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Be that as it may, this Court is not inclined to deny this The Court finds the invocation of these grounds
petition merely on the basis of the change in theory, as unsound.
explained in Philippine Ports Authority v. City of Lex loci celebrationis relates to the law of the place of
Iloilo.[52] We only pointed out petitioners' inconstancy in the ceremony[63] or the law of the place where a contract
their arguments to emphasize their incorrect assertion of is made.[64] The doctrine of lex contractus or lex loci
conflict of laws principles. contractus means the law of the place where a contract
is executed or to be performed.[65] It controls the nature,
To elucidate, in the judicial resolution of conflicts construction, and validity of the contract[66] and it may
problems, three consecutive phases are involved: pertain to the law voluntarily agreed upon by the parties
jurisdiction, choice of law, and recognition and or the law intended by them either expressly or
enforcement of judgments. Corresponding to these implicitly.[67] Under the state of the most significant
phases are the following questions: (1) Where can or relationship rule, to ascertain what state law to apply to
should litigation be initiated? (2) Which law will the court a dispute, the court should determine which state has
apply? and (3) Where can the resulting judgment be the most substantial connection to the occurrence and
enforced?[53] the parties. In a case involving a contract, the court
should consider where the contract was made, was
Analytically, jurisdiction and choice of law are two negotiated, was to be performed, and the domicile,
distinct concepts.[54] Jurisdiction considers whether it is place of business, or place of incorporation of the
fair to cause a defendant to travel to this state; choice of parties.[68] This rule takes into account several contacts
law asks the further question whether the application of and evaluates them according to their relative
a substantive law which will determine the merits of the importance with respect to the particular issue to be
case is fair to both parties. The power to exercise resolved.[69]
jurisdiction does not automatically give a state
constitutional authority to apply forum law. While Since these three principles in conflict of laws make
jurisdiction and the choice of the lex fori will often reference to the law applicable to a dispute, they are
coincide, the minimum contacts for one do not always rules proper for the second phase, the choice of
provide the necessary significant contacts for the law.[70] They determine which state's law is to be applied
other.[55] The question of whether the law of a state can in resolving the substantive issues of a conflicts
be applied to a transaction is different from the question problem.[71] Necessarily, as the only issue in this case is
of whether the courts of that state have jurisdiction to that of jurisdiction, choice-of-law rules are not only
enter a judgment.[56] inapplicable but also not yet called for.
In this case, only the first phase is at issuejurisdiction. Further, petitioners' premature invocation of choice-of-
Jurisdiction, however, has various aspects. For a court law rules is exposed by the fact that they have not yet
to validly exercise its power to adjudicate a controversy, pointed out any conflict between the laws of Japan and
it must have jurisdiction over the plaintiff or the ours. Before determining which law should apply, first
petitioner, over the defendant or the respondent, over there should exist a conflict of laws situation requiring
the subject matter, over the issues of the case and, in the application of the conflict of laws rules.[72] Also, when
cases involving property, over the res or the thing which the law of a foreign country is invoked to provide the
is the subject of the litigation.[57] In assailing the trial proper rules for the solution of a case, the existence of
court's jurisdiction herein, petitioners are actually such law must be pleaded and proved.[73]
referring to subject matter jurisdiction.
It should be noted that when a conflicts case, one
Jurisdiction over the subject matter in a judicial involving a foreign element, is brought before a court or
proceeding is conferred by the sovereign authority which administrative agency, there are three alternatives open
establishes and organizes the court. It is given only by to the latter in disposing of it: (1) dismiss the case, either
law and in the manner prescribed by law.[58] It is further because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over illegal termination and breach of employment
the case and apply the internal law of the forum; or (3) contract.[4] On 28 September 1995, Labor Arbiter Pablo
assume jurisdiction over the case and take into account C. Espiritu, Jr. rendered judgment ordering BMSI and
or apply the law of some other State or States.[74] The RUST to pay respondents money claims.[5] Upon appeal
courts power to hear cases and controversies is derived by BMSI, the NLRC reversed the decision of the Labor
from the Constitution and the laws. While it may choose Arbiter and dismissed respondents complaint on the
to recognize laws of foreign nations, the court is not ground of lack of jurisdiction.[6] Respondent elevated the
limited by foreign sovereign law short of treaties or other case to this Court but was dismissed in a Resolution
formal agreements, even in matters regarding rights dated 26 November 1997. The Resolution became final
provided by foreign sovereigns.[75] and executory on 09 November 1998.
In a Motion to Dismiss filed on A motion for reconsideration of the said order was filed
December 14, 1984, the defendants by private respondents which was, however, denied (p.
seek the dismissal of the complaint on 66, Rollo).
two grounds, namely:
Private respondents then filed before the respondent
1. That the court has no jurisdiction over Intermediate Appellate Court (now Court of Appeals) a
the subject matter of the complaint; and petition for prohibition with preliminary injunction and/or
prayer for a restraining order (pp. 39-48, Rollo). On
2. That the court has no jurisdiction over August 2, 1985, the respondent Court rendered a
the persons of the defendants. decision (p. 37, Rollo), the dispositive portion of which
reads:
In the light of the Opposition thereto
filed by plaintiff, the Court finds no merit WHEREFORE, the petition for
in the motion. "On the first ground, prohibition with preliminary injuction is
defendants claim that by virtue of the hereby GRANTED. The respondent
provision in the Guarantee (the Court is enjoined from taking further
actionable document) which reads — cognizance of the case and to dismiss
the same for filing with the proper court
This guarantee and all of Singapore which is the proper forum.
No costs.
rights, obligations and
liabilities arising
hereunder shall be SO ORDERED.
construed and
determined under and The motion for reconsideration was denied (p.
may be enforced in 38, Rollo), hence, the present petition.
accordance with the
laws of the Republic of The main issue is whether or not Philippine courts have
Singapore. We hereby jurisdiction over the suit.
agree that the courts in
Singapore shall have
The controversy stems from the interpretation of a
jurisdiction over all
provision in the Joint and Several Guarantee, to wit:
disputes arising under
this guarantee,
(14) This guarantee and all rights,
obligations and liabilites arising
the Court has no jurisdiction over the
hereunder shall be construed and
subject matter of the case. The Court
determined under and may be enforced
finds and concludes otherwise. There is
in accordance with the laws of the
nothing in the Guarantee which says Republic of Singapore. We hereby
that the courts of Singapore shall have agree that the Courts in Singapore shall
jurisdiction to the exclusion of the courts
have jurisdiction over all disputes
of other countries or nations. Also, it
arising under this guarantee. ... (p. 53-
has long been established in law and A, Rollo)
jurisprudence that jurisdiction of courts
is fixed by law; it cannot be conferred by
the will, submission or consent of the In rendering the decision in favor of private respondents,
parties. the Court of Appeals made, the following observations
(pp. 35-36, Rollo):
On the second ground, it is asserted
that defendant Robert' , Sherman is not There are significant aspects of the
a citizen nor a resident of the case to which our attention is invited.
The loan was obtained by Eastern Book justice (J. Salonga, Private International Law, 1981, p.
Service PTE, Ltd., a company 46). Indeed, as pointed-out by petitioner BANK at the
incorporated in Singapore. The loan outset, the instant case presents a very odd situation. In
was granted by the Singapore Branch the ordinary habits of life, anyone would be disinclined
of Hongkong and Shanghai Banking to litigate before a foreign tribunal, with more reason as
Corporation. The Joint and Several a defendant. However, in this case, private respondents
Guarantee was also concluded are Philippine residents (a fact which was not disputed
in Singapore. The loan was in by them) who would rather face a complaint against
Singaporean dollars and the repayment them before a foreign court and in the process incur
thereof also in the same currency. The considerable expenses, not to mention inconvenience,
transaction, to say the least, took place than to have a Philippine court try and resolve the case.
in Singporean setting in which the law Private respondents' stance is hardly comprehensible,
of that country is the measure by which unless their ultimate intent is to evade, or at least delay,
that relationship of the parties will be the payment of a just obligation.
governed.
The defense of private respondents that the complaint
xxx xxx xxx should have been filed in Singapore is based merely on
technicality. They did not even claim, much less prove,
Contrary to the position taken by that the filing of the action here will cause them any
respondents, the guarantee agreement unnecessary trouble, damage, or expense. On the other
compliance that any litigation will be hand, there is no showing that petitioner BANK filed the
before the courts of Singapore and that action here just to harass private respondents.
the rights and obligations of the parties
shall be construed and determined in In the case of Polytrade Corporation vs. Blanco, G.R.
accordance with the laws of the No. L-27033, October 31, 1969, 30 SCRA 187, it was
Republic of Singapore. A closer ruled:
examination of paragraph 14 of the
Guarantee Agreement upon which the ... An accurate reading, however, of the
motion to dismiss is based, employs in stipulation, 'The parties agree to sue
clear and unmistakeable (sic) terms the and be sued in the Courts of Manila,'
word 'shall' which under statutory does not preclude the filing of suits in
construction is mandatory. the residence of plaintiff or defendant.
The plain meaning is that the parties
Thus it was ruled that: merely consented to be sued in Manila.
Qualifying or restrictive words which
... the word 'shall' is imperative, would indicate that Manila and Manila
operating to impose a duty which may alone is the venue are totally absent
be enforced (Dizon vs. Encarnacion, 9 therefrom. We cannot read into that
SCRA 714).lâwphî1.ñèt clause that plaintiff and defendant
bound themselves to file suits with
There is nothing more imperative and respect to the last two transactions in
restrictive than what the agreement question only or exclusively in Manila.
For, that agreement did not change or
categorically commands that 'all rights,
transfer venue. It simply is permissive.
obligations, and liabilities arising
hereunder shall be construed and The parties solely agreed to add the
courts of Manila as tribunals to which
determined under and may be enforced
in accordance with the laws of the they may resort. They did not waive
Republic of Singapore.' their right to pursue remedy in the
courts specifically mentioned in Section
2(b) of Rule 4. Renuntiatio non
While it is true that "the transaction took place in praesumitur.
Singaporean setting" and that the Joint and Several
Guarantee contains a choice-of-forum clause, the very
This ruling was reiterated in the case of Neville Y. Lamis
essence of due process dictates that the stipulation that
Ents., et al. v. Lagamon, etc., et al., G.R. No. 57250,
"[t]his guarantee and all rights, obligations and liabilities
October 30, 1981, 108 SCRA 740, where the stipulation
arising hereunder shall be construed and determined
was "[i]n case of litigation, jurisdiction shall be vested in
under and may be enforced in accordance with the laws
the Court of Davao City." We held:
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 Anent the claim that Davao City had
construed. One basic principle underlies all rules of been stipulated as the venue, suffice it
jurisdiction in International Law: a State does not have to say that a stipulation as to venue
jurisdiction in the absence of some reasonable basis for does not preclude the filing of suits in
exercising it, whether the proceedings are in rem quasi the residence of plaintiff or defendant
in rem or in personam. To be reasonable, the jurisdiction under Section 2 (b), Rule 4, Rules of
must be based on some minimum contacts that will not Court, in the absence of qualifying or
offend traditional notions of fair play and substantial restrictive words in the agreement
which would indicate that the place 1981, p. 49).lâwphî1.ñèt Thus, the respondent Court
named is the only venue agreed upon should not have relied on such principle.
by the parties.
Although the Joint and Several Guarantee prepared by
Applying the foregoing to the case at bar, the parties did petitioner BANK is a contract of adhesion and that
not thereby stipulate that only the courts of Singapore, consequently, it cannot be permitted to take a stand
to the exclusion of all the rest, has jurisdiction. Neither contrary to the stipulations of the contract, substantial
did the clause in question operate to divest Philippine bases exist for petitioner Bank's choice of forum, as
courts of jurisdiction. In International Law, jurisdiction is discussed earlier.
often defined as the light of a State to exercise authority
over persons and things within its boundaries subject to Lastly, private respondents allege that neither the
certain exceptions. Thus, a State does not assume petitioner based at Hongkong nor its Philippine branch is
jurisdiction over travelling sovereigns, ambassadors and involved in the transaction sued upon. This is a vain
diplomatic representatives of other States, and foreign attempt on their part to further thwart the proceedings
military units stationed in or marching through State below inasmuch as well-known is the rule that a
territory with the permission of the latter's authorities. defendant cannot plead any defense that has not been
This authority, which finds its source in the concept of interposed in the court below.
sovereignty, is exclusive within and throughout the
domain of the State. A State is competent to take hold of
ACCORDINGLY, the decision of the respondent Court is
any judicial matter it sees fit by making its courts and hereby REVERSED and the decision of the Regional
agencies assume jurisdiction over all kinds of cases Trial Court is REINSTATED, with costs against private
brought before them (J. Salonga, Private International
respondents. This decision is immediately executory.
Law, 1981, pp. 37-38).lâwphî1.ñèt
SO ORDERED.
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:
QUEZON VS. ENCARNACION 9 SCRA 794
While in the main, the motion to dismiss
fails to categorically use with exactitude
the words 'improper venue' it can be POLYTRADE VS. BLANCO G.R. NO. L-27033
perceived from the general thrust and
context of the motion that what is meant SANCHEZ, J.:
is improper venue, The use of the word
'jurisdiction' was merely an attempt to
Suit before the Court of First Instance of Bulacan on four
copy-cat the same word employed in
causes of action to recover the purchase price of
the guarantee agreement but conveys
rawhide delivered by plaintiff to defendant. 1 Plaintiff
the concept of venue. Brushing aside all
corporation has its principal office and place of business
technicalities, it would appear that
in Makati, Rizal. Defendant is a resident of Meycauayan,
jurisdiction was used loosely as to be
Bulacan. Defendant moved to dismiss upon the ground
synonymous with venue. It is in this
of improper venue. He claims that by contract suit may
spirit that this Court must view the
only be lodged in the courts of Manila. The Bulacan
motion to dismiss. ... (p. 35, Rollo).
court overruled him. He did not answer the complaint. In
consequence, a default judgment was rendered against
At any rate, this issue is now of no moment because We him on September 21, 1966, thus:
hold that venue here was properly laid for the same
reasons discussed above.
WHEREFORE, judgment is hereby rendered in
favor of plaintiff and against defendant ordering
The respondent Court likewise ruled that (pp. 36- defendant to pay plaintiff the following amounts:
37, Rollo):
... In a conflict problem, a court will First Cause of Action — P60,845.67, with interest
simply refuse to entertain the case if it is amount is paid.
not authorized by law to exercise
jurisdiction. And even if it is so Second Cause of — P51,952.55, with interest
authorized, it may still refuse to Action full amount is paid.
entertain the case by applying the
Third Cause of Action — P53,973.07, with interest
principle of forum non conveniens. ...
amount is paid.
However, whether a suit should be entertained or Fourth Cause of — P41,075.22, with interest t
dismissed on the basis of the principle of forum non Action
conveniens depends largely upon the facts of the
particular case and is addressed to the sound discretion
of the trial court (J. Salonga, Private International Law, In addition, defendant shall pay plaintiff
attorney's fees amounting to 25% of the
principal amount due in each cause of action, question the parties do not agree to submit their
and the costs of the suit. The amount of disputes to the jurisdiction of the Viennese court, and to
P400.00 shall be deducted from the total those courts only. There is nothing exclusive in the
amount due plaintiff in accordance with this language used. They do agree to submit to the
judgment. Viennese jurisdiction, but they say not a word in
restriction of the jurisdiction of courts elsewhere; and
Defendant appealed. whatever may be said on the subject of the legality of
contracts to submit controversies to courts of certain
jurisdictions exclusively, it is entirely plain that such
1. The forefront question is whether or not venue was
properly laid in the province of Bulacan where defendant agreements should be strictly construed, and should not
is a resident. be extended by implication."
FOR THE REASON GIVEN, the appealed judgment is Interest of 14% per annum will be
hereby affirmed, except that interest granted, in charged on delayed payment and
reference to the fourth cause of action, should start from twenty five (25%) of the amount due as
March 24, 1965. attorney's fees and expenses of
collection in the event of judicial
collection.
Costs against defendant-appellant. So ordered.
In case of litigation, jurisdiction shall be
vested in the Court of Davao City.
N. LAMIS VS. LAGAMON, ET.AL G.R. NO. 57250
Santiago Maningo in a complaint dated November 3, That the defendants have not paid said
198 1, sued Neville Y. Lamis Enterprises and Neville loan nor any part thereof, despite
Lamis for sums of money in the above-mentioned civil plaintiff's demand for payment;
case under the following causes of action:
IV
FIRST CAUSE OF ACTION
That for having purposely failed to pay
I the said loan, the defendants are now
liable to plaintiff for the payment of
interest and at, Attorney's fees which,
That as First Cause of Action against
as per computation, it is already P
the defendants, it is hereby averred,
ll,550.00 for and as interest and P
that sometimes on January 26, 1979,
the defendants obtained a loan from the 20,625.00 for attorney's fees;
plaintiff in the sum of FIFTY FIVE
THOUSAND (P 55,000.00) PESOS SECOND CAUSE OF ACTION
payable on or before February 28, 1979
at 14% interest per annum: I
II
That on August 16, 1979, that is several Davao City, where summons may be
months after the defendants had failed served;
to pay their obligation with the plaintiff,
to the latter's surprise, the defendants 2. That on January 27,1979 defendant
after having received several demands and plaintiff executed a memorandum
from the plaintiff, through counsel, in of agreement whereby defendant shall
clear abuse of their rights under the specifically advance unto plaintiff for the
provisions of the Article above- latter's logging operations with ETCO
mentioned and basically, for a certain TIMBER CORPORATION at General
purpose to evade the fulfillment of their Santos City which corporation, the
obligations with the plaintiff, had proprietor of plaintiff's firm, NEVILLE Y.
maliciously filed a groundless suit in the LAMIS is now President likewise
Court of First Instance of Rizal, Branch thereof, the sum of ONE HUNDRED
XXV thereof, for specific performance THOUSAND PESOS (P100,000.00)
against the plaintiff; payable as follows:
That with the filing of the defendant's /Par. A-1, (a) & (b)
most malicious complaint against the
plaintiff, the latter had suffered mental
copy of which memorandum of
anguish, fright, anxieties and certainly
agreement is herewith attached as
such wounded feeling, where the
Annex "A" hereof
amount of P200,000.00 had been asked
and prayed for to compensate the
plaintiff for his moral damages; 3. That to the aforesaid conditions
defendant only complied and released
the sum of P50,000 upon the signing of
V
the agreement and failed to release the
balance Of P50,000 unto pig within one
That with the filing of the defendant's week from date of the memorandum of
most malicious complaint against the agreement. inspite of the latter's
plaintiff there an abuse of a right had repeated calls and demands for the
been committed by the defendants, in release of the same (copy of one of
which case, as a corrective measure which demands is herein attached as.
against them, the amount of P Annex "B " hereof, and defendant
30,000.00 should be imposed by way of refused and still refuses to release the
example or correction for the public said amount up to the present to the
good; ... prejudice of the plaintiff's logging
operation and productions;
The suit mentioned in par. II of Maningo's Third Cause
of Action (supra) was filed by Neville Lamis Ents. 4. That the performance of aforesaid
against Santiago Maningo in the Court of First Instance obligation is now long overdue and
of Rizal (Civil Case No. 35199) by means of a complaint defendant just simply ignores the same;
dated November 16, 1979, alleging the following causes
of action: SECOND CAUSE OF ACTION
Respondent Judge subsequently issued another However, during the pendency of the instant Petition,
Order 24 dated February 2, 1995, denying SAUDIA's respondent Court of Appeals rendered the
Motion for Reconsideration. The pertinent portion of the Decision 30 dated April 10, 1996, now also assailed. It
assailed Order reads as follows: ruled that the Philippines is an appropriate forum
considering that the Amended Complaint's basis for
Acting on the Motion for recovery of damages is Article 21 of the Civil Code, and
Reconsideration of defendant Saudi thus, clearly within the jurisdiction of respondent Court.
Arabian Airlines filed, thru counsel, on It further held that certiorari is not the proper remedy in a
September 20, 1994, and the denial of a Motion to Dismiss, inasmuch as the petitioner
Opposition thereto of the plaintiff filed, should have proceeded to trial, and in case of an
thru counsel, on October 14, 1994, as adverse ruling, find recourse in an appeal.
well as the Reply therewith of defendant
Saudi Arabian Airlines filed, thru On May 7, 1996, SAUDIA filed its Supplemental Petition
counsel, on October 24, 1994, for Review with Prayer for Temporary Restraining
considering that a perusal of the Order 31 dated April 30, 1996, given due course by this
plaintiffs Amended Complaint, which is Court. After both parties submitted their
one for the recovery of actual, moral Memoranda, 32 the instant case is now deemed
and exemplary damages plus attorney's submitted for decision.
fees, upon the basis of the applicable
Philippine law, Article 21 of the New
Petitioner SAUDIA raised the following issues:
Civil Code of the Philippines, is, clearly,
within the jurisdiction of this Court as
regards the subject matter, and there I
being nothing new of substance which
might cause the reversal or modification The trial court has no jurisdiction to hear
of the order sought to be reconsidered, and try Civil Case No. Q-93-18394
the motion for reconsideration of the based on Article 21 of the New Civil
defendant, is DENIED. Code since the proper law applicable is
the law of the Kingdom of Saudi Arabia
SO ORDERED. 25 inasmuch as this case involves what is
known in private international law as a
"conflicts problem". Otherwise, the
Consequently, on February 20, 1995, SAUDIA filed its Republic of the Philippines will sit in
Petition for Certiorari and Prohibition with Prayer for
judgment of the acts done by another
Issuance of Writ of Preliminary Injunction and/or
sovereign state which is abhorred.
Temporary Restraining Order 26 with the Court of
Appeals.
II
Respondent Court of Appeals promulgated a Resolution
with Temporary Restraining Order 27 dated February 23, Leave of court before filing a
1995, prohibiting the respondent Judge from further supplemental pleading is not a
conducting any proceeding, unless otherwise directed, jurisdictional requirement. Besides, the
in the interim. matter as to absence of leave of court is
now moot and academic when this
Honorable Court required the
In another Resolution 28 promulgated on September 27,
respondents to comment on petitioner's
1995, now assailed, the appellate court denied
April 30, 1996 Supplemental Petition
SAUDIA's Petition for the Issuance of a Writ of
For Review With Prayer For A
Preliminary Injunction dated February 18, 1995, to wit:
Temporary Restraining Order Within
Ten (10) Days From Notice Thereof.
The Petition for the Issuance of a Writ Further, the Revised Rules of Court
of Preliminary Injunction is hereby should be construed with liberality
DENIED, after considering the Answer, pursuant to Section 2, Rule 1 thereof.
with Prayer to Deny Writ of Preliminary
Injunction (Rollo, p. 135) the Reply and
III Travel Wide Associated Sales (Phils.).
Inc., 3rd Floor, Cougar Building, 114
Petitioner received on April 22, 1996 the Valero St., Salcedo Village, Makati,
April 10, 1996 decision in CA-G.R. SP Metro Manila.
NO. 36533 entitled "Saudi Arabian
Airlines v. Hon. Rodolfo A. Ortiz, et al." xxx xxx xxx
and filed its April 30, 1996
Supplemental Petition For Review With 6. Plaintiff learned that, through the
Prayer For A Temporary Restraining intercession of the Saudi Arabian
Order on May 7, 1996 at 10:29 a.m. or government, the Indonesian authorities
within the 15-day reglementary period agreed to deport Thamer and Allah after
as provided for under Section 1, Rule two weeks of detention. Eventually, they
45 of the Revised Rules of Court. were again put in service by defendant
Therefore, the decision in CA-G.R. SP SAUDIA. In September 1990, defendant
NO. 36533 has not yet become final SAUDIA transferred plaintiff to Manila.
and executory and this Honorable Court
can take cognizance of this case. 33
7. On January 14, 1992, just when
plaintiff thought that the Jakarta incident
From the foregoing factual and procedural antecedents, was already behind her, her superiors
the following issues emerge for our resolution: reauested her to see MR. Ali Meniewy,
Chief Legal Officer of SAUDIA in
I. Jeddah, Saudi Arabia. When she saw
him, he brought her to the police station
WHETHER RESPONDENT where the police took her passport and
APPELLATE COURT ERRED IN questioned her about the Jakarta
HOLDING THAT THE REGIONAL incident. Miniewy simply stood by as the
TRIAL COURT OF QUEZON CITY HAS police put pressure on her to make a
JURISDICTION TO HEAR AND TRY statement dropping the case against
CIVIL CASE NO. Q-93-18394 Thamer and Allah. Not until she agreed
ENTITLED "MILAGROS P. MORADA to do so did the police return her
V. SAUDI ARABIAN AIRLINES". passport and allowed her to catch the
afternoon flight out of Jeddah.
II.
8. One year and a half later or on June
WHETHER RESPONDENT 16, 1993, in Riyadh, Saudi Arabia, a
few minutes before the departure of her
APPELLATE COURT ERRED IN
flight to Manila, plaintiff was not allowed
RULING THAT IN THIS CASE
to board the plane and instead ordered
PHILIPPINE LAW SHOULD GOVERN.
to take a later flight to Jeddah to see
Mr. Meniewy, the Chief Legal Officer of
Petitioner SAUDIA claims that before us is a conflict of SAUDIA. When she did, a certain
laws that must be settled at the outset. It maintains that Khalid of the SAUDIA office brought her
private respondent's claim for alleged abuse of rights to a Saudi court where she was asked
occurred in the Kingdom of Saudi Arabia. It alleges that to sigh a document written in Arabic.
the existence of a foreign element qualifies the instant They told her that this was necessary to
case for the application of the law of the Kingdom of close the case against Thamer and
Saudi Arabia, by virtue of the lex loci delicti Allah. As it turned out, plaintiff signed a
commissi rule. 34 notice to her to appear before the court
on June 27, 1993. Plaintiff then returned
On the other hand, private respondent contends that to Manila.
since her Amended Complaint is based on Articles
19 35 and 21 36 of the Civil Code, then the instant case is 9. Shortly afterwards, defendant
properly a matter of domestic law. 37 SAUDIA summoned plaintiff to report to
Jeddah once again and see Miniewy on
Under the factual antecedents obtaining in this case, June 27, 1993 for further investigation.
there is no dispute that the interplay of events occurred Plaintiff did so after receiving assurance
in two states, the Philippines and Saudi Arabia. from SAUDIA's Manila manger, Aslam
Saleemi, that the investigation was
As stated by private respondent in her Amended routinary and that it posed no danger to
Complaint 38 dated June 23, 1994: her.
Pragmatic considerations, including the convenience of Similarly, the case of De Midgely vs. Ferandos, held
the parties, also weigh heavily in favor of the RTC that;
Quezon City assuming jurisdiction. Paramount is the
private interest of the litigant. Enforceability of a
judgment if one is obtained is quite obvious. Relative When the appearance is by motion for
advantages and obstacles to a fair trial are equally the purpose of objecting to the
jurisdiction of the court over the person,
important. Plaintiff may not, by choice of an inconvenient
it must be for the sole and separate
forum, "vex", "harass", or "oppress" the
defendant, e.g. by inflicting upon him needless expense purpose of objecting to the jurisdiction
of the court. If his motion is for any
or disturbance. But unless the balance is strongly in
favor of the defendant, the plaintiffs choice of forum other purpose than to object to the
should rarely be disturbed. 49 jurisdiction of the court over his person,
he thereby submits himself to the
jurisdiction of the court. A special
Weighing the relative claims of the parties, the court a appearance by motion made for the
quo found it best to hear the case in the Philippines. purpose of objecting to the jurisdiction
Had it refused to take cognizance of the case, it would of the court over the person will be held
be forcing plaintiff (private respondent now) to seek to be a general appearance, if the party
remedial action elsewhere, i.e. in the Kingdom of Saudi in said motion should, for example, ask
Arabia where she no longer maintains substantial for a dismissal of the action upon the
connections. That would have caused a fundamental further ground that the court had no
unfairness to her. jurisdiction over the subject matter. 52
Moreover, by hearing the case in the Philippines no Clearly, petitioner had submitted to the jurisdiction of the
unnecessary difficulties and inconvenience have been Regional Trial Court of Quezon City. Thus, we find that
shown by either of the parties. The choice of forum of
the plaintiff (now private respondent) should be upheld.
the trial court has jurisdiction over the case and that its performance of contractual duties, or
exercise thereof, justified. the place where a power of attorney is
to be exercised;
As to the choice of applicable law, we note that choice-
of-law problems seek to answer two important (6) the intention of the contracting
questions: (1) What legal system should control a given parties as to the law that should govern
situation where some of the significant facts occurred in their agreement, the lex loci intentionis;
two or more states; and (2) to what extent should the
chosen legal system regulate the situation. 53 (7) the place where judicial or
administrative proceedings are
Several theories have been propounded in order to instituted or done. The lex fori — the
identify the legal system that should ultimately control. law of the forum — is particularly
Although ideally, all choice-of-law theories should important because, as we have seen
intrinsically advance both notions of justice and earlier, matters of "procedure" not going
predictability, they do not always do so. The forum is to the substance of the claim involved
then faced with the problem of deciding which of these are governed by it; and because the lex
two important values should be stressed. 54 fori applies whenever the content of the
otherwise applicable foreign law is
Before a choice can be made, it is necessary for us to excluded from application in a given
determine under what category a certain set of facts or case for the reason that it falls under
rules fall. This process is known as "characterization", or one of the exceptions to the
the "doctrine of qualification". It is the "process of applications of foreign law; and
deciding whether or not the facts relate to the kind of
question specified in a conflicts rule." 55 The purpose of (8) the flag of a ship, which in many
"characterization" is to enable the forum to select the cases is decisive of practically all legal
proper law. 56 relationships of the ship and of its
master or owner as such. It also covers
Our starting point of analysis here is not a legal relation, contractual relationships particularly
but a factual situation, event, or operative fact. 57 An contracts of affreightment. 60 (Emphasis
essential element of conflict rules is the indication of a ours.)
"test" or "connecting factor" or "point of contact".
Choice-of-law rules invariably consist of a factual After a careful study of the pleadings on record,
relationship (such as property right, contract claim) and including allegations in the Amended Complaint deemed
a connecting factor or point of contact, such as admitted for purposes of the motion to dismiss, we are
the situs of the res, the place of celebration, the place of convinced that there is reasonable basis for private
performance, or the place of wrongdoing. 58 respondent's assertion that although she was already
working in Manila, petitioner brought her to Jeddah on
Note that one or more circumstances may be present to the pretense that she would merely testify in an
serve as the possible test for the determination of the investigation of the charges she made against the two
applicable law. 59 These "test factors" or "points of SAUDIA crew members for the attack on her person
contact" or "connecting factors" could be any of the while they were in Jakarta. As it turned out, she was the
following: one made to face trial for very serious charges,
including adultery and violation of Islamic laws and
tradition.
(1) The nationality of a person, his
domicile, his residence, his place of
sojourn, or his origin; 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
(2) the seat of a legal or juridical
have acted beyond its duties as employer. Petitioner's
person, such as a corporation;
purported act contributed to and amplified or even
proximately caused additional humiliation, misery and
(3) the situs of a thing, that is, the place suffering of private respondent. Petitioner thereby
where a thing is, or is deemed to be allegedly facilitated the arrest, detention and prosecution
situated. In particular, the lex situs is of private respondent under the guise of petitioner's
decisive when real rights are involved; authority as employer, taking advantage of the trust,
confidence and faith she reposed upon it. As purportedly
(4) the place where an act has been found by the Prince of Makkah, the alleged conviction
done, the locus actus, such as the place and imprisonment of private respondent was wrongful.
where a contract has been made, a But these capped the injury or harm allegedly inflicted
marriage celebrated, a will signed or a upon her person and reputation, for which petitioner
tort committed. The lex loci actus is could be liable as claimed, to provide compensation or
particularly important in contracts and redress for the wrongs done, once duly proven.
torts;
Considering that the complaint in the court a quo is one
(5) the place where an act is intended to involving torts, the "connecting factor" or "point of
come into effect, e.g., the place of contact" could be the place or places where the tortious
conduct or lex loci actus occurred. And applying the "[s]ince private respondent instituted this suit, she has
torts principle in a conflicts case, we find that the the burden of pleading and proving the applicable Saudi
Philippines could be said as a situs of the tort (the place law on the matter." 64 As aptly said by private
where the alleged tortious conduct took place). This is respondent, she has "no obligation to plead and prove
because it is in the Philippines where petitioner allegedly the law of the Kingdom of Saudi Arabia since her cause
deceived private respondent, a Filipina residing and of action is based on Articles 19 and 21" of the Civil
working here. According to her, she had honestly Code of the Philippines. In her Amended Complaint and
believed that petitioner would, in the exercise of its subsequent pleadings, she never alleged that Saudi law
rights and in the performance of its duties, "act with should govern this case. 65 And as correctly held by the
justice, give her due and observe honesty and good respondent appellate court, "considering that it was the
faith." Instead, petitioner failed to protect her, she petitioner who was invoking the applicability of the law of
claimed. That certain acts or parts of the injury allegedly Saudi Arabia, then the burden was on it [petitioner] to
occurred in another country is of no moment. For in our plead and to establish what the law of Saudi Arabia
view what is important here is the place where the over- is". 66
all harm or the totality of the alleged injury to the person,
reputation, social standing and human rights of Lastly, no error could be imputed to the respondent
complainant, had lodged, according to the plaintiff below appellate court in upholding the trial court's denial of
(herein private respondent). All told, it is not without defendant's (herein petitioner's) motion to dismiss the
basis to identify the Philippines as the situs of the case. Not only was jurisdiction in order and venue
alleged tort. properly laid, but appeal after trial was obviously
available, and expeditious trial itself indicated by the
Moreover, with the widespread criticism of the traditional nature of the case at hand. Indubitably, the Philippines
rule of lex loci delicti commissi, modern theories and is the state intimately concerned with the ultimate
rules on tort liability 61 have been advanced to offer fresh outcome of the case below, not just for the benefit of all
judicial approaches to arrive at just results. In keeping the litigants, but also for the vindication of the country's
abreast with the modern theories on tort liability, we find system of law and justice in a transnational setting. With
here an occasion to apply the "State of the most these guidelines in mind, the trial court must proceed to
significant relationship" rule, which in our view should be try and adjudge the case in the light of relevant
appropriate to apply now, given the factual context of Philippine law, with due consideration of the foreign
this case. element or elements involved. Nothing said herein, of
course, should be construed as prejudging the results of
In applying said principle to determine the State which the case in any manner whatsoever.
has the most significant relationship, the following
contacts are to be taken into account and evaluated WHEREFORE, the instant petition for certiorari is
according to their relative importance with respect to the hereby DISMISSED. Civil Case No. Q-93-18394 entitled
particular issue: (a) the place where the injury occurred; "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby
(b) the place where the conduct causing the injury REMANDED to Regional Trial Court of Quezon City,
occurred; (c) the domicile, residence, nationality, place Branch 89 for further proceedings.
of incorporation and place of business of the parties,
and (d) the place where the relationship, if any, between SO ORDERED.
the parties is centered. 62
KOREA TECH VS. LERMA G.R. NO. 143581
As already discussed, there is basis for the claim that
over-all injury occurred and lodged in the Philippines. VELASCO, JR., J.:
There is likewise no question that private respondent is
a resident Filipina national, working with petitioner, a In our jurisdiction, the policy is to favor alternative
resident foreign corporation engaged here in the methods of resolving disputes, particularly in civil and
business of international air carriage. Thus, the commercial disputes. Arbitration along with mediation,
"relationship" between the parties was centered here, conciliation, and negotiation, being inexpensive, speedy
although it should be stressed that this suit is not based and less hostile methods have long been favored by this
on mere labor law violations. From the record, the claim Court. The petition before us puts at issue an arbitration
that the Philippines has the most significant contact with clause in a contract mutually agreed upon by the parties
the matter in this dispute, 63 raised by private stipulating that they would submit themselves to
respondent as plaintiff below against defendant (herein arbitration in a foreign country. Regrettably, instead of
petitioner), in our view, has been properly established. hastening the resolution of their dispute, the parties
wittingly or unwittingly prolonged the controversy.
Prescinding from this premise that the Philippines is the
situs of the tort complained of and the place "having the Petitioner Korea Technologies Co., Ltd.
most interest in the problem", we find, by way of (KOGIES) is a Korean corporation which is engaged in
recapitulation, that the Philippine law on tort liability the supply and installation of Liquefied Petroleum Gas
should have paramount application to and control in the (LPG) Cylinder manufacturing plants, while private
resolution of the legal issues arising out of this case. respondent Pacific General Steel Manufacturing Corp.
Further, we hold that the respondent Regional Trial (PGSMC) is a domestic corporation.
Court has jurisdiction over the parties and the subject
matter of the complaint; the appropriate venue is in On March 5, 1997, PGSMC and KOGIES
Quezon City, which could properly apply Philippine law. executed a Contract[1] whereby KOGIES would set up
Moreover, we find untenable petitioner's insistence that an LPG Cylinder Manufacturing Plant in
Carmona, Cavite. The contract was executed in the Public Prosecutor an Affidavit-Complaint
the Philippines. On April 7, 1997, the parties executed, for Estafa docketed as I.S. No. 98-03813 against Mr.
in Korea, an Amendment for Contract No. KLP-970301 Dae Hyun Kang, President of KOGIES.
dated March 5, 1997[2] amending the terms of
payment. The contract and its amendment stipulated On June 15, 1998, KOGIES wrote PGSMC
that KOGIES will ship the machinery and facilities informing the latter that PGSMC could not unilaterally
necessary for manufacturing LPG cylinders for which rescind their contract nor dismantle and transfer the
PGSMC would pay USD 1,224,000. KOGIES would machineries and equipment on mere imagined violations
install and initiate the operation of the plant for which by KOGIES. It also insisted that their disputes should be
PGSMC bound itself to pay USD 306,000 upon the settled by arbitration as agreed upon in Article 15, the
plants production of the 11-kg. LPG cylinder arbitration clause of their contract.
samples. Thus, the total contract price amounted to
USD 1,530,000. On June 23, 1998, PGSMC again wrote
KOGIES reiterating the contents of its June 1,
On October 14, 1997, PGSMC entered into a 1998 letter threatening that the machineries, equipment,
Contract of Lease[3] with Worth Properties, Inc. (Worth) and facilities installed in the plant would be dismantled
for use of Worths 5,079-square meter property with a and transferred on July 4, 1998. Thus, on July 1, 1998,
4,032-square meter warehouse building to house the KOGIES instituted an Application for Arbitration before
LPG manufacturing plant. The monthly rental was PhP the Korean Commercial Arbitration Board (KCAB)
322,560 commencing on January 1, 1998 with a 10% in Seoul, Korea pursuant to Art. 15 of the Contract as
annual increment clause.Subsequently, the amended.
machineries, equipment, and facilities for the
manufacture of LPG cylinders were shipped, delivered, On July 3, 1998, KOGIES filed a
and installed in the Carmona plant. PGSMC paid Complaint for Specific Performance, docketed as Civil
KOGIES USD 1,224,000. Case No. 98-117[8] against PGSMC before the
Muntinlupa City Regional Trial Court (RTC). The RTC
However, gleaned from the granted a temporary restraining order (TRO) on July 4,
Certificate[4] executed by the parties on January 22, 1998, which was subsequently extended until July 22,
1998, after the installation of the plant, the initial 1998. In its complaint, KOGIES alleged that PGSMC
operation could not be conducted as PGSMC had initially admitted that the checks that were stopped
encountered financial difficulties affecting the supply of were not funded but later on claimed that it stopped
materials, thus forcing the parties to agree that KOGIES payment of the checks for the reason that their value
would be deemed to have completely complied with the was not received as the former allegedly breached their
terms and conditions of the March 5, 1997 contract. contract by altering the quantity and lowering the quality
of the machinery and equipment installed in the plant
For the remaining balance of USD306,000 for and failed to make the plant operational although it
the installation and initial operation of the plant, PGSMC earlier certified to the contrary as shown in a January
issued two postdated checks: (1) BPI Check No. 22, 1998 Certificate. Likewise, KOGIES averred that
0316412 dated January 30, 1998 for PhP 4,500,000; PGSMC violated Art. 15 of their Contract, as amended,
and (2) BPI Check No. 0316413 dated March 30, 1998 by unilaterally rescinding the contract without resorting
for PhP 4,500,000.[5] to arbitration. KOGIES also asked that PGSMC be
restrained from dismantling and transferring the
When KOGIES deposited the checks, these machinery and equipment installed in the plant which
were dishonored for the reason PAYMENT the latter threatened to do on July 4, 1998.
STOPPED. Thus, on May 8, 1998, KOGIES sent a
demand letter[6] to PGSMC threatening criminal action On July 9, 1998, PGSMC filed an opposition to
for violation of Batas Pambansa Blg. 22 in case of the TRO arguing that KOGIES was not entitled to the
nonpayment. On the same date, the wife of PGSMCs TRO since Art. 15, the arbitration clause, was null and
President faxed a letter dated May 7, 1998 to KOGIES void for being against public policy as it ousts the local
President who was then staying at courts of jurisdiction over the instant controversy.
a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from On July 17, 1998, PGSMC filed its Answer with
that agreed upon but it had not delivered several Compulsory Counterclaim [9] asserting that it had the full
equipment parts already paid for. right to dismantle and transfer the machineries and
equipment because it had paid for them in full as
On May 14, 1998, PGSMC replied that the two stipulated in the contract; that KOGIES was not entitled
checks it issued KOGIES were fully funded but the to the PhP 9,000,000 covered by the checks for failing
payments were stopped for reasons previously made to completely install and make the plant operational; and
known to KOGIES.[7] that KOGIES was liable for damages amounting to PhP
4,500,000 for altering the quantity and lowering the
On June 1, 1998, PGSMC informed KOGIES quality of the machineries and equipment. Moreover,
that PGSMC was canceling their Contract dated March PGSMC averred that it has already paid PhP 2,257,920
5, 1997 on the ground that KOGIES had altered the in rent (covering January to July 1998) to Worth and it
quantity and lowered the quality of the machineries and was not willing to further shoulder the cost of renting the
equipment it delivered to PGSMC, and that PGSMC premises of the plant considering that the LPG cylinder
would dismantle and transfer the machineries, manufacturing plant never became operational.
equipment, and facilities installed in the Carmona
plant. Five days later, PGSMC filed before the Office of
After the parties submitted their Memoranda, positing that the queries and issues raised in the motion
on July 23, 1998, the RTC issued an Order denying the for inspection fell under the coverage of the arbitration
application for a writ of preliminary injunction, reasoning clause in their contract.
that PGSMC had paid KOGIES USD 1,224,000, the
value of the machineries and equipment as shown in the On September 21, 1998, the trial court issued
contract such that KOGIES no longer had proprietary an Order (1) granting PGSMCs motion for inspection;
rights over them.And finally, the RTC held that Art. 15 of (2) denying KOGIES motion for reconsideration of the
the Contract as amended was invalid as it tended to July 23, 1998 RTC Order; and (3) denying KOGIES
oust the trial court or any other court jurisdiction over motion to dismiss PGSMCs compulsory counterclaims
any dispute that may arise between the as these counterclaims fell within the requisites of
parties. KOGIES prayer for an injunctive writ was compulsory counterclaims.
denied.[10] The dispositive portion of the Order stated:
On October 2, 1998, KOGIES filed an Urgent
Motion for Reconsideration[17] of the September 21,
WHEREFORE, in view of the foregoing 1998 RTC Order granting inspection of the plant and
consideration, this Court believes and denying dismissal of PGSMCs compulsory
so holds that no cogent reason exists counterclaims.
for this Court to grant the writ of
preliminary injunction to restrain and Ten days after, on October 12, 1998, without
refrain defendant from dismantling the waiting for the resolution of its October 2, 1998 urgent
machineries and facilities at the lot and motion for reconsideration, KOGIES filed before the
building of Worth Properties, Court of Appeals (CA) a petition for
Incorporated at Carmona, Cavite and certiorari[18] docketed as CA-G.R. SP No. 49249,
transfer the same to another site: and seeking annulment of the July 23, 1998 and September
therefore denies plaintiffs application for 21, 1998 RTC Orders and praying for the issuance of
a writ of preliminary injunction. writs of prohibition, mandamus, and preliminary
injunction to enjoin the RTC and PGSMC from
inspecting, dismantling, and transferring the machineries
and equipment in the Carmona plant, and to direct the
On July 29, 1998, KOGIES filed its Reply to RTC to enforce the specific agreement on arbitration to
Answer and Answer to Counterclaim.[11] KOGIES denied resolve the dispute.
it had altered the quantity and lowered the quality of the
machinery, equipment, and facilities it delivered to the In the meantime, on October 19, 1998, the RTC
plant. It claimed that it had performed all the denied KOGIES urgent motion for reconsideration and
undertakings under the contract and had already directed the Branch Sheriff to proceed with the
produced certified samples of LPG cylinders. It averred inspection of the machineries and equipment in the plant
that whatever was unfinished was PGSMCs fault since it on October 28, 1998.[19]
failed to procure raw materials due to lack of
funds. KOGIES, relying on Chung Fu Industries (Phils.), Thereafter, KOGIES filed a Supplement to the
Inc. v. Court of Appeals,[12] insisted that the arbitration Petition[20] in CA-G.R. SP No. 49249 informing the CA
clause was without question valid. about the October 19, 1998 RTC Order. It also
reiterated its prayer for the issuance of the writs of
After KOGIES filed a Supplemental prohibition, mandamus and preliminary injunction which
Memorandum with Motion to Dismiss[13] answering was not acted upon by the CA. KOGIES asserted that
PGSMCs memorandum of July 22, 1998 and seeking the Branch Sheriff did not have the technical expertise
dismissal of PGSMCs counterclaims, KOGIES, on to ascertain whether or not the machineries and
August 4, 1998, filed its Motion for Reconsideration[14] of equipment conformed to the specifications in the
the July 23, 1998 Order denying its application for contract and were properly installed.
an injunctive writ claiming that the contract was not
merely for machinery and facilities worth USD 1,224,000 On November 11, 1998, the Branch Sheriff filed
but was for the sale of an LPG manufacturing plant his Sheriffs Report[21] finding that the enumerated
consisting of supply of all the machinery and facilities machineries and equipment were not fully and properly
and transfer of technology for a total contract price of installed.
USD 1,530,000 such that the dismantling and transfer of
the machinery and facilities would result in the The Court of Appeals affirmed the trial court and
dismantling and transfer of the very plant itself to the declared
great prejudice of KOGIES as the still unpaid the arbitration clause against public policy
owner/seller of the plant. Moreover, KOGIES points out
that the arbitration clause under Art. 15 of the Contract
as amended was a valid arbitration stipulation under Art. On May 30, 2000, the CA rendered the assailed
2044 of the Civil Code and as held by this Court Decision[22] affirming the RTC Orders and dismissing the
in Chung Fu Industries (Phils.), Inc.[15] petition for certiorari filed by KOGIES. The CA found
that the RTC did not gravely abuse its discretion in
In the meantime, PGSMC filed a Motion for issuing the assailed July 23, 1998 and September 21,
Inspection of Things[16] to determine whether there was 1998 Orders. Moreover, the CA reasoned that KOGIES
indeed alteration of the quantity and lowering of quality contention that the total contract price for USD
of the machineries and equipment, and whether these 1,530,000 was for the whole plant and had not been
were properly installed. KOGIES opposed the motion fully paid was contrary to the finding of the RTC that
PGSMC fully paid the price of USD 1,224,000, which
was for all the machineries and equipment. According to d. RULING THAT THE
the CA, this determination by the RTC was a factual PETITION WAS FILED
finding beyond the ambit of a petition for certiorari. PREMATURELY WITHOUT WAITING
FOR THE RESOLUTION OF THE
On the issue of the validity of the arbitration MOTION FOR RECONSIDERATION
clause, the CA agreed with the lower court that an OF THE ORDER DATED SEPTEMBER
arbitration clause which provided for a final 21, 1998 OR WITHOUT GIVING THE
determination of the legal rights of the parties to the TRIAL COURT AN OPPORTUNITY TO
contract by arbitration was against public policy. CORRECT ITSELF;
Hence, we have this Petition for Review on Before we delve into the substantive issues, we
Certiorari under Rule 45. shall first tackle the procedural issues.
With our disquisition above, petitioner is correct Issue on ownership of plant proper for arbitration
in its contention that an arbitration clause, stipulating
that the arbitral award is final and binding, does not oust Petitioner assails the CA ruling that the issue petitioner
our courts of jurisdiction as the international arbitral raised on whether the total contract price of USD
award, the award of which is not absolute and without 1,530,000 was for the whole plant and its installation is
exceptions, is still judicially reviewable under certain beyond the ambit of a Petition for Certiorari.
conditions provided for by the UNCITRAL Model Law on
ICA as applied and incorporated in RA 9285. Petitioners position is untenable.
Finally, it must be noted that there is nothing in It is settled that questions of fact cannot be raised in an
the subject Contract which provides that the parties may original action for certiorari.[49] Whether or not there was
dispense with the arbitration clause. full payment for the machineries and equipment and
installation is indeed a factual issue prohibited by Rule
Unilateral rescission improper and illegal 65.
Having ruled that the arbitration clause of the However, what appears to constitute a grave abuse of
subject contract is valid and binding on the parties, and discretion is the order of the RTC in resolving the issue
not contrary to public policy; consequently, being bound on the ownership of the plant when it is the arbitral body
to the contract of arbitration, a party may not unilaterally (KCAB) and not the RTC which has jurisdiction and
rescind or terminate the contract for whatever cause authority over the said issue. The RTCs determination of
without first resorting to arbitration. such factual issue constitutes grave abuse of discretion
What this Court held in University of the and must be reversed and set aside.
Philippines v. De Los Angeles[47] and reiterated in
succeeding cases,[48] that the act of treating a contract
Court or arbitral tribunal as the case
RTC has interim jurisdiction to protect the rights of may be and the party against whom the
the parties relief is sought, describing in
appropriate detail the precise relief, the
Anent the July 23, 1998 Order denying the party against whom the relief is
issuance of the injunctive writ paving the way for requested, the grounds for the relief,
PGSMC to dismantle and transfer the equipment and and the evidence supporting the
machineries, we find it to be in order considering the request.
factual milieu of the instant case.
(e) The order shall be binding
Firstly, while the issue of the proper installation upon the parties.
of the equipment and machineries might well be under
the primary jurisdiction of the arbitral body to decide, yet (f) Either party may apply with
the RTC under Sec. 28 of RA 9285 has jurisdiction to the Court for assistance in
hear and grant interim measures to protect vested rights implementing or enforcing an interim
of the parties. Sec. 28 pertinently provides: measure ordered by an arbitral tribunal.
Any party may request that (b) Take action that would prevent, or
provisional relief be granted against the refrain from taking action that is likely to
adverse party. cause, current or imminent harm or
prejudice to the arbitral process itself;
Such relief may be granted:
(c) Provide a means of preserving
(i) to prevent irreparable loss assets out of which a subsequent award
or injury; may be satisfied; or
(ii) to provide security for the
performance of any obligation; (d) Preserve evidence that may be
(iii) to produce or preserve any relevant and material to the resolution
evidence; or of the dispute.
(iv) to compel any other
appropriate act or omission.
Art. 17 J of UNCITRAL Model Law on ICA also
(c) The order granting grants courts power and jurisdiction to issue interim
provisional relief may be conditioned measures:
upon the provision of security or any act
or omission specified in the order. Article 17 J. Court-ordered interim
measures
(d) Interim or provisional relief
is requested by written application A court shall have the same
transmitted by reasonable means to the power of issuing an interim measure in
relation to arbitration proceedings, measure of protection to PGSMC which would otherwise
irrespective of whether their place is in been irreparably damaged.
the territory of this State, as it has in
relation to proceedings in courts. The Fifth, KOGIES is not unjustly prejudiced as it
court shall exercise such power in has already been paid a substantial amount based on
accordance with its own procedures in the contract. Moreover, KOGIES is amply protected by
consideration of the specific features of the arbitral action it has instituted before the KCAB, the
international arbitration. award of which can be enforced in our jurisdiction
through the RTC. Besides, by our decision, PGSMC is
compelled to submit to arbitration pursuant to the valid
In the recent 2006 case of Transfield arbitration clause of its contract with KOGIES.
Philippines, Inc. v. Luzon Hydro Corporation, we were
explicit that even the pendency of an arbitral proceeding PGSMC to preserve the subject equipment and
does not foreclose resort to the courts for provisional machineries
reliefs. We explicated this way:
Finally, while PGSMC may have been granted
As a fundamental point, the pendency the right to dismantle and transfer the subject equipment
of arbitral proceedings does not and machineries, it does not have the right to convey or
foreclose resort to the courts for dispose of the same considering the pending arbitral
provisional reliefs. The Rules of the proceedings to settle the differences of the
ICC, which governs the parties arbitral parties. PGSMC therefore must preserve and maintain
dispute, allows the application of a party the subject equipment and machineries with the
to a judicial authority for interim or diligence of a good father of a family[51] until final
conservatory measures. Likewise, resolution of the arbitral proceedings and enforcement
Section 14 of Republic Act (R.A.) No. of the award, if any.
876 (The Arbitration Law) recognizes
the rights of any party to petition the
court to take measures to safeguard WHEREFORE, this petition is PARTLY
and/or conserve any matter which is the GRANTED, in that:
subject of the dispute in arbitration. In
addition, R.A. 9285, otherwise known (1) The May 30, 2000 CA Decision in CA-G.R.
as the Alternative Dispute Resolution SP No. 49249 is REVERSED and SET ASIDE;
Act of 2004, allows the filing of
provisional or interim measures with the (2) The September 21, 1998 and October 19,
regular courts whenever the arbitral 1998 RTC Orders in Civil Case No. 98-117
tribunal has no power to act or to act are REVERSED and SET ASIDE;
effectively.[50]
(3) The parties are hereby ORDERED to submit
It is thus beyond cavil that the RTC has themselves to the arbitration of their dispute and
authority and jurisdiction to grant interim measures of differences arising from the subject Contract before the
protection. KCAB; and
Secondly, considering that the equipment and (4) PGSMC is hereby ALLOWED to dismantle
machineries are in the possession of PGSMC, it has the and transfer the equipment and machineries, if it had not
right to protect and preserve the equipment and done so, and ORDERED to preserve and maintain them
machineries in the best way it can. Considering that the until the finality of whatever arbitral award is given in the
LPG plant was non-operational, PGSMC has the right to arbitration proceedings.
dismantle and transfer the equipment and machineries
either for their protection and preservation or for the No pronouncement as to costs.
better way to make good use of them which is
ineluctably within the management discretion of SO ORDERED.
PGSMC.
Thirdly, and of greater import is the reason that UNITED AIRLINES INC. VS. CA G.R. NO. 124110
maintaining the equipment and machineries in Worths
property is not to the best interest of PGSMC due to the KAPUNAN, J.:
prohibitive rent while the LPG plant as set-up is not
operational. PGSMC was losing PhP322,560 as monthly On March 1, 1989, private respondent Aniceto
rentals or PhP3.87M for 1998 alone without considering Fontanilla purchased from petitioner United Airlines,
the 10% annual rent increment in maintaining the plant. through the Philippine Travel Bureau in Manila, three (3)
Visit the U.S.A. tickets for himself, his wife and his minor
Fourthly, and corollarily, while the KCAB can son Mychal for the following routes:
rule on motions or petitions relating to the preservation
or transfer of the equipment and machineries as an (a) San Francisco to Washington (15 April 1989);
interim measure, yet on hindsight, the July 23, 1998
Order of the RTC allowing the transfer of the equipment (b) Washington to Chicago (25 April 1989);
and machineries given the non-recognition by the lower
courts of the arbitral clause, has accorded an interim
(c) Chicago to Los Angeles (29 April 1989); humiliation and embarrassment. The chastening
situation even caused the younger Fontanilla to break
(d) Los Angeles to San Francisco (01 May 1989 for into tears.[11]
petitioners wife and 05 May 1989 for petitioner and his After some time, Linda, without any explanation,
son).[1] offered the Fontanillas $50.00 each. She simply
said Take it or leave it. This, the Fontanillas declined.[12]
All flights had been confirmed previously by United
Airlines.[2] The Fontanillas then proceeded to the United
Airlines customer service counter to plead their
The Fontanillas proceeded to the United States as case. The male employee at the counter reacted by
planned, where they used the first coupon from San shouting that he was ready for it and left without saying
Francisco to Washington. On April 24, 1989, Aniceto anything.[13]
Fontanilla bought two (2) additional coupons each for The Fontanillas were not booked on the next flight,
himself, his wife and his son from petitioner at its office which departed for San Francisco at 11:00 a.m. It was
in Washington Dulles Airport. After paying the penalty only at 12:00 noon that they were able to leave Los
for rewriting their tickets, the Fontanillas were issued Angeles on United Airlines Flight No. 803.
tickets with corresponding boarding passes with the
words CHECK-IN REQUIRED, for United Airlines Flight Petitioner United Airlines has a different version of
No. 1108, set to leave from Los Angeles to San what occurred at the Los Angeles Airport on May 5,
Francisco at 10:30 a.m. on May 5, 1989.[3] 1989.
The cause of the non-boarding of the Fontanillas According to United Airlines, the Fontanillas did not
on United Airlines Flight No. 1108 makes up the bone of initially go to the check-in counter to get their seat
contention of this controversy. assignments for UA Flight 1108. They instead
proceeded to join the queue boarding the aircraft without
Private respondents' version is as follows: first securing their seat assignments as required in their
Aniceto Fontanilla and his son Mychal claim that on ticket and boarding passes. Having no seat
May 5, 1989, upon their arrival at the Los Angeles assignments, the stewardess at the door of the plane
Airport for their flight, they proceeded to United Airlines instructed them to go to the check-in counter. When the
counter where they were attended by an employee Fontanillas proceeded to the check-in counter, Linda
wearing a nameplate bearing the name LINDA. Linda Allen, the United Airlines Customer Representative at
examined their tickets, punched something into her the counter informed them that the flight was
computer and then told them that boarding would be in overbooked. She booked them on the next available
fifteen minutes.[4] flight and offered them denied boarding
compensation. Allen vehemently denies uttering the
When the flight was called, the Fontanillas derogatory and racist words attributed to her by the
proceeded to the plane. To their surprise, the Fontanillas.[14]
stewardess at the gate did not allow them to board the
plane, as they had no assigned seat numbers. They The incident prompted the Fontanillas to file Civil
were then directed to go back to the check-in counter Case No. 89-4268 for damages before the Regional
where Linda subsequently informed them that the flight Trial Court of Makati. After trial on the merits, the trial
had been overbooked and asked them to wait.[5] court rendered a decision, the dispositive portion of
which reads as follows:
The Fontanillas tried to explain to Linda the special
circumstances of their visit. However, Linda told them in WHEREFORE, judgment is rendered dismissing the
arrogant manner, So what, I can not do anything about complaint. The counterclaim is likewise dismissed as it
it.[6] appears that plaintiffs were not actuated by legal malice
Subsequently, three other passengers with when they filed the instant complaint.[15]
Caucasian features were graciously allowed to board,
after the Fontanillas were told that the flight had been On appeal, the Court of Appeals ruled in favor of
overbooked.[7] the Fontanillas. The appellate court found that there was
an admission on the part of United Airlines that the
The plane then took off with the Fontanillas Fontanillas did in fact observe the check-in
baggage in tow, leaving them behind.[8] requirement. It ruled further that even assuming there
was a failure to observe the check-in requirement,
The Fontanillas then complained to Linda, who in
United Airlines failed to comply with the procedure laid
turn gave them an ugly stare and rudely uttered, Its not
down in cases where a passenger is denied
my fault. Its the fault of the company. Just sit down and
boarding. The appellate court likewise gave credence to
wait.[9] When Mr. Fontanilla reminded Linda of the
the claim of Aniceto Fontanilla that the employees of
inconvenience being caused to them, she bluntly
United Airlines were discourteous and arbitrary and,
retorted, Who do you think you are? You lousy Flips are
worse, discriminatory. In light of such treatment, the
good for nothing beggars. You always ask for American
Fontanillas were entitled to moral damages. The
aid. After which she remarked Dont worry about your
dispositive portion of the decision of the respondent
baggage. Anyway there is nothing in there. What are
Court of Appeals dated 29 September 1995, states as
you doing here anyway? I will report you to
follows:
immigration. You Filipinos should go home.[10] Such
rude statements were made in front of other people in
the airport causing the Fontanillas to suffer shame,
WHEREFORE, in view of the foregoing, judgment the check-in requirement at the Los Angeles Airport.
appealed herefrom is hereby REVERSED and SET Thus:
ASIDE, and a new judgment is entered ordering
defendant-appellee to pay plaintiff-appellant the A perusal of the above pleadings filed before the
following: trial court disclosed that there exists a blatant admission
on the part of the defendant-appellee that the plaintiffs-
appellants indeed observed the check-in requirement at
a) P200,000.00 as moral damages; the Los Angeles Airport on May 5, 1989. In view of
defendant-appellees admission of plaintiffs-appellants
b) P200,000.00 as exemplary damages; material averment in the complaint, We find no reason
why the trial court should rule against such
c) P50, 000.00 as attorneys fees. admission.[19]
We disagree with the above conclusion reached by
No pronouncement as to costs. respondent Court of Appeals. Paragraph 7 of private
respondents' complaint states:
SO ORDERED.[16]
7. On May 5, 1989 at 9:45 a.m., plaintiff and his son
Petitioner United Airlines now comes to this Court checked in at defendants designated counter at the
raising the following assignment of errors: airport in Los Angeles for their scheduled flight to San
Francisco on defendants Flight No. 1108.[20]
I
Existing jurisprudence explicitly states that overbooking HUTCHISON PORTS VS. SBMA G.R. NO. 131367
amounts to bad faith, entitling passengers concerned to
an award of moral damages. In Alitalia Airways v. Court YNARES-SANTIAGO, J.:
of Appeals, where passengers with confirmed booking
were refused carriage on the last minute, this Court held
On February 12, 1996, the Subic Bay Metropolitan
that when an airline issues a ticket to a passenger
Authority (or SBMA) advertised in leading national daily
confirmed on a particular flight, on a certain date, a newspapers and in one international publication,[1] an
contract of carriage arises, and the passenger has every invitation offering to the private sector the opportunity to
right to expect that he would fly on that flight and on that
develop and operate a modern marine container
date. If he does not, then the carrier opens itself to a suit
terminal within the Subic Bay Freeport Zone. Out of
for breach of contract of carriage. Where an airline
seven bidders who responded to the published
had deliberately overbooked, it took the risk of having
invitation, three were declared by the SBMA as qualified
to deprive some passengers of their seats in case all of bidders after passing the pre-qualification evaluation
them would show up for check in. For the indignity and conducted by the SBMAs Technical Evaluation
inconvenience of being refused a confirmed seat on the
Committee (or SBMA-TEC).These are: (1) International
last minute, said passenger is entitled to moral
Container Terminal Services, Inc. (or ICTSI); (2) a
damages. (Emphasis supplied.)
consortium consisting of Royal Port Services, Inc. and
HPC Hamburg Port Consulting GMBH (or RPSI); and
However, the Courts ruling in said case should be (3) Hutchison Ports Philippines Limited (or HPPL),
read in consonance with existing laws, particularly, representing a consortium composed of HPPL, Guoco
Economic Regulations No. 7, as amended, of the Civil Holdings (Phils.), Inc. and Unicol Management Services,
Aeronautics Board: Inc. All three qualified bidders were required to submit
their respective formal bid package on or before July 1,
Sec 3. Scope. This regulation shall apply to every 1996 by the SBMAs Pre-qualification, Bids and Awards
Philippine and foreign air carrier with respect to its Committee (or SBMA-PBAC).
operation of flights or portions of flights originating from
or terminating at, or serving a point within the territory of Thereafter, the services of three (3) international
the Republic of the Philippines insofar as it denies consultants[2] recommended by the World Bank for their
boarding to a passenger on a flight, or portion of a flight expertise were hired by SBMA to evaluate the business
inside or outside the Philippines, for which he holds plans submitted by each of the bidders, and to ensure
confirmed reserved space.Furthermore, this Regulation that there would be a transparent and comprehensive
is designed to cover only honest mistakes on the part of review of the submitted bids. The SBMA also hired the
the carriers and excludes deliberate and willful acts of firm of Davis, Langdon and Seah Philippines, Inc. to
non-accommodation. Provided, however, that assist in the evaluation of the bids and in the negotiation
overbooking not exceeding 10% of the seating process after the winning bidder is chosen. All the
capacity of the aircraft shall not be considered as a consultants, after such review and evaluation
deliberate and willful act of non-accommodation. unanimously concluded that HPPLs Business Plan was
far superior to that of the two other bidders.[3]
What this Court considers as bad faith is the willful However, even before the sealed envelopes
and deliberate overbooking on the part of the airline containing the bidders proposed royalty fees could be
carrier. The above-mentioned law clearly states that opened at the appointed time and place, RPSI formally
when the overbooking does not exceed ten percent protested that ICTSI is legally barred from operating a
(10%), it is not considered as deliberate and therefore second port in the Philippines based on Executive Order
does not amount to bad faith. While there may have No. 212 and Department of Transportation and
been overbooking in this case, private respondents were Communication (DOTC) Order 95-863. RPSI thus
not able to prove that the overbooking on United Airlines requested that the financial bid of ICTSI should be set
Flight 1108 exceeded ten percent. aside.[4]
As earlier stated, the Court is of the opinion that the Nevertheless, the opening of the sealed financial
private respondents were not able to prove that they bids proceeded under advisement relative to the protest
were subjected to coarse and harsh treatment by the signified by RPSI. The financial bids, more particularly
ground crew of United Airlines. Neither were they able to the proposed royalty fee of each bidder, was as follows:
show that there was bad faith on part of the carrier
airline. Hence, the award of moral and exemplary ICTSI ------------US$57.80 TEU
damages by the Court of Appeals is
HPPL ------------US$20.50 TEU components/justification for their respective financial
bids in order to ensure fair play and transparency in the
RPSI -------------US$15.08 TEU proceedings.
The SBMA-PBAC decided to suspend the 6. The Presidents authority to review the final award
announcement of the winning bid, however, and instead shall remain.[8] (Underscoring supplied)
gave ICTSI seven (7) days within which to respond to
the letter-protest lodged by RPSI.The HPPL joined in The recommendation of CPLC Cayetano was
RPSIs protest, stating that ICTSI should be disqualified approved by President Ramos, and a copy of President
because it was already operating the Manila Ramos handwritten approval was sent to the SBMA
International Container Port (or MICP), which would give Board of Directors.Accordingly, the SBMA Board, with
rise to inevitable conflict of interest between the MICP the concurrence of representatives of the Commission
and the Subic Bay Container Terminal facility.[5] on Audit, agreed to focus the reevaluation of the bids in
accordance with the evaluation criteria and the detailed
On August 15, 1996, the SBMA-PBAC issued a components contained in the Tender Document,
resolution rejecting the bid of ICTSI because said bid including all relevant information gleaned from the
does not comply with the requirements of the tender bidding documents, as well as the reports of the three
documents and the laws of the Philippines. The said international experts and the consultancy firm hired by
resolution also declared that: the SBMA.
RESOLVED FURTHER, that the winning bid be On September 19, 1996, the SBMA Board issued a
awarded to HUTCHISON PORTS PHILIPPINES Resolution, declaring:
LIMITED (HPPL) and that negotiations commence
immediately with HPPL (HUTCHISON) with a view to NOW, THEREFORE, IT IS HEREBY RESOLVED that
concluding an acceptable agreement within 45 days of the bid that conforms to the Invitation to Tender, that
this date failing which negotiations with RPSI (ROYAL) has a realistic Business Plan offering the greatest
will commence with a view to concluding an acceptable financial return to SBMA, the best possible offer and the
agreement within 45 days thereafter failing which there most advantageous to the government is that of HPPL
will be declared a failure of bids.[6] (Underscoring and HPPL is accordingly selected as the winning
supplied) bidder and is hereby awarded the concession for the
operation and development of the Subic Bay Container
The following day, ICTSI filed a letter-appeal with Terminal.[9] (Underscoring supplied)
SBMAs Board of Directors requesting the nullification
and reversal of the above-quoted resolution rejecting In a letter dated September 24, 1996, the SBMA
ICTSIs bid while awarding the same to HPPL. But even Board of Directors submitted to the Office of the
before the SBMA Board could act on the appeal, ICTSI President the results of the re-evaluation of the bid
filed a similar appeal before the Office of the proposals, to wit:
President.[7] On August 30, 1996, then Chief Presidential
Legal Counsel (CPLC) Renato L. Cayetano submitted a SBMA, through the unanimous vote of all the Board
memorandum to then President Fidel V. Ramos, Members, excluding the Chairman of the Board who
containing the following recommendations: voluntarily inhibited himself from participating in the re-
evaluation, selected the HPPL bid as the winning bid,
We therefore suggest that the President direct SBMA being: the conforming bid with a realistic Business Plan
Chairman Gordon to consider option number 4 that is to offering the greatest financial return to the SBMA; the
re-evaluate the financial bids submitted by the parties, best possible offer in the market, and the most
taking into consideration all the following factors: advantageous to the government in accordance with the
Tender Document.[10]
1. Reinstate ICTSIs bid;
Notwithstanding the SBMA Boards
2. Disregard all arguments relating to monopoly; recommendations and action awarding the project to
HPPL, then Executive Secretary Ruben Torres
3. The re-evaluation must be limited to the parties submitted a memorandum to the Office of the President
recommending that another rebidding be
financial bids.
conducted.[11] Consequently, the Office of the President
issued a Memorandum directing the SBMA Board of
3.1 Considering that the parties business Directors to refrain from signing the Concession
have been accepted (passed), strictly Contract with HPPL and to conduct a rebidding of the
follow the criteria for bid evaluation project.[12]
provided for in pars. (c) and (d), Part B
(1) of the Tender Document. In the meantime, the Resident Ombudsman for the
DOTC filed a complaint against members of the SBMA-
4. In the re-evaluation, the COA should actively PBAC before the Office of the Ombudsman for alleged
participate to determine which of the financial bids is violation of Section 3(e) of Republic Act No. 3019 for
more advantageous. awarding the contract to HPPL. On April 16, 1997, the
Evaluation and Preliminary Investigation Bureau of the
Office of the Ombudsman issued a Resolution absolving
5. In addition, all the parties should be given ample
opportunity to elucidate or clarify the
the members of the SBMA-PBAC of any liability and negotiations and to execute the Concession Agreement
dismissing the complaint against them, ruling thus: despite its earlier pronouncements that HPPL was the
winning bidder, filed a complaint[14] against SBMA
After an assiduous study of the respective contentions before the Regional Trial Court (RTC) of Olongapo City,
of both parties, we are inclined to hold, as it is hereby Branch 75, for specific performance, mandatory
held, that there is no proof on record pinpointing injunction and damages. In due time, ICTSI, RPSI and
respondents to have acted in excess of their discretion the Office of the President filed separate Answers-in-
when they awarded the bid to HPPL. Records revealed Intervention[15] to the complaint opposing the reliefs
that respondents, in the exercise of their discretion in sought by complainant HPPL.
determining the financial packages offered by the Complainant HPPL alleged and argued therein that
applicants, were guided by the expert report of Davis, a binding and legally enforceable contract had been
Langdon and Seah (DLS) that fairly evaluated which of established between HPPL and defendant SBMA under
the bidders tender the greatest financial return to the Article 1305 of the Civil Code, considering that SBMA
government. There is no showing that respondents had had repeatedly declared and confirmed that HPPL was
abused their prerogatives. As succinctly set forth in the the winning bidder. Having accepted HPPLs offer to
DLS report it stated, among others, that, in assessing operate and develop the proposed container terminal,
the full financial return to SBMA offered by the bidders, it defendant SBMA is duty-bound to comply with its
is necessary to consider the following critical matters: obligation by commencing negotiations and drawing up
a Concession Agreement with plaintiff HPPL. HPPL also
1. Royalty fees pointed out that the bidding procedure followed by the
SBMA faithfully complied with existing laws and rules
2. Volume of TEUs as affected by: established by SBMA itself; thus, when HPPL was
declared the winning bidder it acquired the exclusive
a. Tariff rates; right to negotiate with the SBMA. Consequently, plaintiff
HPPL posited that SBMA should be: (1) barred from
conducting a re-bidding of the proposed project and/or
b. Marketing strategy;
performing any such acts relating thereto; and (2)
prohibited from negotiating with any party other than
c. Port facilities; and plaintiff HPPL until negotiations between HPPL and
SBMA have been concluded or in the event that no
d. Efficient reliable services. acceptable agreement could be arrived at. Plaintiff
HPPL also alleged that SBMAs continued refusal to
With the preceding parameters for the evaluation of negotiate the Concession Contract is a substantial
bidders business plan, the respondents were fairly infringement of its proprietary rights, and caused
guided by, as they aligned their judgment in congruence damage and prejudice to plaintiff HPPL.
with, the opinion of the panel of experts and the SBMAs
Hence, HPPL prayed that:
Technical Evaluation Committee to the effect that
HPPLs business is superior while that of ICTSIs
appeared to be unrealistically high which may eventually (1) Upon the filing of this complaint, hearings be
hinder the competitiveness of the SBMA port with the scheduled to determine the propriety of plaintiffs
rest of the world. Respondents averred that the panel of mandatory injunction application which seeks to order
World Bank experts noted that ICTSIs high tariff rates at defendant or any of its appropriate officers or
U.S. $119.00 per TEU is already higher by 37% through committees to forthwith specify the date as well as to
HPPL, which could further increase by 20% in the first perform any and all such acts (e.g. laying the ground
two (2) years and by 5% hike thereafter. In short, high rules for discussion) for the commencement of
tariffs would discourage potential customers which may negotiations with plaintiff with the view to signing at the
be translated into low cargo volume that will eventually earliest possible time a Concession Agreement for the
reduce financial return to SBMA. Respondents asserted development and operation of the Subic Bay Container
that HPPLs business plan offers the greatest financial Terminal.
return which could be equated that over the five years,
HPPL offers 1.25 billion pesos while ICTSI offers P0.859 (2) Thereafter, judgment be rendered in favor of plaintiff
billion, and RPSI offers P.420 billion. Over the first ten and against defendant:
years HPPL gives P2.430 billion, ICTSI tenders P2.197
billion and RPSI has P1.632 billion. 2.1. Making permanent the preliminary mandatory
injunction it had issued;
Viewed from this perspective alongside with the
evidence on record, the undersigned panel does not find 2.2. Ordering defendant to implement the Concession
respondents to have exceeded their discretion in Agreement it had executed with plaintiff in respect of the
awarding the bid to HPPL.Consequently, it could not be development and operation of the proposed Subic Bay
said that respondents act had placed the government at Container Terminal;
a grossly disadvantageous plight that could have
jeopardized the interest of the Republic of the 2.3. Ordering defendant to pay for the cost of plaintiffs
Philippines.[13] attorneys fees in the amount of P500,000.00, or as
otherwise proven during the trial.
On July 7, 1997, the HPPL, feeling aggrieved by
the SBMAs failure and refusal to commence Plaintiff prays for other equitable reliefs.[16]
During the pre-trial hearing, one of the issues intervenors is of the view that the issue of jurisdiction
raised and submitted for resolution was whether or not must be resolved first, ahead of all the other issues.
the Office of the President can set aside the award
made by SBMA in favor of plaintiff HPPL and if so, can WHEREFORE, and viewed from the foregoing
the Office of the President direct the SBMA to conduct a considerations, plaintiffs motion is DENIED.
re-bidding of the proposed project.
While the case before the trial court was pending SO ORDERED.[20] (Underscoring supplied)
litigation, on August 4, 1997, the SBMA sent notices to
plaintiff HPPL, ICTSI and RPSI requesting them to Hence, this petition filed by petitioner (plaintiff
declare their interest in participating in a rebidding of the below) HPPL against respondents SBMA, ICTSI, RPSI
proposed project.[17] On October 20, 1997, plaintiff and the Executive Secretary seeking to obtain a
HPPL received a copy of the minutes of the pre-bid prohibitory injunction. The grounds relied upon by
conference which stated that the winning bidder would petitioner HPPL to justify the filing of the instant petition
be announced on December 5, 1997.[18] Then on are summed up as follows:
November 4, 1997, plaintiff HPPL learned that the
SBMA had accepted the bids of ICTSI and RPSI who 29. It is respectfully submitted that to allow or for this
were the only bidders who qualified. Honorable Court to otherwise refrain from restraining
In order to enjoin the rebidding while the case was SBMA, during the pendency of this suit, from committing
still pending, plaintiff HPPL filed a motion for the aforementioned act(s) which will certainly occur on 5
maintenance of the status quo[19] on October 28, December 1997 such action (or inaction) will work an
1997. The said motion was denied by the court a quo in injustice upon petitioner which has validly been
an Order dated November 3, 1997, to wit: announced as the winning bidder for the operation of the
Subic Bay Container Terminal.
Plaintiff maintains that by voluntarily participating in this
proceedings, the defendant and the intervenors have 30. To allow or for this Honorable Court to otherwise
unqualifiedly agreed to submit the issue of the propriety, refrain from restraining SBMA, during the pendency of
legality and validity of the Office of the Presidents this suit, from committing the aforementioned threatened
directive that the SBMA effect a rebidding of its acts would be in violation of petitioners rights in respect
concession contract or the operation of the Subic Bay of the action it had filed before the RTC of Olongapo
Container Terminal. As such, the status quo must be City in Civil Case No. 243-O-97, and could render any
maintained in order not to thwart the courts ability to judgment which may be reached by said Court moot and
resolve the issues presented. Further, the ethics of the ineffectual. As stated, the legal issues raised by the
profession require that counsel should discontinue any parties in that proceedings are of far reaching
act which tends to render the issues academic. importance to the national pride and prestige, and they
impact on the integrity of government agencies engaged
in international bidding of privatization projects. Its
The Opposition is anchored on lack of jurisdiction since resolution on the merits by the trial court below and,
the issuance of a cease-and-desist order would be thereafter, any further action to be taken by the parties
tantamount to the issuance of a Temporary Restraining before the appellate courts will certainly benefit
Order or a Writ of Injunction which this Court cannot do respondents and the entire Filipino people.[21]
in light of the provision of Section 21 of R.A. 7227 which
states:
WHEREFORE, petitioner HPPL sought relief
praying that:
Section 21. Injunction and Restraining Order. The
implementation of the projects for the conversion into
alternative productive uses of the military reservations a) Upon the filing of this petition, the same be given due
are urgent and necessary and shall not be restrained or course and a temporary restraining order and/or writ of
enjoined except by an order issued by the Supreme preliminary injunction be issued ex parte, restraining
Court of the Philippines. SBMA or any of its committees, or other persons acting
under its control or direction or upon its instruction, from
declaring any winner on 5 December 1997 or at any
During the hearing on October 30, 1997, SBMAs other date thereafter, in connection with the rebidding
counsel revealed that there is no law or administrative for the privatization of the Subic Bay Container Terminal
rule or regulation which requires that a bidding be and/or for any, some or all of the respondents to perform
accomplished within a definite time frame. any such act(s) in pursuance thereof, until further orders
from this Honorable Court;
Truly, the matter of the deferment of the re-bidding on
November 4, 1997 rests on the sound discretion of the b) After appropriate proceedings, judgment be rendered
SBMA. For this Court to issue a cease-and-desist order in favor of petitioner and against respondents --
would be tantamount to an issuance of a Temporary
Restraining Order or a Writ of Preliminary
Injunction. (Prado v. Veridiano II, G.R. No. 98118, (1) Ordering SBMA to desist from conducting any
December 6, 1991). rebidding or in declaring the winner of any such
rebidding in respect of the development and operation of
the Subic Bay Container Terminal until the judgment
The Court notes that the Office of the President has not which the RTC of Olongapo City may render in Civil
been heard fully on the issues. Moreover, one of the Case No. 243-O-97 is resolved with finality;
(2) Declaring null and void any award which SBMA may Second. That there is a material and substantial
announce or issue on 5 December 1997; and invasion of such right.
(3) Ordering respondents to pay for the cost of suit. Third. That there is an urgent and permanent necessity
for the writ to prevent serious damage.[25]
Petitioner prays for other equitable reliefs.[22]
To our mind, petitioner HPPL has not sufficiently
The instant petition seeks the issuance of an shown that it has a clear and unmistakable right to be
injunctive writ for the sole purpose of holding in declared the winning bidder with finality, such that the
abeyance the conduct by respondent SBMA of a SBMA can be compelled to negotiate a Concession
rebidding of the proposed SBICT project until the case Contract. Though the SBMA Board of Directors, by
for specific performance is resolved by the trial court. In resolution, may have declared HPPL as the winning
other words, petitioner HPPL prays that the status bidder, said award cannot be said to be final and
quo be preserved until the issues raised in the main unassailable. The SBMA Board of Directors and other
case are litigated and finally determined. Petitioner was officers are subject to the control and supervision of the
constrained to invoke this Courts exclusive jurisdiction Office of the President. All projects undertaken by
and authority by virtue of the above-quoted Republic Act SBMA require the approval of the President of the
7227, Section 21. Philippines under Letter of Instruction No. 620, which
places the SBMA under its ambit as an instrumentality,
On December 3, 1997, this Court granted petitioner defined in Section 10 thereof as an agency of the
HPPLs application for a temporary restraining order national government, not integrated within the
enjoining the respondent SBMA or any of its department framework, vested with special functions or
committees, or other persons acting under its control or jurisdiction by law, endowed with some if not all
direction or upon its instruction, from declaring any corporate powers, administering special funds, and
winner on December 5, 1997 or at any other date enjoying operational autonomy, usually through a
thereafter, in connection with the rebidding for the charter. This term includes regulatory agencies,
privatization of the Subic Bay Container Terminal and/or chartered institutions and government owned and
for any, some or all of the respondents to perform any controlled corporations.[26] (Underscoring supplied)
such act or acts in pursuance thereof.[23]
As a chartered institution, the SBMA is always
There is no doubt that since this controversy arose, under the direct control of the Office of the President,
precious time has been lost and a vital infrastructure particularly when contracts and/or projects undertaken
project has in essense been mothballed to the detriment by the SBMA entail substantial amounts of
of all parties involved, not the least of which is the money. Specifically, Letter of Instruction No. 620 dated
Philippine Government, through its officials and October 27, 1997 mandates that the approval of the
agencies, who serve the interest of the nation. It is, President is required in all contracts of the national
therefore, imperative that the issues raised herein and in government offices, agencies and instrumentalities,
the court a quo be resolved without further delay so as including government-owned or controlled corporations
not to exacerbate an already untenable situation. involving two million pesos (P2,000,000.00) and above,
awarded through public bidding or negotiation. The
At the outset, the application for the injunctive writ
President may, within his authority, overturn or reverse
is only a provisional remedy, a mere adjunct to the main
any award made by the SBMA Board of Directors for
suit.[24] Thus, it is not uncommon that the issues in the
justifiable reasons. It is well-established that the
main action are closely intertwined, if not identical, to the
discretion to accept or reject any bid, or even recall the
allegations and counter allegations propounded by the
award thereof, is of such wide latitude that the courts will
opposing parties in support of their contrary positions
not generally interfere with the exercise thereof by the
concerning the propriety or impropriety of the injunctive
executive department, unless it is apparent that such
writ. While it is not our intention to preempt the trial
exercise of discretion is used to shield unfairness or
courts determination of the issues in the main action for
injustice. When the President issued the memorandum
specific performance, this Court has a bounden duty to
setting aside the award previously declared by the
perform; that is, to resolve the matters before this Court
SBMA in favor of HPPL and directing that a rebidding be
in a manner that gives essence to justice, equity and
conducted, the same was, within the authority of the
good conscience.
President and was a valid exercise of his
While our pronouncements are for the purpose only prerogative.Consequently, petitioner HPPL acquired no
of determining whether or not the circumstances warrant clear and unmistakable right as the award announced
the issuance of the writ of injunction, it is inevitable that by the SBMA prior to the Presidents revocation thereof
it may have some impact on the main action pending was not final and binding.
before the trial court. Nevertheless, without delving into
There being no clear and unmistakable right on the
the merits of the main case, our findings herein shall be
part of petitioner HPPL, the rebidding of the proposed
confined to the necessary issues attendant to the
project can no longer be enjoined as there is no material
application for an injunctive writ.
and substantial invasion to speak of. Thus, there is no
For an injunctive writ to be issued, the following longer any urgent or permanent necessity for the writ to
requisites must be proven: prevent any perceived serious damage. In fine, since
the requisites for the issuance of the writ of injunction
First. That the petitioner/applicant must have a clear and are not present in the instant case, petitioners
unmistakable right. application must be denied for lack of merit.[27]
Finally, we focus on the matter of whether or not a foreign corporation doing business in the Philippines
petitioner HPPL has the legal capacity to even seek without the requisite license.
redress from this Court. Admittedly, petitioner HPPL is a
foreign corporation, organized and existing under the WHEREFORE, in view of all the foregoing, the
laws of the British Virgin Islands. While the actual bidder instant petition is hereby DISMISSED for lack of
was a consortium composed of petitioner, and two other merit. Further, the temporary restraining order issued on
corporations, namely, Guoco Holdings (Phils.) Inc. and December 3, 1997 is LIFTED and SET ASIDE. No
Unicol Management Servises, Inc., it is only petitioner costs.
HPPL that has brought the controversy before the Court, SO ORDERED.
arguing that it is suing only on an isolated transaction to
evade the legal requirement that foreign corporations
must be licensed to do business in the Philippines to be
able to file and prosecute an action before Philippines
courts.
The maelstrom of this issue is whether participating
in the bidding is a mere isolated transaction, or did it
constitute engaging in or transacting business in the
Philippines such that petitioner HPPL needed a license
to do business in the Philippines before it could come to
court.
There is no general rule or governing principle laid
down as to what constitutes doing or engaging in or
transacting business in the Philippines. Each case must
be judged in the light of its peculiar
circumstances.[28] Thus, it has often been held that a
single act or transaction may be considered as doing
business when a corporation performs acts for which it
was created or exercises some of the functions for
which it was organized. The amount or volume of the
business is of no moment, for even a singular act cannot
be merely incidental or casual if it indicates the foreign
corporations intention to do business.[29]
Participating in the bidding process constitutes
doing business because it shows the foreign
corporations intention to engage in business here. The
bidding for the concession contract is but an exercise of
the corporations reason for creation or existence. Thus,
it has been held that a foreign company invited to bid for
IBRD and ADB international projects in the Philippines
will be considered as doing business in the Philippines
for which a license is required. In this regard, it is the
performance by a foreign corporation of the acts for
which it was created, regardless of volume of business,
that determines whether a foreign corporation needs a
license or not.[30]
The primary purpose of the license requirement is
to compel a foreign corporation desiring to do business
within the Philippines to submit itself to the jurisdiction of
the courts of the state and to enable the government to
exercise jurisdiction over them for the regulation of their
activities in this country.[31] If a foreign corporation
operates a business in the Philippines without a license,
and thus does not submit itself to Philippine laws, it is
only just that said foreign corporation be not allowed to
invoke them in our courts when the need arises. While
foreign investors are always welcome in this land to
collaborate with us for our mutual benefit, they must be
prepared as an indispensable condition to respect and
be bound by Philippine law in proper cases, as in the
one at bar.[32] The requirement of a license is not
intended to put foreign corporations at a disadvantage,
for the doctrine of lack of capacity to sue is based on
considerations of sound public policy.[33] Accordingly,
petitioner HPPL must be held to be incapacitated to
bring this petition for injunction before this Court for it is