and government
issuances that reportedly explain the allegations of fraud and misrepresentation, but these are, at
best, evidentiary matters that should not be included in the pleading.

As to the issue of prescription, Gonzales’s claims of fraud and misrepresentation attending the
execution of the Addendum Contract are grounds for the annulment of a voidable contract under the
Civil Code.55 Under Art. 1391 of the Code, an action for annulment shall be brought within four years,
in the case of fraud, beginning from the time of the discovery of the same. However, the time of the
discovery of the alleged fraud is not clear from the allegations of Gonzales’s complaint. That being
the situation coupled with the fact that this Court is not a trier of facts, any ruling on the issue of
prescription would be uncalled for or even unnecessary.

WHEREFORE, the Petition for Certiorari in G.R. No. 167994 is DISMISSED. Such dismissal
effectively renders superfluous formal action on the Motion for Partial Reconsideration and/or
Clarification filed by Climax Mining Ltd., et al. in G.R. No. 161957.

The Motion for Reconsideration filed by Jorge Gonzales in G.R. No. 161957 is DENIED WITH
FINALITY.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.

Associate Justice Asscociate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in
the above Resolution were reached in consultation before the case was assigned to the writer of the
opinion of the Court.

REYNATO S. PUNO
Chief Justice

Footnotes

1 Gonzales v. Climax Mining Ltd., G.R. No. 161957, 28 February 2005.

2 Rollo (G.R. No. 161957), pp. 715-741.

3 Id. at 700-706.

4 The pertinent portion of the assailed decision reads:

Petitioner also disagrees with the Court of Appeals’ ruling that the case should be
brought for arbitration under Rep. Act [No.] 876, pursuant to the arbitration clause in
the Addendum Contract which states that "[a]ll disputes arising out of or in
connection with the Contract, which cannot be settled amicably among the Parties,
shall finally be settled under R.A. No. 876." He points out that respondents Climax
and APMI are not parties to the Addendum Contract and are thus not bound by the
arbitration clause in said contract.

We agree that the case should not be brought under the ambit of the Arbitration Law,
but for a different reason. The question of validity of the contract containing the
agreement to submit to arbitration will affect the applicability of the arbitration clause
itself. A party cannot rely on the contract and claim rights or obligations under it and
at the same time impugn its existence or validity. Indeed, litigants are enjoined from
taking inconsistent positions. As previously discussed, the complaint should have
been filed before the regular courts as it involved issues which are judicial in
nature. Rollo [G.R. No. 161957], p. 695
5 4 Am Jur 2d, at 136, and American Law Reports, Annotated, 3 ALR2d 425 to 426.

6Art. 16(1) thereof states: "The arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. For that
purpose, an arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract. A decision by the arbitral tribunal
that the contract is null and void shall not entail ipso jure the invalidity of the arbitration
clause." The Model Law was adopted in Republic Act No. 9285 or the "Alternative Dispute
Resolution Act of 2004" (in Sec. 19 thereof).

7 Resolution of 15 June 2005, rollo (G.R. No. 161957), p. 767.

8 Id. at 780-790.

9 Id. at 832-838.

10 Rollo (G.R. No. 167994), pp. 3-24.

11Clause 19.1 of the Addendum Contract, rollo (G.R. No. 167994), p. 87. It reads: "All
disputes arising out of or in connection with the Contract, which cannot be settled amicable
among the Parties, shall be finally settled under Republic Act No. 876, otherwise known as
‘The Arbitration Law," as may be amended from time to time. It is agreed, however, that at all
events and notwithstanding any provision of Republic Act No. 876, only one arbitrator shall
be appointed by all the Parties. For purposes of such appointment and at all proceedings
hereunder, each of the CLAIMOWNER and ARIMCO shall have one vote. AUMEX,
GEOPHILIPPINES and INMEX shall jointly have only one vote and, for purposes hereof,
GEOPHILIPPINES and INMEX hereby irrevocably constitute AUMEX as their attorney-in-
fact, in their place, name and stead, to exercise the voting right granted hereunder. If the
CLAIMOWNER, ARIMCO and AUMEX fail to agree on an arbitrator within 30 days from the
date they first begin considering persons to act as arbitrator, such arbitrator shall be
appointed by the appropriate court in accordance with Republic Act No. 876. The Parties
agree that the venue of the arbitration and all actions under the Contract shall be Metro
Manila, Philippines. The Parties further agree that the decision of the arbitrator shall be
binding and enforceable upon the Parties and that no judicial action may be instituted by any
Party against any other Party under the Contract except as provided in this Clause 19.1."

12
Rollo (G.R. No. 167994), pp. 250-322.

13 Id. at 517.

14 Id. at 518-520.

15 Id. at 525.

16 Id. at 526.

17 Id. at 381.

18 Id.

19 Id. at 527-530.

20 Id. at 30-35.

21 Id. at 39.

22 G.R. No. 103200, 31 August 1994, 236 SCRA 78.

23 Id. at 91.

24Sec. 19 of R.A. No. 9258 adopts the UNCITRAL Model Law for international commercial
arbitration, while Sec. 33 of R.A. No. 9258 makes certain portions of the UNCITRAL Model
Law, including Art. 8, applicable to domestic arbitration.
25Nippon Paint Employees Union-Olalia v. Court of Appeals, G.R. No. 159010, 19 November
2004, 443 SCRA 286, 291.

26Justice Romero, in his dissenting opinion in Asset Privatizatoin Trust v. Court of Appeals,
360 Phil. 768, 824-825 (1998), had occasion to discuss the mode of review under Sec. 29 of
R.A. No. 876:

The term "certiorari" in [Sec. 29 of R.A. No. 876] refers to an ordinary appeal under
Rule 45, not the special action of certiorari under Rule 65. It is an "appeal," as
Section 29 proclaims. The proper forum for this action is, under the old and the new
rules of procedure, the Supreme Court. Thus, Section 2(c) of Rule 41 of the 1997
Rules of Civil Procedure states that, "In all cases where only questions of law are
raised or involved, the appeal shall be to the Supreme Court by petition for review on
certiorari in accordance with Rule 45." Moreover, Section 29 limits the appeal to
"questions of law," another indication that it is referring to an appeal by certiorari
under Rule 45 which, indeed, is the customary manner of reviewing such issues. On
the other hand, the extraordinary remedy of certiorari under Rule 65 may be availed
of by a party where there is "no appeal, nor any plain, speedy, and adequate remedy
in the course of law," and under circumstances where "a tribunal, board or officer
exercising judicial functions, has acted without or in excess of its or his jurisdiction, or
with grave abuse of discretion."

27 Rollo (G.R. No. 167994), pp. 364-365.

28 351 Phil. 508 (1998).

29 Rollo (G.R. No. 167994), p. 365.

30 Supra note 28, at 518-519.

31 Supra note 28 at 520-521.

32 Estate of Salud Jimenez v. Philippine Export Processing Zone, 402 Phil. 271, 284 (2001).

33 Civil Code, Book IV, Title XIV, Chapter 2.

National Union Fire Insurance Company of Pittsburgh v. Stolt-Nielsen Philippines, Inc.,

34

G.R. No. 87958, 26 April 1990, 184 SCRA 682.

35 57 Phil. 600 (1932).

36 Id. at 603.

37 404 Phil. 192 (2001).

38 Id. at 201.

39 Supra note 22.

40 Supra note 22 at 91.

41 Id.

42 126 Phil. 78 (1967).

43 Id. at 84-85.

44 Supra note 35.

45 Supra note 37.

46 P. Capper, International arbitration: A Handbook (3rd ed., 2004), p. 12.

 47Id. Accordingly, the termination or avoidance (for example, following a fraudulent
misrepresentation) of a contract which was initially valid will not affect the validity of the
arbitration agreement. The doctrine also recognizes in this way the wish of the parties to
have disputes arising out of their contract settled by arbitration, even if that contract is no
longer in existence. Id. at 81.

In the U.S., a distinction has been drawn between legal doctrines relating to
enforceability of contracts and legal doctrines relating to whether a contract is
formed. Making this distinction, some courts have applied Prima Paint Corp. v. Flood
and ConKlin, infra note 49, to voidable-contract arguments, but not to no-contract
agreements involving for example forgery. S.J. Ware, infra note 50 at 49.

48 Supra note 46, at 81.

49 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).

50 S.J. Ware, Alternative Dispute Resolution (2001 ed.), pp. 45-46, citing Prima Paint,supra.

51 Supra note 49, 380 U.S., at 404.

52 Order of 25 June 2002, rollo (G.R. No. 161957), p. 612.

53 Rollo (G.R. No. 161957), pp. 194-201.

54 Id. at 199.

55 See Civil Code, Art. 1390.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-13005 October 10, 1917

THE UNITED STATES, plaintiff-appellee,

vs.
AH SING, defendant-appellant.

Antonio Sanz for appellant.

Acting Attorney-General Paredes for appellee.

MALCOLM, J.:

This is an appeal from a judgment of the Court of First Instance of Cebu finding the defendant guilty
of a violation of section 4 of Act No. 2381 (the Opium Law), and sentencing him to two years
imprisonment, to pay a fine of P300 or to suffer subsidiary imprisonment in case of insolvency, and
to pay the costs.

The following facts are fully proven: The defendant is a subject of China employed as a fireman on
the steamship Shun Chang. The Shun Chang is a foreign steamer which arrived at the port of Cebu
on April 25, 1917, after a voyage direct from the port of Saigon. The defendant bought eight cans of
opium in Saigon, brought them on board the steamship Shun Chang, and had them in his
possession during the trip from Saigon to Cebu. When the steamer anchored in the port of Cebu on
April 25, 1917, the authorities on making a search found the eight cans of opium above mentioned
hidden in the ashes below the boiler of the steamer's engine. The defendant confessed that he was
the owner of this opium, and that he had purchased it in Saigon. He did not confess, however, as to
his purpose in buying the opium. He did not say that it was his intention to import the prohibited drug
into the Philippine Islands. No other evidence direct or indirect, to show that the intention of the
accused was to import illegally this opium into the Philippine Islands, was introduced.

Has the crime of illegal importation of opium into the Philippine Islands been proven?

Two decisions of this Court are cited in the judgment of the trial court, but with the intimation that
there exists inconsistently between the doctrines laid down in the two cases. However, neither
decision is directly a precedent on the facts before us.

In the case of United States vs. Look Chaw ([1910], 18 Phil., 573), in the opinion handed down by
the Chief Justice, it is found —

That, although the mere possession of a thing of prohibited use in these Islands, aboard a
foreign vessel in transit, in any of their ports, does not, as a general rule, constitute a crime
triable by the courts of this country, on account of such vessel being considered as an
extension of its own nationality, the same rule does no apply when the article, whose use is
prohibited within the Philippine Islands, in the present case a can of opium, is landed from
the vessel upon Philippine soil, thus committing an open violation of the laws of the land, with
respect to which, as it is a violation of the penal law in force at the place of the commission of
the crime, only the court established in the said place itself has competent jurisdiction, in the
absence of an agreement under an international treaty. 1awphil.net

A marked difference between the facts in the Look Chaw case and the facts in the present instance
is readily observable. In the Look Chaw case, the charge case the illegal possession and sale of
opium — in the present case the charge as illegal importation of opium; in the Look Chaw case the
foreign vessel was in transit — in the present case the foreign vessel was not in transit; in the Look
Chaw case the opium was landed from the vessel upon Philippine soil — in the present case of
United States vs. Jose ([1916], 34 Phil., 840), the main point, and the one on which resolution
turned, was that in a prosecution based on the illegal importation of opium or other prohibited drug,
the Government must prove, or offer evidence sufficient to raise a presumption, that the vessel from
which the drug is discharged came into Philippine waters from a foreign country with the drug on
board. In the Jose case, the defendants were acquitted because it was not proved that the opium
was imported from a foreign country; in the present case there is no question but what the opium
came from Saigon to Cebu. However, in the opinion in the Jose case, we find the following which
may be obiter dicta, but which at least is interesting as showing the view of the writer of the opinion:

The importation was complete, to say the least, when the ship carrying it anchored in Subic
Bay. It was not necessary that the opium discharged or that it be taken from the ship. It was
sufficient that the opium was brought into the waters of the Philippine Islands on a boat
destined for a Philippine port and which subsequently anchored in a port of the Philippine
Islands with intent to discharge its cargo.

Resolving whatever doubt was exist as to the authority of the views just quoted, we return to an
examination of the applicable provisions of the law. It is to be noted that section 4 of Act No. 2381
begins, "Any person who shall unlawfully import or bring any prohibited drug into the Philippine
Islands." "Import" and "bring" are synonymous terms. The Federal Courts of the United States have
held that the mere act of going into a port, without breaking bulk, is prima facie evidence of
importation. (The Mary [U. S.], 16 Fed. Cas., 932, 933.) And again, the importation is not the making
entry of goods at the custom house, but merely the bringing them into port; and the importation is
complete before entry of the Custom House. (U. S. vs. Lyman [U. S.], 26, Fed. Cas., 1024, 1028;
Perots vs. U. S., 19 Fed. Cas., 258.) As applied to the Opium Law, we expressly hold that any
person unlawfully imports or brings any prohibited drug into the Philippine Islands, when the
prohibited drug is found under this person's control on a vessel which has come direct from a foreign
country and is within the jurisdictional limits of the Philippine Islands. In such case, a person is guilty
of illegal importation of the drug unless contrary circumstances exist or the defense proves
otherwise. Applied to the facts herein, it would be absurb to think that the accused was merely
carrying opium back and forth between Saigon and Cebu for the mere pleasure of so doing. It would
likewise be impossible to conceive that the accused needed so large an amount of opium for his
personal use. No better explanation being possible, the logical deduction is that the defendant
intended this opium to be brought into the Philippine Islands. We accordingly find that there was
illegal importation of opium from a foreign country into the Philippine Islands. To anticipate any
possible misunderstanding, let it be said that these statements do not relate to foreign vessels in
transit, a situation not present.

The defendant and appellant, having been proved guilty beyond a reasonable doubt as charged and
the sentence of the trial court being within the limits provided by law, it results that the judgment
must be affirmed with the costs of this instance against the appellant. So ordered.
Arellano, C.J., Johnson, Carson, Araullo and Street, JJ., concur.