1
I. INTRODUCTION TO CONFLICTS OF LAW jurisdiction of respondent Judge.7 Petitioner, thereafter, on January
G.R. No. L-24294 May 3, 1974
DONALD BAER, Commander U.S. Naval Base, Subic Bay,
Olongapo, Zambales, petitioner, vs.
HON. TITO V. TIZON, as Presiding Judge of the Court of First
Instance of Bataan, and EDGARDO GENER, respondents.
FERNANDO, J.:p
There is nothing novel about the question raised in this certiorari
proceeding against the then Judge Tito V. Tizon, filed by petitioner
Donald Baer, then Commander of the United States Naval Base,
Subic Bay, Olongapo, Zambales, seeking to nullify the orders of
respondent Judge denying his motion to dismiss a complaint filed
against him by the private respondent, Edgardo Gener, on the ground
of sovereign immunity of a foreign power, his contention being that
it was in effect a suit against the United States, which had not given
its consent. The answer given is supplied by a number of cases
coming from this Tribunal starting from a 1945 decision, Raquiza v.
Bradford1 to Johnson v. Turner,2 promulgated in 1954. The doctrine
of immunity from suit is of undoubted applicability in this
jurisdiction. It cannot be otherwise, for under the 1935 Constitution,
as now, it is expressly made clear that the Philippines "adopts the
generally accepted principles of international law as part of the law
of the Nation."3 As will subsequently be shown, there was a failure
on the part of the lower court to accord deference and respect to such
a basic doctrine, a failure compounded by its refusal to take note of
the absence of any legal right on the part of petitioner. Hence,
certiorari is the proper remedy.
The facts are not in dispute. On November 17, 1964, respondent
Edgardo Gener, as plaintiff, filed a complaint for injunction with the
Court of First Instance of Bataan against petitioner, Donald Baer,
Commander of the United States Naval Base in Olongapo. It was
docketed as Civil Case No. 2984 of the Court of First Instance of
Bataan. He alleged that he was engaged in the business of logging in
an area situated in Barrio Mabayo, Municipality of Morong, Bataan
and that the American Naval Base authorities stopped his logging
operations. He prayed for a writ of preliminary injunction restraining
petitioner from interfering with his logging operations. A restraining
order was issued by respondent Judge on November 23,
1964.4 Counsel for petitioner, upon instructions of the American
Ambassador to the Philippines, entered their appearance for the
purpose of contesting the jurisdiction of respondent Judge on the
ground that the suit was one against a foreign sovereign without its
consent.5 Then, on December 12, 1964, petitioner filed a motion to
dismiss, wherein such ground was reiterated. It was therein pointed
out that he is the chief or head of an agency or instrumentality of the
United States of America, with the subject matter of the action being
official acts done by him for and in behalf of the United States of
America. It was added that in directing the cessation of logging
operations by respondent Gener within the Naval Base, petitioner
was entirely within the scope of his authority and official duty, the
maintenance of the security of the Naval Base and of the installations
therein being the first concern and most important duty of the
Commander of the Base.6 There was, on December 14, 1964, an
opposition and reply to petitioner's motion to dismiss by respondent
Gener, relying on the principle that "a private citizen claiming title
and right of possession of certain property may, to recover
possession of said property, sue as individuals, officers and agents of
the Government, who are said to be illegally withholding the same
from him, though in doing so, said officers and agents claim that they
are acting for the Government." That was his basis for sustaining the
12, 1965, made a written offer of documentary evidence, including
certified copies of telegrams of the Forestry Director to Forestry
personnel in Balanga, Bataan dated January 8, and January 11, 1965,
directing immediate investigation of illegal timber cutting in Bataan
and calling attention to the fact that the records of the office show no
new renewal of timber license or temporary extension permits.8 The
above notwithstanding, respondent Judge, on January 12, 1965,
issued an order granting respondent Gener's application for the
issuance of a writ of preliminary injunction and denying petitioner's
motion to dismiss the opposition to the application for a writ of
preliminary injunction.9
A motion for reconsideration having proved futile, this petition for
certiorari was filed with this Court. The prayer was for the
nullification and setting aside of the writ of preliminary injunction
issued by respondent Judge in the aforesaid Civil Case No. 2984 of
the Court of First Instance of Bataan. A resolution of March 17, 1965
was issued by this Court requiring respondents to file an answer and
upon petitioner's posting a bond of P5,000.00 enjoining them from
enforcing such writ of preliminary injunction. The answer was duly
forthcoming. It sought to meet the judicial question raised by the
legal proposition that a private citizen claiming title and right of
possession of a certain property may, to recover the same, sue as
individuals officers and agents of the government alleged to be
illegally withholding such property even if there is an assertion on
their part that they are acting for the government. Support for such a
view is found in the American Supreme Court decisions of United
States v. Lee10 and Land v. Dollar.11Thus the issue is squarely
joined whether or not the doctrine of immunity from suit without
consent is applicable. Thereafter, extensive memoranda were filed
both by petitioner and respondents. In addition, there was a
manifestation and memorandum of the Republic of the Philippines
as amicus curiae where, after a citation of American Supreme Court
decisions going back to Schooner Exchange v. M'faddon,12 an 1812
decision, to United States v. Belmont,13 decided in 1937, the plea
was made that the petition for certiorari be granted..
A careful study of the crucial issue posed in this dispute yields the
conclusion, as already announced, that petitioner should prevail.
1. The invocation of the doctrine of immunity from suit of a foreign
state without its consent is appropriate. More specifically, insofar as
alien armed forces is concerned, the starting point is Raquiza v.
Bradford, a 1945 decision.14In dismissing a habeas corpus petition
for the release of petitioners confined by American army authorities,
Justice Hilado, speaking for the Court, cited from Coleman v.
Tennessee,15 where it was explicitly declared: "It is well settled that
a foreign army, permitted to march through a friendly country or to
be stationed in it, by permission of its government or sovereign, is
exempt from the civil and criminal jurisdiction of the place."16 Two
years later, in Tubb and Tedrow v. Griess,17 this Court relied on the
ruling in Raquiza v. Bradford and cited in support thereof excerpts
from the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenhein, Westlake, Hyde, and McNair
and Lauterpacht.18 Accuracy demands the clarification that after the
conclusion of the Philippine-American7 Military Bases Agreement,
the treaty provisions should control on such matter, the assumption
being that there was a manifestation of the submission to jurisdiction
on the part of the foreign power whenever appropriate.19More to the
point is Syquia v. Almeda Lopez,20 where plaintiffs as lessors sued
the Commanding General of the United States Army in the
Philippines, seeking the restoration to them of the apartment
buildings they owned leased to United States armed forces stationed
in the Manila area. A motion to dismiss on the ground of
non-suability was filed and upheld by respondent Judge. The matter
was taken to this Court in a mandamus proceeding. It failed. It was
the ruling that respondent Judge acted correctly considering that the

"action must be considered as one against the U.S.
Government."21 The opinion of Justice Montemayor continued: "It
is clear that the courts of the Philippines including the Municipal
Court of Manila have no jurisdiction over the present case for
unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government
has not given its consent to the filing of this suit which is essentially
against her, though not in name. Moreover, this is not only a case of
a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen filing an action against a foreign
government without said government's consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The
principles of law behind this rule are so elementary and of such
general acceptance that we deem it unnecessary to cite authorities in
support thereof."22 Then came Marvel Building Corporation v.
Philippine War Damage Commission,23 where respondent, a United
States agency established to compensate damages suffered by the
Philippines during World War II was held as falling within the above
doctrine as the suit against it "would eventually be a charge against
or financial liability of the United States Government because ..., the
Commission has no funds of its own for the purpose of paying
money judgments."24 The Syquiaruling was again explicitly relied
upon in Marquez Lim v. Nelson,25 involving a complaint for the
recovery of a motor launch, plus damages, the special defense
interposed being "that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said
Government, and that the United States Government is therefore the
real party in interest."26 So it was in Philippine Alien Property
Administration v. Castelo,27 where it was held that a suit against the
Alien Property Custodian and the Attorney General of the United
States involving vested property under the Trading with the Enemy
Act is in substance a suit against the United States. To the same
effect is Parreno v. McGranery,28 as the following excerpt from the
opinion of Justice Tuason clearly shows: "It is a widely accepted
principle of international law, which is made a part of the law of the
land (Article II, Section 3 of the Constitution), that a foreign state
may not be brought to suit before the courts of another state or its
own courts without its consent."29 Finally, there is Johnson v.
Turner,30 an appeal by the defendant, then Commanding General,
Philippine Command (Air Force, with office at Clark Field) from a
decision ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the lower
court decision, this Tribunal, through Justice Montemayor, relied
on Syquia v. Almeda Lopez,31 explaining why it could not be
sustained.
The solidity of the stand of petitioner is therefore evident. What was
sought by private respondent and what was granted by respondent
Judge amounted to an interference with the performance of the duties
of petitioner in the base area in accordance with the powers
possessed by him under the Philippine-American Military Bases
Agreement. This point was made clear in these words: "Assuming,
for purposes of argument, that the Philippine Government, through
the Bureau of Forestry, possesses the "authority to issue a Timber
License to cut logs" inside a military base, the Bases Agreement
subjects the exercise of rights under a timber license issued by the
Philippine Government to the exercise by the United States of its
rights, power and authority of control within the bases; and the
findings of the Mutual Defense Board, an agency of both the
Philippine and United States Governments, that "continued logging
operation by Mr. Gener within the boundaries of the U.S. Naval Base
would not be consistent with the security and operation of the Base,"
is conclusive upon the respondent Judge. .. The doctrine of state
immunity is not limited to cases which would result in a pecuniary
charge against the sovereign or would require the doing of an
affirmative act by it. Prevention of a sovereign from doing an
affirmative act pertaining directly and immediately to the most
2
important public function of any government - the defense of the
state — is equally as untenable as requiring it to do an affirmative
act."32 That such an appraisal is not opposed to the interpretation of
the relevant treaty provision by our government is made clear in the
aforesaid manifestation and memorandum as amicus curiae, wherein
it joined petitioner for the grant of the remedy prayed for.
2. There should be no misinterpretation of the scope of the decision
reached by this Court. Petitioner, as the Commander of the United
States Naval Base in Olongapo, does not possess diplomatic
immunity. He may therefore be proceeded against in his personal
capacity, or when the action taken by him cannot be imputed to the
government which he represents. Thus, after the Military Bases
Agreement, in Miquiabas v. Commanding General33and Dizon v.
The Commanding General of the Philippine-Ryukus
Command,34 both of them being habeas corpus petitions, there was
no question as to the submission to jurisdiction of the respondents.
As a matter of fact, in Miquiabas v. Commanding General,35 the
immediate release of the petitioner was ordered, it being apparent
that the general court martial appointed by respondent Commanding
General was without jurisdiction to try petitioner. Thereafter, in the
cited cases of Syquia, Marquez Lim, and Johnson, the parties
proceeded against were American army commanding officers
stationed in the Philippines. The insuperable obstacle to the
jurisdiction of respondent Judge is that a foreign sovereign without
its consent is haled into court in connection with acts performed by it
pursuant to treaty provisions and thus impressed with a governmental
character.
3. The infirmity of the actuation of respondent Judge becomes even
more glaring when it is considered that private respondent had ceased
to have any right of entering within the base area. This is made clear
in the petition in these words: "In 1962, respondent Gener was issued
by the Bureau of Forestry an ordinary timber license to cut logs in
Barrio Mabayo, Morong, Bataan. The license was renewed on July
10, 1963. In 1963, he commenced logging operation inside the
United States Naval Base, Subic Bay, but in November 1963 he was
apprehended and stopped by the Base authorities from logging inside
the Base. The renewal of his license expired on July 30, 1964, and to
date his license has not been renewed by the Bureau of Forestry. .. In
July 1964, the Mutual Defense Board, a joint Philippines-United
States agency established pursuant to an exchange of diplomatic
notes between the Secretary of Foreign Affairs and the United States
Ambassador to provide "direct liaison and consultation between
appropriate Philippine and United States authorities on military
matters of mutual concern,' advised the Secretary of Foreign Affairs
in writing that: "The enclosed map shows that the area in which Mr.
Gener was logging definitely falls within the boundaries of the base.
This map also depicts certain contiguous and overlapping areas
whose functional usage would be interfered with by the logging
operations.'"36 Nowhere in the answer of respondents, nor in their
memorandum, was this point met. It remained unrefuted.
WHEREFORE, the writ of certiorari prayed for is granted, nullifying
and setting aside the writ of preliminary injunction issued by
respondent Judge in Civil Case No. 2984 of the Court of First
Instance of Bataan. The injunction issued by this Court on March 18,
1965 enjoining the enforcement of the aforesaid writ of preliminary
injunction of respondent Judge is hereby made permanent. Costs
against private respondent Edgardo Gener.

G.R. Nos. 97468-70 September 2, 1993
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER
represented by its Chief, DR. FLOR J.
LACANILAO, petitioner, vs.
DANILO ACOSTA in his capacity as Labor Arbiter of the
National Labor Relations Commission, Regional Arbitration,
Branch VI, CORAZON CANTO, DAN BALIAO, ELIZABETH
SUPETRAN, CARMELITA FERRER, CATHRYN
CONTRADOR, and DORIC VELOSO, respondents.
VITUG, J.:
This is an original petition for certiorari and prohibition, with a
prayer for the issuance of a restraining order, to set aside the order of
respondent labor arbiter, dated 20 September 1990, denying herein
petitioner's motion to dismiss the cases subject matter of the petition
for lack of jurisdiction.
Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB
case No. VI - 0214-86, were filed by the herein private respondents
against the petitioner, Southeast Asian Fisheries Development Center
(SEAFDEC), before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch, Iloilo City. In these cases, the
private respondents claim having been wrongfully terminated from
their employment by the petitioner.
On 22 August 1990, the petitioner, contending to be an international
inter-government organization, composed of various Southeast Asian
countries, filed a Motion to Dismiss, challenging the jurisdiction of
the public respondent in taking cognizance of the above cases.
On 20 September 1990, the public respondent issued the assailed
order denying the Motion to Dismiss. In due course, a Motion for
Reconsideration was interposed but the same, in an order, dated 07
January 1991, was likewise denied.
Hence, the instant petition. This Court, on 20 March 1991, issued the
temporary restraining order prayed for.
The private respondents, as well as respondent labor arbiter, allege
that the petitioner is not immune from suit and assuming that if,
indeed, it is an international organization, it has, however, impliedly,
if not expressly, waived its immunity by belatedly raising the issue of
jurisdiction.
The Solicitor General, on his part, filed a Manifestation and Motion,
which the Court granted, praying that he be excused from filing his
comment for respondent Labor Arbiter, he not being in agreement
with the latter's position on this matter.
On 30 March 1992, this Court dismissed the instant petition in a
resolution which reads:
. . . — Considering the allegations, issues and arguments adduced in
the petition for certiorari as well as the separate comments thereon of
the public and private respondents, and the consolidated reply thereto
of the petitioner, the Court RESOLVED to dismiss the petition for
failure to sufficiently show that the questioned judgment is tainted
with grave abuse of discretion. The temporary restraining order
issued on March 20, 1991 is hereby LIFTED effective immediately.
In time, the petitioner moved for a reconsideration, arguing that the
ground for its seeking the allowance of the petition is the labor
arbiter's lack of jurisdiction over the dispute.
3
The court is now asked to rule upon the motion for reconsideration.
We rule for the petitioner.
It is beyond question that petitioner SEAFDEC is an international
agency enjoying diplomatic immunity. This, we have already held
in Southeast Asian Fisheries Development Center-Aquaculture
Department vs. National Labor Relations Commission, G.R. No.
86773, 206 SCRA 283/1992; see also Lacanilao v. de Leon, G.R. No.
76532, 147 SCRA, 286/1987/, where we
said —
Petitioner Southeast Asian Fisheries Development
Center-Aquaculture Department (SEAFDEC-AQD) is an
international agency beyond the jurisdiction of public respondent
NLRC.
It was established by the Governments of Burma, Kingdom of
Cambodia, Republic of Indonesia, Japan, Kingdom of Laos,
Malaysia, Republic of the Philippines, Republic of Singapore,
Kingdom of Thailand and Republic of Vietnam . . . .
The Republic of the Philippines became a signatory to the Agreement
establishing SEAFDEC on January 16, 1968. Its purpose is as
follows:
The purpose of the Center is to contribute to the promotion of the
fisheries development in Southeast Asia by mutual co-operation
among the member governments of the Center, hereinafter called the
'Members', and through collaboration with international
organizations and governments external to the Center.
(Agreement Establishing the SEAFDEC, Art. 1; . . .).
SEAFDEC-AQD was organized during the Sixth Council Meeting of
SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of
the principal departments of SEAFDEC. . . . to be established in
Iloilo for the promotion of research in aquaculture. Paragraph 1,
Article 6 of the Agreement establishing mandates:
1. The Council shall be the supreme organ of the Center and all
powers of the Center shall be vested in the Council.
Being an intergovernmental organization, SEAFDEC including its
Departments (AQD), enjoys functional independence and freedom
from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap
stated in their book, Public International Law (p. 83,1956 ed.):
Permanent international commissions and administrative bodies have
been created by the agreement of a considerable number of States for
a variety of international purposes, economic or social and mainly
non-political. Among the notable instances are the International
Labor Organization, the International Institute of Agriculture, the
International Danube Commission. In so far as they are autonomous
and beyond the control of any one State, they have a distinct juridical
personality independent of the municipal law of the State where they
are situated. As such, according to one leading authority they must be
deemed to possess a species of international personality of their own.
(Salonga and Yap, Public International Law, 83 [1956 ed.]
Pursuant to its being a signatory to the Agreement, the Republic of
the Philippines agreed to be represented by one Director in governing
SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par.
1,. . .), and that its national laws and regulations shall apply only
insofar as its contributions to SEAFDEC of "an agreed amount of
money, movable and immovable property and services necessary for
the establishment and operation of the Center" are concerned (Art.
11, ibid). It expressly waived the application of the Philippine laws
 4

on the disbursement of funds of petitioner SEAFDEC-AQD (Section

2, P.D. No. 292).

The then Minister of Justice likewise opined that Philippine Courts

have no jurisdiction over SEAFDEC-AQD in Opinion No. 139,
Series of 1984 —

4. One of the basic immunities of an international organization is

immunity from local jurisdiction, i.e., that it is immune from the
legal writs and processes issued by the tribunals of the country where
it is found. (See Jenks, Id., pp. 37-44). The obvious reason for this is
that the subjection of such an organization to the authority of the
local courts would afford a convenient medium thru which the host
government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such
objection to local jurisdiction would impair the capacity of such body
to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by
the National Labor Relations Commission of Mr. Madamba's
reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA governing
board; even worse, it could compromise the desired impartiality of
the organization since it will have to suit its actuations to the
requirements of Philippine law, which may not necessarily coincide
with the interests of the other member-states. It is precisely to
forestall these possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of international
organizations (jurisdictional immunity, is specified in the enabling
instruments of international organizations), jurisdictional immunity
from the host country is invariably among the first accorded.
(See Jenks, Id.; See Bowett. The Law of International Institutions. pp.
284-285).

At its Sixth Meeting held at Kuala Lumpur, Malaysia, on 3 to 7 July

1973, the SEAFDEC Council approved the formal establishment of
its Aquaculture Department in the province of Iloilo, Philippines, to
promote research in Aquaculture as so expressed in the "Whereas"
Clauses of Presidential Decree No. 292 issued on 13 September
1973 1. Furthermore, Section 2 of the same decree had provided for
the autonomous character of SEAFDEC, thus:

. . . .All funds received by the Department shall be receipted and

disbursed in accordance with the Agreement establishing the
Southeast Asian Fisheries Development Center and pertinent
resolutions duly approved by the SEAFDEC Council.

As aptly pointed out by Associate Justice Isagani Cruz of this

Court—

Certain administrative bodies created by agreement among states

may be vested with international personality when two conditions
concur, to wit:, that their purposes are mainly non-political and that
they are autonomous, i.e., not subject to the control of any state. 2

Anent the issue of waiver of immunity, suffice it to say at the

moment that the petitioner has timely raised the issue of jurisdiction.
While the petitioner did not question the public respondent's lack of
jurisdiction at the early stages of the proceedings, it, nevertheless, did
so before it rested its case and certainly well before the proceedings
thereat had terminated.

WHEREFORE, our resolution, dated 30 March 1992, dismissing the

petition for certiorari, is hereby reconsidered, and another is entered
(a) granting due course to the petition; (b) setting aside the order,
dated 20 September 1990, of the public respondent; and (c) enjoining
the public respondent from further proceeding with RAB Case No.
VI-0156-86 and RAB Case No. VI-0214-86. No costs.

SO ORDERED.

[G.R. No. 122191. October 8, 1998]
SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court
seeks to annul and set aside the Resolution[1] dated September 27,
1995 and the Decision[2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated
August 29, 1994[6] and February 2, 1995[7] that were issued by the
trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition,
as stated in the questioned Decision[9], are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer
Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it
was almost morning when they returned to their hotels, they agreed
to have breakfast together at the room of Thamer. When they were in
te (sic) room, Allah left on some pretext. Shortly after he did,
Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued
her. Later, the Indonesian police came and arrested Thamer and
Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of
Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad
and base manager Baharini negotiated with the police for the
immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might
be tricked into something she did not want because of her inability to
understand the local dialect. She also declined to sign a blank paper
and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta
flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDI (sic). In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
5
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report
to Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told
her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to
the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male
crew, in contravention of Islamic tradition.[10]
Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help
her while her case is on appeal. Meanwhile, to pay for her upkeep,
she worked on the domestic flight of SAUDIA, while Thamer and
Allah continued to serve in the international flights.[11]
Because she was wrongfully convicted, the Prince of Makkah
dismissed the case against her and allowed her to leave Saudi
Arabia. Shortly before her return to Manila,[12] she was terminated
from the service by SAUDIA, without her being informed of the
cause.
On November 23, 1993, Morada filed a Complaint[13] for damages
against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss[14] which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that defendant
Al-Balawi is not a real party in interest; (3) that the claim or demand
set forth in the Complaint has been waived, abandoned or otherwise
extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to
Dismiss)[15] Saudia filed a reply[16] thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint[17] wherein
Al-Balawi was dropped as party defendant. On August 11, 1994,
Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint[18].
The trial court issued an Order[19] dated August 29, 1994 denying
the Motion to Dismiss Amended Complaint filed by Saudia.

From the Order of respondent Judge[20] denying the Motion to
Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration[21] of the Order dated August 29, 1994. It alleged
that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable
is the law of the Kingdom of Saudi Arabia. On October 14, 1994,
Morada filed her Opposition[22] (To Defendants Motion for
Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994,
SAUDIA alleged that since its Motion for Reconsideration raised
lack of jurisdiction as its cause of action, the Omnibus Motion Rule
does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not
have any substantial interest in the prosecution of the instant case,
and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order[24] dated
February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi
Arabian Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14,
1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiffs Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorneys fees,
upon the basis of the applicable Philippine law, Article 21 of the
New Civil Code of the Philippines, is, clearly, within the jurisdiction
of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration of
the defendant, is DENIED.
SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition
for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order[26] with
the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with
Temporary Restraining Order[27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIAs Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18, 1995,
to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny
Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et.
Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the
instant Petition[29] for Review with Prayer for Temporary
Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent
Court of Appeals rendered the Decision[30] dated April 10, 1996,
now also assailed. It ruled that the Philippines is an appropriate
forum considering that the Amended Complaints basis for recovery
6
of damages is Article 21 of the Civil Code, and thus, clearly within
the jurisdiction of respondent Court. It further held that certiorari is
not the proper remedy in a denial of a Motion to Dismiss, inasmuch
as the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for
Review with Prayer for Temporary Restraining Order[31] dated
April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda,[32] the instant case is now deemed
submitted for decision.
Petitioner SAUDIA raised the following issues:
I
The trial court has no jurisdiction to hear and try Civil Case No.
Q-93-18394 based on Article 21 of the New Civil Code since the
proper law applicable is the law of the Kingdom of Saudi Arabia
inasmuch as this case involves what is known in private international
law as a conflicts problem. Otherwise, the Republic of the
Philippines will sit in judgment of the acts done by another sovereign
state which is abhorred.
II.
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of leave
of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioners April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed
with liberality pursuant to Section 2, Rule 1 thereof.
III.
Petitioner received on April 22, 1996 the April 10, 1996 decision in
CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining
Order on May 7, 1996 at 10:29 a.m. or within the 15-day
reglementary period as provided for under Section 1, Rule 45 of the
Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO.
36533 has not yet become final and executory and this Honorable
Court can take cognizance of this case.[33]
From the foregoing factual and procedural antecedents, the following
issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE
NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THE CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that
must be settled at the outset. It maintains that private respondents
claim for alleged abuse of rights occurred in the Kingdom of Saudi
Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom of Saudi
Arabia, by virtue of the lex loci delicti commissi rule.[34]

On the other hand, private respondent contends that since her
Amended Complaint is based on Articles 19[35] and 21[36] of the
Civil Code, then the instant case is properly a matter of domestic
law.[37]
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint[38] dated
June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a
foreign airlines corporation doing business in the Philippines. It may
be served with summons and other court processes at Travel Wide
Associated Sales (Phils.), Inc., 3rd Floor, Cougar Building, 114
Valero St., Salcedo Village, Makati, Metro Manila.
xxxxxxxxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah,
Saudi Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing, and listening to the
7
music in violation of Islamic laws; (3) socializing with the male crew,
in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff
sought the help of the Philippine Embassy in Jeddah. The latter
helped her pursue an appeal from the decision of the court. To pay
for her upkeep, she worked on the domestic flights of defendant
SAUDIA while, ironically, Thamer and Allah freely served the
international flights.[39]
Where the factual antecedents satisfactorily establish the existence of
a foreign element, we agree with petitioner that the problem herein
could present a conflicts case.
A factual situation that cuts across territorial lines and is affected by
the diverse laws of two or more states is said to contain a foreign
element. The presence of a foreign element is inevitable since social
and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception.[40]
The forms in which this foreign element may appear are
many.[41] The foreign element may simply consist in the fact that
one of the parties to a contract is an alien or has a foreign domicile,
or that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may
assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that
private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight
stewardess, events did transpire during her many occasions of travel
across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation
to arise.
We thus find private respondents assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and the
question of jurisdiction[43]confronts the court a quo.
After a careful study of the private respondents Amended
Complaint,[44] and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil
Code.
On one hand, Article 19 of the New Civil Code provides;
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of
Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to
expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private respondents
assertion that violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.

Based on the allegations[46] in the Amended Complaint, read in the
light of the Rules of Court on jurisdiction[47] we find that the
Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit.[48] Its authority to try and hear
the case is provided for under Section 1 of Republic Act No. 7691, to
wit:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known
as the Judiciary Reorganization Act of 1980, is hereby amended to
read as follows:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall
exercise exclusive jurisdiction:
xxxxxxxxx
(8) In all other cases in which demand, exclusive of interest, damages
of whatever kind, attorneys fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand
pesos (P100,000.00) or, in such other cases in Metro Manila, where
the demand, exclusive of the above-mentioned items exceeds Two
hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxxxxxxxx
And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe
venue, Quezon City, is appropriate:
SEC. 2 Venue in Courts of First Instance. [Now Regional Trial
Court]
(a) x x x x x x x x x
(b) Personal actions. All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiff resides, at the election of
the plaintiff.
Pragmatic considerations, including the convenience of the parties,
also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite
obvious. Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum, vex,
harass, or oppress the defendant, e.g. by inflicting upon him needless
expense or disturbance. But unless the balance is strongly in favor of
the defendant, the plaintiffs choice of forum should rarely be
disturbed.[49]
Weighing the relative claims of the parties, the court a quo found it
best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains substantial
connections.That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent)
should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons
of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary
submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several
motions[50] praying for the dismissal of Moradas Amended
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs under
8
the premises.Undeniably, petitioner SAUDIA has effectively
submitted to the trial courts jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of
jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower courts jurisdiction over defendants person,
prayed for dismissal of the complaint on the ground that plaintiffs
cause of action has prescribed. By interposing such second ground in
its motion to dismiss, Ker and Co., Ltd. availed of an affirmative
defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea
of defendant Ker & Co., Ltd., it necessarily had to acquire
jurisdiction upon the latters person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the
court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and
separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of
the court over his person, he thereby submits himself to the
jurisdiction of the court. A special appearance by motion made for
the purpose of objecting to the jurisdiction of the court over the
person will be held to be a general appearance, if the party in said
motion should, for example, ask for a dismissal of the action upon
the further ground that the court had no jurisdiction over the subject
matter.[52]
Clearly, petitioner had submitted to the jurisdiction of the Regional
Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law
problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant
facts occurred in two or more states; and (2) to what extent should
the chosen legal system regulate the situation.[53]
Several theories have been propounded in order to identify the legal
system that should ultimately control. Although ideally, all
choice-of-law theories should intrinsically advance both notions of
justice and predictability, they do not always do so. The forum is
then faced with the problem of deciding which of these two
important values should be stressed.[54]
Before a choice can be made, it is necessary for us to determine
under what category a certain set of facts or rules fall. This process is
known as characterization, or the doctrine of qualification. It is the
process of deciding whether or not the facts relate to the kind of
question specified in a conflicts rule.[55] The purpose
ofcharacterization is to enable the forum to select the proper law.[56]
Our starting point of analysis here is not a legal relation, but a factual
situation, event, or operative fact.[57] An essential element of
conflict rules is the indication of a test or connecting factor or point
of contact. Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting
factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of
wrongdoing.[58]
Note that one or more circumstances may be present to serve as the
possible test for the determination of the applicable law.[59] These

test factors or points of contact or connecting factors could be any of
the following:
(1) The nationality of a person, his domicile, his residence, his place
of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive when
real rights are involved;
(4) the place where an act has been done, the locus actus, such as the
place where a contract has been made, a marriage celebrated, a will
signed or a tort committed. The lex loci actus is particularly
important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the
place of performance of contractual duties, or the place where a
power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should
govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex forithe law of the forumis particularly
important because, as we have seen earlier, matters of procedure not
going to the substance of the claim involved are governed by it; and
because the lex fori applies whenever the content of the otherwise
applicable foreign law is excluded from application in a given case
for the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically
all legal relationships of the ship and of its master or owner as
such. It also covers contractual relationships particularly contracts of
affreightment.[60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations
in the Amended Complaint deemed submitted for purposes of the
motion to dismiss, we are convinced that there is reasonable basis for
private respondents assertion that although she was already working
in Manila, petitioner brought her to Jeddah on the pretense that she
would merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on her person
while they were in Jakarta. As it turned out, she was the one made to
face trial for very serious charges, including adultery and violation of
Islamic laws and tradition.
There is likewise logical basis on record for the claim that the
handing over or turning over of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioners purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering
of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the
guise of petitioners authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found
by the Prince of Makkah, the alleged conviction and imprisonment of
private respondent was wrongful. But these capped the injury or
harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or
redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving
torts, the connecting factor or point of contact could be the place or
places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the
Philippines could be said as a situs of the tort (the place where the
alleged tortious conduct took place). This is because it is in the
9
Philippines where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights
and in the performance of its duties, act with justice, give her her due
and observe honesty and good faith. Instead, petitioner failed to
protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment.For in our
view what is important here is the place where the over-all harm or
the fatality of the alleged injury to the person, reputation, social
standing and human rights of complainant, had lodged, according to
the plaintiff below (herein private respondent). All told, it is not
without basis to identify the Philippines as the situs of the alleged
tort.
Moreover, with the widespread criticism of the traditional rule of lex
loci delicti commissi, modern theories and rules on tort
liability[61] have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories on
tort liability, we find here an occasion to apply the State of the most
significant relationship rule, which in our view should be appropriate
to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred;
(b) the place where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if
any, between the parties is centered.[62]
As already discussed, there is basis for the claim that over-all injury
occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the business
of international air carriage. Thus, the relationship between the
parties was centered here, although it should be stressed that this suit
is not based on mere labor law violations. From the record, the claim
that the Philippines has the most significant contact with the matter
in this dispute,[63] raised by private respondent as plaintiff below
against defendant (herein petitioner), in our view, has been properly
established.
Prescinding from this premise that the Philippines is the situs of the
tort complaint of and the place having the most interest in the
problem, we find, by way of recapitulation, that the Philippine law on
tort liability should have paramount application to and control in the
resolution of the legal issues arising out of this case. Further, we hold
that the respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the appropriate venue
is in Quezon City, which could properly apply Philippine
law. Moreover, we find untenable petitioners insistence that [s]ince
private respondent instituted this suit, she has the burden of pleading
and proving the applicable Saudi law on the matter.[64] As aptly said
by private respondent, she has no obligation to plead and prove the
law of the Kingdom of Saudi Arabia since her cause of action is
based on Articles 19 and 21 of the Civil Code of the Philippines. In
her Amended Complaint and subsequent pleadings she never alleged
that Saudi law should govern this case.[65] And as correctly held by
the respondent appellate court, considering that it was the petitioner
who was invoking the applicability of the law of Saudi Arabia, thus
the burden was on it [petitioner] to plead and to establish what the
law of Saudi Arabia is.[66]
Lastly, no error could be imputed to the respondent appellate court in
upholding the trial courts denial of defendants (herein petitioners)
motion to dismiss the case. Not only was jurisdiction in order and
venue properly laid, but appeal after trial was obviously available,
 10

and the expeditious trial itself indicated by the nature of the case at
hand. Indubitably, the Philippines is the state intimately concerned
with the ultimate outcome of the case below not just for the benefit
of all the litigants, but also for the vindication of the countrys system
of law and justice in a transnational setting. With these guidelines in
mind, the trial court must proceed to try and adjudge the case in the
light of relevant Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of course, should
be construed as prejudging the results of the case in any manner
whatsoever.

WHEREFORE, the instant petition for certiorari is hereby

DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P.
Morada vs. Saudi Arabia Airlines is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further
proceedings. SO ORDERED.

II. WHAT TRIBUNALS OF THE FORUM MUST DO
HASEGAWA V KITAMURA
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the April 18, 2001 Decision[1] of the
Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution[2] denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co.,
Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,[3] entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.[4] The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.[5] Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.[6]
When the STAR Project was near completion, the Department of
Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.[7] Respondent was named as the
project manager in the contract's Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
general manager for its International Division, informed respondent
that the company had no more intention of automatically renewing
his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.[9]
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondents
contract was for a fixed term that had already expired, and refused to
negotiate for the renewal of the ICA.[10]
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with
the Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been
perfected in Japan and executed by and between Japanese nationals,
moved to dismiss the complaint for lack of jurisdiction. They
asserted that the claim for improper pre-termination of
respondent's ICA could only be heard and ventilated in the proper
courts of Japan following the principles of lex loci
celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.[13]
11
On June 29, 2000, the RTC, invoking our ruling in Insular
Government v. Frank[14] that matters connected with the
performance of contracts are regulated by the law prevailing at the
place of performance,[15] denied the motion to dismiss.[16] The trial
court subsequently denied petitioners' motion for
reconsideration,[17] prompting them to file with the appellate court,
on August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].[18] On August 23, 2000, the
CA resolved to dismiss the petition on procedural groundsfor lack of
statement of material dates and for insufficient verification and
certification against forum shopping.[19] An Entry of Judgment was
later issued by the appellate court on September 20, 2000.[20]
Aggrieved by this development, petitioners filed with the CA,
on September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein
the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.[21]
Ruling on the merits of the second petition, the appellate court
rendered the assailed April 18, 2001 Decision[22] finding no grave
abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. The
CA thus declared that the trial court was correct in applying instead
the principle of lex loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by
the CA in the assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review
on Certiorari[25] imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS
ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE
LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S]
IN PRIVATE INTERNATIONAL LAWS.[26]

The pivotal question that this Court is called upon to resolve is
whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the state of the
most significant relationship rule, or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising
the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.[27] The same holds
true in the CA's dismissal of the said case due to defects in the formal
requirement of verification[28] and in the other requirement in Rule
46 of the Rules of Court on the statement of the material
dates.[29] The dismissal being without prejudice, petitioners can
re-file the petition, or file a second petition attaching thereto the
appropriate verification and certificationas they, in fact didand
stating therein the material dates, within the prescribed period[30] in
Section 4, Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the
merits does not bar another action involving the same parties, on the
same subject matter and theory.[32]
Necessarily, because the said dismissal is without prejudice and has
no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural
grounds,[33] petitioners are no longer required by the Rules to
indicate in their certification of non-forum shopping in the instant
petition for review of the second certiorari petition, the status of the
aforesaid first petition before the CA. In any case, an omission in the
certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is
not a fatal defect. It will not warrant the dismissal and nullification of
the entire proceedings, considering that the evils sought to be
prevented by the said certificate are no longer present.[34]
The Court also finds no merit in respondent's contention that
petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not the
instant petition. True, the Authorization[35] dated September 4, 2000,
which is attached to the second certiorari petition and which is also
attached to the instant petition for review, is limited in scopeits
wordings indicate that Hasegawa is given the authority to sign for
and act on behalf of the company only in the petition filed with the
appellate court, and that authority cannot extend to the instant
12
petition for review.[36] In a plethora of cases, however, this Court
has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of
the requirements have been made.[37] Given that petitioners herein
sufficiently explained their misgivings on this point and appended to
their Reply[38] an updated Authorization[39] for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the
same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on
behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a
few cases, we have ruled that corporate powers are exercised by the
board of directors; thus, no person, not even its officers, can bind
the corporation, in the absence of authority from the
board.[40] Considering that Hasegawa verified and certified the
petition only on his behalf and not on behalf of the other petitioner,
the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.[41] Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.[42] While technical
rules of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court
dockets.[43]
Further, the Court has observed that petitioners incorrectly filed a
Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying
a motion to dismiss is interlocutory,
and cannot be the subject of the extraordinary petition for certiorari o
r mandamus. The appropriate recourse is to file an answer and to
interpose as defenses the objections raised in the motion, to proceed
to trial, and, in case of an adverse decision, to elevate the entire case
by appeal in due course.[44] While there are recognized exceptions
to this rule,[45] petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum,
petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent.
The ICA subject of the litigation was entered into and perfected
in Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties[46] following the [state of the]
most significant relationship rule in Private International Law.[47]
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the
Motion to Dismiss[48] filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely
argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.[49] While not
abandoning this stance in their petition before the appellate court,
petitioners on certiorari significantly invoked the defense of forum

non conveniens.[50] On petition for review before this Court,
petitioners dropped their other arguments, maintained the forum non
conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship
rule.[51]
Be that as it may, this Court is not inclined to deny this petition
merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.[52] We only pointed
out petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can
the resulting judgment be enforced?[53]
Analytically, jurisdiction and choice of law are two distinct
concepts.[54] Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of
the lex fori will often coincide, the minimum contacts for one do not
always provide the necessary significant contacts for the
other.[55] The question of whether the law of a state can be applied
to a transaction is different from the question of whether the courts of
that state have jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issuejurisdiction. Jurisdiction,
however, has various aspects. For a court to validly exercise its
power to adjudicate a controversy, it must have jurisdiction over the
plaintiff or the petitioner, over the defendant or the respondent, over
the subject matter, over the issues of the case and, in cases involving
property, over the res or the thing which is the subject of the
litigation.[57] In assailing the trial court's jurisdiction herein,
petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is
conferred by the sovereign authority which establishes and organizes
the court. It is given only by law and in the manner prescribed by
law.[58] It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein.[59] To succeed in its motion for the
dismissal of an action for lack of jurisdiction over the subject matter
of the claim,[60] the movant must show that the court or tribunal
cannot act on the matter submitted to it because no law grants it the
power to adjudicate the claims.[61]
In the instant case, petitioners, in their motion to dismiss, do not
claim that the trial court is not properly vested by law with
jurisdiction to hear the subject controversy for, indeed, Civil Case No.
00-0264 for specific performance and damages is one not capable of
pecuniary estimation and is properly cognizable by the RTC of Lipa
City.[62] What they rather raise as grounds to question subject matter
13
jurisdiction are the principles of lex loci celebrationis and lex
contractus,and the state of the most significant relationship rule.
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the law of the place of the
ceremony[63] or the law of the place where a contract is
made.[64] The doctrine of lex contractus or lex loci contractus means
the law of the place where a contract is executed or to be
performed.[65] It controls the nature, construction, and validity of the
contract[66] and it may pertain to the law voluntarily agreed upon by
the parties or the law intended by them either expressly or
implicitly.[67] Under the state of the most significant relationship
rule, to ascertain what state law to apply to a dispute, the court
should determine which state has the most substantial connection to
the occurrence and the parties. In a case involving a contract, the
court should consider where the contract was made, was negotiated,
was to be performed, and the domicile, place of business, or place of
incorporation of the parties.[68] This rule takes into account several
contacts and evaluates them according to their relative importance
with respect to the particular issue to be resolved.[69]
Since these three principles in conflict of laws make reference to the
law applicable to a dispute, they are rules proper for the second phase,
the choice of law.[70]They determine which state's law is to be
applied in resolving the substantive issues of a conflicts
problem.[71] Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also not
yet called for.
Further, petitioners' premature invocation of choice-of-law rules is
exposed by the fact that they have not yet pointed out any conflict
between the laws of Japanand ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules.[72] Also, when
the law of a foreign country is invoked to provide the proper rules for
the solution of a case, the existence of such law must be pleaded and
proved.[73]
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over
the case and take into account or apply the law of some other State or
States.[74] The courts power to hear cases and controversies is
derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign
sovereign law short of treaties or other formal agreements, even in
matters regarding rights provided by foreign sovereigns.[75]
Neither can the other ground raised, forum non conveniens,[76] be
used to deprive the trial court of its jurisdiction herein. First, it is not
a proper basis for a motion to dismiss because Section 1, Rule 16 of
the Rules of Court does not include it as a ground.[77] Second,
whether a suit should be entertained or dismissed on the basis of the
said doctrine depends largely upon the facts of the particular case and
is addressed to the sound discretion of the trial court.[78] In this case,
the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual
 14

determination; hence, this conflicts principle is more properly

considered a matter of defense.[79]

Accordingly, since the RTC is vested by law with the power to

entertain and hear the civil case filed by respondent and the grounds
raised by petitioners to assail that jurisdiction are inappropriate, the
trial and appellate courts correctly denied the petitioners motion to
dismiss.

WHEREFORE, premises considered, the petition for review

on certiorari is DENIED. SO ORDERED.

G.R. No. 112573 February 9, 1995
NORTHWEST ORIENT AIRLINES, INC. petitioner, vs.
COURT OF APPEALS and C.F. SHARP & COMPANY
INC., respondents.
PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the decision of
the Court of Appeals affirming the dismissal of the petitioner's
complaint to enforce the judgment of a Japanese court. The principal
issue here is whether a Japanese court can acquire jurisdiction over a
Philippine corporation doing business in Japan by serving summons
through diplomatic channels on the Philippine corporation at its
principal office in Manila after prior attempts to serve summons in
Japan had failed.
Petitioner Northwest Orient Airlines, Inc.
(hereinafter NORTHWEST), a corporation organized under the laws
of the State of Minnesota, U.S.A., sought to enforce in Civil Case No.
83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a
judgment rendered in its favor by a Japanese court against private
respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a
corporation incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F.
Sharp & Company, through its Japan branch, entered into an
International Passenger Sales Agency Agreement, whereby the
former authorized the latter to sell its air transportation tickets.
Unable to remit the proceeds of the ticket sales made by defendant on
behalf of the plaintiff under the said agreement, plaintiff on March 25,
1980 sued defendant in Tokyo, Japan, for collection of the
unremitted proceeds of the ticket sales, with claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th Civil
Department, Tokyo District Court of Japan against defendant at its
office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho,
Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the
summons was unsuccessful because the bailiff was advised by a
person in the office that Mr. Dinozo, the person believed to be
authorized to receive court processes was in Manila and would be
back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve
the summons. Mr. Dinozo refused to accept the same claiming that
he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the
Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila. On
July 11, 1980, the Director of the Tokyo District Court requested the
Supreme Court of Japan to serve the summons through diplomatic
channels upon the defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records). Despite
receipt of the same, defendant failed to appear at the scheduled
hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's
complaint and on [January 29, 1981], rendered judgment ordering the
defendant to pay the plaintiff the sum of 83,158,195 Yen and
damages for delay at the rate of 6% per annum from August 28, 1980
up to and until payment is completed (pp. 12-14, Records).
15
On March 24, 1981, defendant received from Deputy Sheriff Balingit
copy of the judgment. Defendant not having appealed the judgment,
the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May
20, 1983, a suit for enforcement of the judgment was filed by
plaintiff before the Regional Trial Court of Manila Branch 54.2
On July 16, 1983, defendant filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null and
void and unenforceable in this jurisdiction having been rendered
without due and proper notice to the defendant and/or with collusion
or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
Rec.).
Unable to settle the case amicably, the case was tried on the merits.
After the plaintiff rested its case, defendant on April 21, 1989, filed a
Motion for Judgment on a Demurrer to Evidence based on two
grounds:
(1) the foreign judgment sought to be enforced is null and void for
want of jurisdiction and (2) the said judgment is contrary to
Philippine law and public policy and rendered without due process of
law. Plaintiff filed its opposition after which the court a quo rendered
the now assailed decision dated June 21, 1989 granting the demurrer
motion and dismissing the complaint (Decision, pp. 376-378,
Records). In granting the demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this action is
null and void for want of jurisdiction over the person of the
defendant considering that this is an action in personam; the Japanese
Court did not acquire jurisdiction over the person of the defendant
because jurisprudence requires that the defendant be served with
summons in Japan in order for the Japanese Court to acquire
jurisdiction over it, the process of the Court in Japan sent to the
Philippines which is outside Japanese jurisdiction cannot confer
jurisdiction over the defendant in the case before the Japanese Court
of the case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff
contends that the Japanese Court acquired jurisdiction because the
defendant is a resident of Japan, having four (4) branches doing
business therein and in fact had a permit from the Japanese
government to conduct business in Japan (citing the exhibits
presented by the plaintiff); if this is so then service of summons
should have been made upon the defendant in Japan in any of these
alleged four branches; as admitted by the plaintiff the service of the
summons issued by the Japanese Court was made in the Philippines
thru a Philippine Sheriff. This Court agrees that if the defendant in a
foreign court is a resident in the court of that foreign court such court
could acquire jurisdiction over the person of the defendant but it
must be served upon the defendant in the territorial jurisdiction of the
foreign court. Such is not the case here because the defendant was
served with summons in the Philippines and not in Japan.
Unable to accept the said decision, plaintiff on July 11, 1989 moved
for reconsideration of the decision, filing at the same time a
conditional Notice of Appeal, asking the court to treat the said notice
of appeal "as in effect after and upon issuance of the court's denial of
the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply
dated August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court disregarded the Motion for
Reconsideration and gave due course to the plaintiff's Notice of
Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It
agreed with the latter in its reliance upon Boudard vs.Tait 4 wherein
it was held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by

serving him beyond the boundaries of the state." To support its
position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case, personal
service of summons within the forum is required for the court to
acquire jurisdiction over the defendant (Magdalena Estate Inc. vs.
Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal
or substituted service of summons on the defendant not
extraterritorial service is necessary (Dial Corp vs. Soriano, 161
SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is
an action in personam, it is its theory that a distinction must be made
between an action in personam against a resident defendant and an
action in personam against a non-resident defendant. Jurisdiction is
acquired over a non-resident defendant only if he is served personally
within the jurisdiction of the court and over a resident defendant if by
personal, substituted or constructive service conformably to statutory
authorization. Plaintiff-appellant argues that since the
defendant-appellee maintains branches in Japan it is considered a
resident defendant. Corollarily, personal, substituted or constructive
service of summons when made in compliance with the procedural
rules is sufficient to give the court jurisdiction to render judgment in
personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be
served outside the territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and this
is regardless of the residence or citizenship of the party thus served
(Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292,
Am. Case 1912 D680). There must be actual service within the
proper territorial limits on defendant or someone authorized to accept
service for him. Thus, a defendant, whether a resident or not in the
forum where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant and
non-resident defendant were to be adopted, such distinction applies
only to natural persons and not in the corporations. This finds support
in the concept that "a corporation has no home or residence in the
sense in which those terms are applied to natural persons" (Claude
Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited
by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and can be
predicated on an artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a corporation can have no local
residence or habitation. It has been said that a corporation is a mere
ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy no
space, and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p.
693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v.
Hartfold F. Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character of a
corporation is to be determined by the place of its origin where its
charter was granted and not by the location of its business activities
(Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101), A
corporation is a "resident" and an inhabitant of the state in which it is
incorporated and no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under
the Philippine laws. Clearly, its residence is the Philippines, the place
of its incorporation, and not Japan. While defendant-appellee
maintains branches in Japan, this will not make it a resident of Japan.
A corporation does not become a resident of another by engaging in
business there even though licensed by that state and in terms given
16
all the rights and privileges of a domestic corporation (Galveston H.
& S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As
such, court processes must be served upon it at a place within the
state in which the action is brought and not elsewhere (St. Clair vs.
Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354).5
It then concluded that the service of summons effected in Manila or
beyond the territorial boundaries of Japan was null and did not confer
jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST
elevated the case to this Court contending that the respondent court
erred in holding that SHARP was not a resident of Japan and that
summons on SHARP could only be validly served within that
country.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is also
proper to presume the regularity of the proceedings and the giving of
due notice therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right
as between the parties and their successors-in-interest by a
subsequent title. The judgment may, however, be assailed by
evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under Section
3 of Rule 131, a court, whether of the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of
jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden
of overcoming the presumption of its validity.7Being the party
challenging the judgment rendered by the Japanese court, SHARP
had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial
service of summons effected at its home office in the Philippines was
not only ineffectual but also void, and the Japanese Court did not,
therefore acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those
relating to the service of process upon a defendant are governed by
the lex fori or the internal law of the forum.8 In this case, it is the
procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on
SHARP. As to what this law is is a question of fact, not of law. It
may not be taken judicial notice of and must be pleaded and proved
like any other fact.9 Sections 24 and 25, Rule 132 of the Rules of
Court provide that it may be evidenced by an official publication or
by a duly attested or authenticated copy thereof. It was then
incumbent upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of summons and
the decision thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese
law, the presumption of identity or similarity or the so-called
processual presumption 10 may be invoked. Applying it, the
Japanese law on the matter is presumed to be similar with the
Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule 14 of
the Rules of Court provides that if the defendant is a foreign
corporation doing business in the Philippines, service may be made:
(1) on its resident agent designated in accordance with law for that

purpose, or, (2) if there is no such resident agent, on the government
official designated by law to that effect; or (3) on any of its officers
or agents within the Philippines.
If the foreign corporation has designated an agent to receive
summons, the designation is exclusive, and service of summons is
without force and gives the court no jurisdiction unless made upon
him. 11
Where the corporation has no such agent, service shall be made on
the government official designated by law, to wit: (a) the Insurance
Commissioner in the case of a foreign insurance company; (b) the
Superintendent of Banks, in the case of a foreign banking corporation;
and (c) the Securities and Exchange Commission, in the case of other
foreign corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government office or
official served shall transmit by mail a copy of the summons or other
legal proccess to the corporation at its home or principal office. The
sending of such copy is a necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon
the Securities and Exchange Commission, the Superintendent of
Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing
business in the country no longer has any branches or offices within
the Philippines. Such contention is belied by the pertinent provisions
of the said laws. Thus, Section 128 of the Corporation Code 13 and
Section 190 of the Insurance Code 14 clearly contemplate two
situations: (1) if the corporation had left the Philippines or had
ceased to transact business therein, and (2) if the corporation has no
designated agent. Section 17 of the General Banking Act 15 does not
even speak a corporation which had ceased to transact business in the
Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan. This
silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official or on any
of SHARP's officers or agents in Japan could be availed of. The
respondent, however, insists that only service of any of its officers or
employees in its branches in Japan could be resorted to. We do not
agree. As found by the respondent court, two attempts at service
were made at SHARP's Yokohama branch. Both were unsuccessful.
On the first attempt, Mr. Dinozo, who was believed to be the person
authorized to accept court process, was in Manila. On the second, Mr.
Dinozo was present, but to accept the summons because, according
to him, he was no longer an employee of SHARP. While it may be
true that service could have been made upon any of the officers or
agents of SHARP at its three other branches in Japan, the availability
of such a recourse would not preclude service upon the proper
government official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court
which ordered that summons for SHARP be served at its head office
in the Philippine's after the two attempts of service had failed. 16 The
Tokyo District Court requested the Supreme Court of Japan to cause
the delivery of the summons and other legal documents to the
Philippines. Acting on that request, the Supreme Court of Japan sent
the summons together with the other legal documents to the Ministry
of Foreign Affairs of Japan which, in turn, forwarded the same to the
Japanese Embassy in Manila . Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of the
Philippines, then to the Executive Judge of the Court of First Instance
(now Regional Trial Court) of Manila, who forthwith ordered Deputy
Sheriff Rolando Balingit to serve the same on SHARP at its principal
office in Manila. This service is equivalent to service on the proper
government official under Section 14, Rule 14 of the Rules of Court,
in relation to Section 128 of the Corporation Code. Hence, SHARP's
17
contention that such manner of service is not valid under Philippine
laws holds no water.17
In deciding against the petitioner, the respondent court sustained the
trial court's reliance on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in personam over
nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial effect, and no
jurisdiction is acquired over the person of the defendant by serving
him beyond the boundaries of the state. Nor has a judgment of a
court of a foreign country against a resident of this country having no
property in such foreign country based on process served here, any
effect here against either the defendant personally or his property
situated here.
Process issuing from the courts of one state or country cannot run
into another, and although a nonresident defendant may have been
personally served with such process in the state or country of his
domicile, it will not give such jurisdiction as to authorize a personal
judgment against him.
It further availed of the ruling in Magdalena Estate,
Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the
principle laid down by the Iowa Supreme Court in the 1911 case
of Raher vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved
the enforcement of a judgment of the civil division of the Court of
First Instance of Hanoi, French Indo-China. The trial court dismissed
the case because the Hanoi court never acquired jurisdiction over the
person of the defendant considering that "[t]he, evidence adduced at
the trial conclusively proves that neither the appellee [the defendant]
nor his agent or employees were ever in Hanoi, French Indo-China;
and that the deceased Marie Theodore Jerome Boudard had never, at
any time, been his employee." In Magdalena Estate, what was
declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in
personam was the service of summons through publication against
non-appearing resident defendants. It was claimed that the latter
concealed themselves to avoid personal service of summons upon
them. In Dial, the defendants were foreign corporations which were
not, domiciled and licensed to engage in business in the Philippines
and which did not have officers or agents, places of business, or
properties here. On the other hand, in the instant case, SHARP was
doing business in Japan and was maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of the past.
In that case, a divided Supreme Court of Iowa declared that the
principle that there can be no jurisdiction in a court of a territory to
render a personal judgment against anyone upon service made
outside its limits was applicable alike to cases of residents and
non-residents. The principle was put at rest by the United States
Supreme Court when it ruled in the 1940 case of Milliken
vs. Meyer 22 that domicile in the state is alone sufficient to bring an
absent defendant within the reach of the state's jurisdiction for
purposes of a personal judgment by means of appropriate substituted
service or personal service without the state. This principle is
embodied in section 18, Rule 14 of the Rules of Court which allows
service of summons on residents temporarily out of the Philippines to
be made out of the country. The rationale for this rule was explained
in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by
the mere fact of his absence from the state. The state which accords

him privileges and affords protection to him and his property by
virtue of his domicile may also exact reciprocal duties. "Enjoyment
of the privileges of residence within the state, and the attendant right
to invoke the protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that citizenship
arise out of the relationship to the state which domicile creates. That
relationship is not dissolved by mere absence from the state. The
attendant duties, like the rights and privileges incident to domicile,
are not dependent on continuous presence in the state. One such
incident of domicile is amenability to suit within the state even
during sojourns without the state, where the state has provided and
employed a reasonable method for apprising such an absent party of
the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can
have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it has
offices and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated
in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may be
considered "residents of the Philippine Islands" as that term is used
in Section 20 of the Insolvency Law . . . or residents of the state
under the laws of which they were respectively incorporated. The
answer cannot be found in the Insolvency Law itself, which contains
no definition of the term, resident, or any clear indication of its
meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the
term may be derived.
The National Internal Revenue Code declares that the term "'resident
foreign corporation' applies to a foreign corporation engaged in trade
or business within the Philippines," as distinguished from a
"'non-resident foreign corporation' . . . (which is one) not engaged in
trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states
"that branches, subsidiaries, affiliation, extension offices or any other
units of corporation or juridical person organized under the laws of
any foreign country operating in the Philippines shall be considered
residents of the Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches
and agencies in the Philippines of foreign banks . . . (which are)
called Philippine branches," in the same category as "commercial
banks, savings associations, mortgage banks, development banks,
rural banks, stock savings and loan associations" (which have been
formed and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms "banking
institutions" and "bank" are used in the Act [Sec. 2], declaring on the
contrary that in "all matters not specifically covered by special
provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, said foreign banks or their branches and
agencies lawfully doing business in the Philippines "shall be bound
by all laws, rules, and regulations applicable to domestic banking
corporations of the same class, except such laws, rules and
regulations as provided for the creation, formation, organization, or
dissolution of corporations or as fix the relation, liabilities,
responsibilities, or duties of members, stockholders or officers of
corporation. [Sec. 18].
This court itself has already had occasion to hold [Claude Neon
Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that
a foreign corporation licitly doing business in the Philippines, which
18
is a defendant in a civil suit, may not be considered
a non-resident within the scope of the legal provision authorizing
attachment against a defendant not residing in the Philippine Islands;
[Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57,
Rules of 1964] in other words, a preliminary attachment may not be
applied for and granted solely on the asserted fact that the defendant
is a foreign corporation authorized to do business in the Philippines
— and is consequently and necessarily, "a party who resides out of
the Philippines." Parenthetically, if it may not be considered as a
party not residing in the Philippines, or as a party who resides out of
the country, then, logically, it must be considered a party who does
reside in the Philippines, who is a resident of the country. Be this as
it may, this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate
foreign corporations, duly licensed to do business here, to the status
of domestic corporations. (Cf. Section 73, Act No. 1459, and
Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu
Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be
entirely out of line with this policy should we make a discrimination
against a foreign corporation, like the petitioner, and subject its
property to the harsh writ of seizure by attachment when it has
complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law
made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized to do
business in the Philippines "to the status of domestic corporations,
subsumes their being found and operating as corporations,
hence, residing, in the country.
The same principle is recognized in American law: that the residence
of a corporation, if it can be said to have a residence, is necessarily
where it exercises corporate functions . . .;" that it is considered as
dwelling "in the place where its business is done . . .," as being
"located where its franchises are exercised . . .," and as being
"present where it is engaged in the prosecution of the corporate
enterprise;" that a "foreign corporation licensed to do business in a
state is a resident of any country where it maintains an office or agent
for transaction of its usual and customary business for venue
purposes;" and that the "necessary element in its signification is
locality of existence." [Words and Phrases, Permanent Ed., vol. 37,
pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the collection
suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of Japan, and, as
such, was amenable to the jurisdiction of the courts therein and may
be deemed to have assented to the said courts' lawful methods of
serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual presumption
but also because of the presumption of regularity of performance of
official duty.
We find NORTHWEST's claim for attorney's fees, litigation
expenses, and exemplary damages to be without merit. We find no
evidence that would justify an award for attorney's fees and litigation
expenses under Article 2208 of the Civil Code of the Philippines.
Nor is an award for exemplary damages warranted. Under Article
2234 of the Civil Code, before the court may consider the question of
whether or not exemplary damages should be awarded, the plaintiff
must show that he is entitled to moral, temperate, or compensatory
damaged. There being no such proof presented by NORTHWEST,
no exemplary damages may be adjudged in its favor.
 19

WHEREFORE, the instant petition is partly GRANTED, and the

challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses, and
exemplary damages but REVERSED insofar as in sustained the trial
court's dismissal of NORTHWEST's complaint in Civil Case No.
83-17637 of Branch 54 of the Regional Trial Court of Manila, and
another in its stead is hereby rendered ORDERING private
respondent C.F. SHARP L COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment
subject of said case, with interest thereon at the legal rate from the
filing of the complaint therein until the said foreign judgment is fully
satisfied. Costs against the private respondent. SO ORDERED.

[G.R. No. 108538. January 22, 1996]
LOURDES A. VALMONTE and ALFREDO D.
VALMONTE, petitioners, vs. THE HONORABLE COURT OF
APPEALS, THIRD DIVISION and ROSITA
DIMALANTA, respondents.
MENDOZA, J.:
Petitioner Lourdes A. Valmonte is a foreign resident. The question is
whether in an action for partition filed against her and her husband,
who is also her attorney, summons intended for her may be served on
her husband, who has a law office in the Philippines. The Regional
Trial Court of Manila, Branch 48, said no and refused to declare
Lourdes A. Valmonte in default, but the Court of Appeals said yes.
Hence this petition for review on certiorari.
The facts of the case are as follows:
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are
husband and wife. They are both residents of 90222 Carkeek Drive
South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte,
who is a member of the Philippine bar, however, practices his
profession in the Philippines, commuting for this purpose between
his residence in the state of Washington and Manila, where he holds
office at S-304 Gedisco Centre, 1564 A. Mabini, Ermita, Manila.
On March 9, 1992, private respondent Rosita Dimalanta, who is the
sister of petitioner Lourdes A. Valmonte, filed a complaint for
partition of real property and accounting of rentals against petitioners
Lourdes A. Valmonte and Alfredo D. Valmonte before the Regional
Trial Court of Manila, Branch 48. The subject of the action is a
three-door apartment located in Paco, Manila.
In her Complaint, private respondent alleged:
The plaintiff is of legal age, a widow and is at present a resident of
14823 Conway Road, Chesterfield, Missouri, U.S.A., while the
defendants are spouses, of legal age and at present residents of 90222
Carkeek Drive, South Seattle, Washington, U.S.A., but, for purposes
of this complaint may be served with summons at Gedisco Center,
Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant
Alfredo D. Valmonte as defendant Lourdes Arreola Valmontes
spouse holds office and where he can be found.
Apparently, the foregoing averments were made on the basis of a
letter previously sent by petitioner Lourdes A. Valmonte to private
respondents counsel
in which, in regard to the partition of the property in question, she
referred private respondents counsel to her husband as the party to
whom all communications intended for her should be sent. The letter
reads:
July 4, 1991
Dear Atty. Balgos:
This is in response to your letter, dated 20 June 1991, which I
received on 3 July 1991. Please address all communications to my
lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and
fax numbers appear below.
c/o Prime Marine
Gedisco Center, Unit 304
1564 A. Mabini, Ermita
Metro Manila
20
Telephone: 521-1736
Fax: 21-2095
Service of summons was then made upon petitioner Alfredo D.
Valmonte, who at the time, was at his office in Manila. Petitioner
Alfredo D. Valmonte accepted the summons, insofar as he was
concerned, but refused to accept the summons for his wife, Lourdes
A. Valmonte, on the ground that he was not authorized to accept the
process on her behalf. Accordingly the process server left without
leaving a copy of the summons and complaint for petitioner Lourdes
A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with
Counterclaim. Petitioner Lourdes A. Valmonte, however, did not file
her Answer. For this reason private respondent moved to declare her
in default. Petitioner Alfredo D. Valmonte entered a special
appearance in behalf of his wife and opposed the private respondents
motion.
In its Order dated July 3, 1992, the trial court, denied private
respondents motion to declare petitioner Lourdes A. Valmonte in
default. A motion for reconsideration was similarly denied
on September 23, 1992. Whereupon, private respondent filed a
petition for certiorari, prohibition and mandamus with the Court of
Appeals.
On December 29, 1992, the Court of Appeals rendered a decision
granting the petition and declaring Lourdes A. Valmonte in default.
A copy of the appellate courts decision was received by petitioner
Alfredo D. Valmonte on January 15, 1993 at his Manila office and
on January 21, 1993 in Seattle, Washington. Hence, this petition.
The issue at bar is whether in light of the facts set forth above,
petitioner Lourdes A. Valmonte was validly served with summons.
In holding that she had been, the Court of Appeals stated:[1]
[I]n her above-quoted reply, Mrs. Valmonte clearly and
unequivocally directed the aforementioned counsel of Dimalanta to
address all communications (evidently referring to her controversy
with her sister Mrs. Dimalanta over the Paco property, now the
subject of the instant case) to her lawyer who happens also to be her
husband. Such directive was made without any qualification just as
was her choice/designation of her husband Atty. Valmonte as her
lawyer likewise made without any qualification or reservation. Any
disclaimer therefore on the part of Atty. Valmonte as to his being his
wifes attorney (at least with regard to the dispute vis-a-vis [sic] the
Paco property) would appear to be feeble or trifling, if not incredible.
This view is bolstered by Atty. Valmontes subsequent alleged special
appearance made on behalf of his wife. Whereas Mrs. Valmonte had
manifestly authorized her husband to serve as her lawyer relative to
her dispute with her sister over the Paco property and to receive all
communications regarding the same and subsequently to appear on
her behalf by way of a so-called special appearance, she would
nonetheless now insist that the same husband would nonetheless had
absolutely no authority to receive summons on her behalf. In effect,
she is asserting that representation by her lawyer (who is also her
husband) as far as the Paco property controversy is concerned,
should only be made by him when such representation would be
favorable to her but not otherwise. It would obviously be inequitable
for this Court to allow private respondent Lourdes A. Valmonte to
hold that her husband has the authority to represent her when an
advantage is to be obtained by her and to deny such authority when it
would turn out to be her disadvantage. If this be allowed, Our Rules
of Court, instead of being an instrument to promote justice would be
made use of to thwart or frustrate the same.
xxx xxx xxx

Turning to another point, it would not do for Us to overlook the fact
that the disputed summons was served not upon just an ordinary
lawyer of private respondent Lourdes A. Valmonte, but upon her
lawyer husband. But that is not all, the same lawyer/husband happens
to be also her co-defendant in the instant case which involves real
property which, according to her lawyer/husband/ co-defendant,
belongs to the conjugal partnership of the defendants (the spouses
Valmonte). It is highly inconceivable and certainly it would be
contrary to human nature for the lawyer/husband/co-defendant to
keep to himself the fact that they (the spouses Valmonte) had been
sued with regard to a property which he claims to be conjugal.
Parenthetically, there is nothing in the records of the case before Us
regarding any manifestation by private respondent Lourdes A.
Valmonte about her lack of knowledge about the case instituted
against her and her lawyer/husband/co-defendant by her sister Rosita.
PREMISES CONSIDERED, the instant petition for certiorari,
prohibition and mandamus is given due course. This Court hereby
Resolves to nullify the orders of the court a quo dated July 3,
1992 and September 23, 1992 and further declares private respondent
Lourdes Arreola Valmonte as having been properly served with
summons.
Petitioners assail the aforequoted decision, alleging that the Court of
Appeals erred (1) in refusing to apply the provisions of Rule 14, 17
of the Revised Rules of Court and applying instead Rule 14, 8 when
the fact is that petitioner Lourdes A. Valmonte is a nonresident
defendant; and (2) because even if Rule 14, 8 is the applicable
provision, there was no valid substituted service as there was no strict
compliance with the requirement by leaving a copy of the summons
and complaint with petitioner Alfredo D. Valmonte. Private
respondent, upon the other hand, asserts that petitioners are invoking
a technicality and that strict adherence to the rules would only result
in a useless ceremony.
We hold that there was no valid service of process on Lourdes A.
Valmonte.
To provide perspective, it will be helpful to determine first the nature
of the action filed against petitioners Lourdes A. Valmonte and
Alfredo D. Valmonte by private respondent, whether it is an action in
personam, in rem or quasi in rem. This is because the rules on service
of summons embodied in Rule 14 apply according to whether an
action is one or the other of these actions.
In an action in personam, personal service of summons or, if this is
not possible and he cannot be personally served, substituted service,
as provided in Rule 14, 7-8[2]is essential for the acquisition by the
court of jurisdiction over the person of a defendant who does not
voluntarily submit himself to the authority of the court.[3] If
defendant cannot be served with summons because he is temporarily
abroad, but otherwise he is a Philippine resident, service of summons
may, by leave of court, be made by publication.[4] Otherwise stated,
a resident defendant in an action in personam, who cannot be
personally served with summons, may be summoned either by means
of substituted service in accordance with Rule 14, 8 or by publication
as provided in 17 and 18 of the same Rule.[5]
In all of these cases, it should be noted, defendant must be a resident
of the Philippines, otherwise an action in personam cannot be
brought because jurisdiction over his person is essential to make a
binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction
over the person of the defendant is not essential for giving the court
jurisdiction so long as the court acquires jurisdiction over the res. If
the defendant is a nonresident and he is not found in the country,
summons may be served extraterritorially in accordance with Rule 14,
17, which provides:
21
17. Extraterritorial service. - When the defendant does not reside and
is not found in the Philippines and the action affects the personal
status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded
consists, wholly or in part, in excluding the defendant from any
interest therein, or the property of the defendant has been attached
within the Philippines, service may, by leave of court, be effected out
of the Philippines by personal service as under Section 7; or by
publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the
court may deem sufficient. Any order granting such leave shall
specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.
In such cases, what gives the court jurisdiction in an action in rem or
quasi in rem is that it has jurisdiction over the res, i.e. the personal
status of the plaintiff who is domiciled in the Philippines or the
property litigated or attached. Service of summons in the manner
provided in 17 is not for the purpose of vesting it with jurisdiction
but for complying with the requirements of fair play or due process,
so that he will be informed of the pendency of the action against him
and the possibility that property in the Philippines belonging to him
or in which he has an interest may be subjected to a judgment in
favor of the plaintiff and he can thereby take steps to protect his
interest if he is so minded.[6]
Applying the foregoing rules to the case at bar, private respondents
action, which is for partition and accounting under Rule 69, is in the
nature of an action quasi in rem. Such an action is essentially for the
purpose of affecting the defendants interest in a specific property and
not to render a judgment against him. As explained in the leading
case of Banco Espaol Filipino v. Palanca :[7]
[An action quasi in rem is] an action which while not strictly
speaking an action in rem partakes of that nature and is substantially
such. . . . The action quasi in rem differs from the true action in
rem in the circumstance that in the former an individual is named as
defendant and the purpose of the proceeding is to subject his interest
therein to the obligation or lien burdening the property. All
proceedings having for their sole object the sale or other disposition
of the property of the defendant, whether by attachment, foreclosure,
or other form of remedy, are in a general way thus designated. The
judgment entered in these proceedings is conclusive only between
the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found
in the Philippines, service of summons on her must be in accordance
with Rule 14, 17. Such service, to be effective outside the Philippines,
must be made either (1) by personal service; (2) by publication in a
newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order
of the court should be sent by registered mail to the last known
address of the defendant; or (3) in any other manner which the court
may deem sufficient.
Since in the case at bar, the service of summons upon petitioner
Lourdes A. Valmonte was not done by means of any of the first two
modes, the question is whether the service on her attorney, petitioner
Alfredo D. Valmonte, can be justified under the third mode, namely,
in any . . . manner the court may deem sufficient.
We hold it cannot. This mode of service, like the first two, must be
made outside the Philippines, such as through the Philippine
Embassy in the foreign country where the defendant
resides.[8] Moreover, there are several reasons why the service of
 22

summons on Atty. Alfredo D. Valmonte cannot be considered a valid
service of summons on petitioner Lourdes A. Valmonte. In the first
place, service of summons on petitioner Alfredo D. Valmonte was
not made upon the order of the court as required by Rule 14, 17 and
certainly was not a mode deemed sufficient by the court which in fact
refused to consider the service to be valid and on that basis declare
petitioner Lourdes A. Valmonte in default for her failure to file an
answer.
In the second place, service in the attempted manner on petitioner
was not made upon prior leave of the trial court as required also in
Rule 14, 17. As provided in 19, such leave must be applied for by
motion in writing, supported by affidavit of the plaintiff or some
person on his behalf and setting forth the grounds for the application.
Finally, and most importantly, because there was no order granting
such leave, petitioner Lourdes A. Valmonte was not given ample
time to file her Answer which, according to the rules, shall be not
less than sixty (60) days after notice. It must be noted that the period
to file an Answer in an action against a resident defendant differs
from the period given in an action filed against a nonresident
defendant who is not found in the Philippines. In the former, the
period is fifteen (15) days from service of summons, while in the
latter, it is at least sixty (60) days from notice.
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not
appoint her husband as her attorney-in-fact. Although she wrote
private respondent s attorney that all communications intended for
her should be addressed to her husband who is also her lawyer at the
latters address in Manila, no power of attorney to receive summons
for her can be inferred therefrom. In fact the letter was written seven
months before the filing of this case below, and it appears that it was
written in connection with the negotiations between her and her sister,
respondent Rosita Dimalanta, concerning the partition of the property
in question. As is usual in negotiations of this kind, the exchange of
correspondence was carried on by counsel for the parties. But the
authority given to petitioners husband in these negotiations certainly
cannot be construed as also including an authority to represent her in
any litigation. For the foregoing reasons, we hold that there was no
valid service on petitioner Lourdes A. Valmonte in this case.
WHEREFORE, the decision appealed from is REVERSED and the
orders dated July 3, 1992 and September 23, 1992 of the Regional
Trial Court of Manila, Branch 48 are REINSTATED. SO
ORDERED.

Strict compliance with these requirements alone can assure

observance of due process. That is why in one case,[9] although the
Court considered publication in the Philippines of the summons
(against the contention that it should be made in the foreign state
where defendant was residing) sufficient, nonetheless the service was
considered insufficient because no copy of the summons was sent to
the last known correct address in the Philippines.

Private respondent cites the ruling in De Leon v. Hontanosas, 67

SCRA 458,462-463 (1975), in which it was held that service of
summons upon the defendants husband was binding on her. But the
ruling in that case is justified because summons were served upon
defendants husband in their conjugal home in Cebu City and the wife
was only temporarily absent, having gone to Dumaguete City for a
vacation. The action was for collection of a sum of money. In
accordance with Rule 14, 8, substituted service could be made on any
person of sufficient discretion in the dwelling place of the defendant,
and certainly defendants husband, who was there, was competent to
receive the summons on her behalf. In any event, it appears that
defendant in that case submitted to the jurisdiction of the court by
instructing her husband to move for the dissolution of the writ of
attachment issued in that case.

On the other hand, in the case of Gemperle v. Schenker,[10] it was

held that service on the wife of a nonresident defendant was found
sufficient because the defendant had appointed his wife as his
attorney-in-fact. It was held that although defendant Paul Schenker
was a Swiss citizen and resident of Switzerland, service of summons
upon his wife Helen Schenker who was in the Philippines was
sufficient because she was her husbands representative and
attorney-in-fact in a civil case, which he had earlier filed against
William Gemperle. In fact Gemperles action was for damages arising
from allegedly derogatory statements contained in the complaint filed
in the first case. As this Court said, i]n other words, Mrs. Schenker
had authority to sue, and had actually sued, on behalf of her husband,
so that she was, also, empowered to represent him in suits filed
against him, particularly in a case, like the one at bar, which is a
consequence of the action brought by her on his behalf.[11] Indeed,
if instead of filing an independent action Gemperle filed
a counterclaim in the action brought by Mr. Schenker against him,
there would have been no doubt that the trial court could have
acquired jurisdiction over Mr. Schenker through his agent and
attorney-in-fact, Mrs. Schenker.

[G.R. No. 128803. September 25, 1998]
ASIAVEST LIMITED, petitioner, vs. THE COURT OF
APPEALS AND ANTONIO HERAS, respondents.
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign
judgment. The antecedents are summarized in the 24 August 1990
Decision[1] of Branch 107 of the Regional Trial Court of Quezon
City in Civil Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3,
1987 against the defendant Antonio Heras praying that said
defendant be ordered to pay to the plaintiff the amounts awarded by
the Hong Kong Court Judgment dated December 28, 1984 and
amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the
time of payment with legal interest from December 28, 1984 until
fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from
October 31, 1984 to December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorneys fees, litigation expenses
and cost, with interest thereon from the date of the judgment until
fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However,
before the court could resolve the said motion, a fire which partially
razed the Quezon City Hall Building on June 11, 1988 totally
destroyed the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the plaintiff, through
counsel filed a Motion for Reconstitution of Case Records. The
Court, after allowing the defendant to react thereto, granted the said
Motion and admitted the annexes attached thereto as the
reconstituted records of this case per Order dated September 6,
1988. Thereafter, the Motion to Dismiss, the resolution of which had
been deferred, was denied by the Court in its Order of October 4,
1988.
On October 19, 1988, defendant filed his Answer. The case was then
set for pre-trial conference. At the conference, the parties could not
arrive at any settlement. However, they agreed on the following
stipulations of facts:
1) The defendant admits the existence of the judgment dated
December 28, 1984 as well as its amendment dated April 13, 1987,
but not necessarily the authenticity or validity thereof;
2) The plaintiff is not doing business and is not licensed to do
business in the Philippines;
3) The residence of defendant, Antonio Heras, is New Manila,
Quezon City.
The only issue for this Court to determine is, whether or not the
judgment of the Hong Kong Court has been repelled by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud or
clear mistake of law or fact, such as to overcome the presumption
established in Section 50, Rule 39 of the Rules of Court in favor of
foreign judgments.
In view of the admission by the defendant of the existence of the
aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989),
23
as well as the legal presumption in favor of the plaintiff as provided
for in paragraph (b), Sec. 50, (Ibid.), the plaintiff presented only
documentary evidence to show rendition, existence, and
authentication of such judgment by the proper officials concerned
(Pls. See Exhibits A thru B, with their submarkings). In addition, the
plaintiff presented testimonial and documentary evidence to show its
entitlement to attorneys fees and other expenses of litigation.
On the other hand, the defendant presented two witnesses, namely,
Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vegas testimony is to the effect that no writ of
summons or copy of a statement of claim of Asiavest Limited was
ever served in the office of the Navegante Shipping Agency Limited
and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New
Manila, Quezon City. Her knowledge is based on the fact that she
was the personal secretary of Mr. Heras during his JD Transit days
up to the latter part of 1972 when he shifted or diversified to shipping
business in Hong Kong; that she was in-charge of all his letters and
correspondence, business commitments, undertakings, conferences
and appointments, until October 1984 when Mr. Heras left Hong
Kong for good; that she was also the Officer-in-Charge or Office
Manager of Navegante Shipping Agency LTD, a Hong Kong
registered and based company acting as ships agent, up to and until
the company closed shop sometime in the first quarter of 1985, when
shipping business collapsed worldwide; that the said company held
office at 34-35 Connaught Road, Central Hong Kong and later
transferred to Caxton House at Duddel Street, Hong Kong, until the
company closed shop in 1985; and that she was certain of such facts
because she held office at Caxton House up to the first quarter of
1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong,
and as a representative of the law office of the defendants counsel
who made a verification of the record of the case filed by the plaintiff
in Hong Kong against the defendant, as well as the procedure in
serving Court processes in Hong Kong.
In his affidavit (Exh. 2) which constitutes his direct testimony, the
said witness stated that:
The defendant was sued on the basis of his personal guarantee of the
obligations of Compania Hermanos de Navegacion S.A. There is no
record that a writ of summons was served on the person of the
defendant in Hong Kong, or that any such attempt at service was
made. Likewise, there is no record that a copy of the judgment of the
High Court was furnished or served on the defendant; anyway, it is
not a legal requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor
(lawyer) of the claimant or plaintiff. In Hong Kong there are no
Court personnel who serve writs of summons and/or most other
processes.
b) If the writ of summons or claim (or complaint) is not contested,
the claimant or the plaintiff is not required to present proof of his
claim or complaint nor present evidence under oath of the claim in
order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision
rendered by the Court in Hong Kong [to] make a recitation of the
facts or the law upon which the claim is based.
d) There is no necessity to furnish the defendant with a copy of the
Judgment or decision rendered against him.
e) In an action based on a guarantee, there is no established legal
requirement or obligation under Hong Kong laws that the creditor

must first bring proceedings against the principal debtor. The creditor
can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was
commissioned by the law firm of the defendants counsel as an expert
witness and to verify the records of the Hong Kong case, he had been
acting as counsel for the defendant in a number of commercial
matters; that there was an application for service of summons upon
the defendant outside the jurisdiction of Hong Kong; that there was
an order of the Court authorizing service upon Heras outside of Hong
Kong, particularly in Manila or any other place in the Philippines (p.
9, TSN, 2/14/90); that there must be adequate proof of service of
summons, otherwise the Hong Kong Court will refuse to render
judgment (p. 10, ibid); that the mere fact that the Hong Kong Court
rendered judgment, it can be presumed that there was service of
summons; that in this case, it is not just a presumption because there
was an affidavit stating that service was effected in [sic] a particular
man here in Manila; that such affidavit was filed by one Jose R.
Fernandez of the firm Sycip Salazar on the 21st of December 1984,
and stated in essence that on Friday, the 23rd of November 1984 he
served the 4th defendant at No. 6 First Street, Quezon City by
leaving it at that address with Mr. Dionisio Lopez, the son-in-law of
the 4th defendant the copy of the writ and Mr. Lopez informed me
and I barely believed that he would bring the said writ to the
attention of the 4th defendant (pp. 11-12, ibid.); that upon filing of
that affidavit, the Court was asked and granted judgment against the
4th defendant; and that if the summons or claim is not contested, the
claimant of the plaintiff is not required to present proof of his claim
or complaint or present evidence under oath of the claim in order to
obtain judgment; and that such judgment can be enforced in the same
manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had
been duly proved, it is a presumptive evidence of a right as between
the parties; hence, the party impugning it had the burden to prove
want of jurisdiction over his person. HERAS failed to discharge that
burden. He did not testify to state categorically and under oath that
he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City
residence. As to De la Vegas testimony regarding non-service of
summons, the same was hearsay and had no probative value.
As to HERAS contention that the Hong Kong court judgment
violated the Constitution and the procedural laws of the Philippines
because it contained no statements of the facts and the law on which
it was based, the trial court ruled that since the issue related to
procedural matters, the law of the forum, i.e., Hong Kong laws,
should govern. As testified by the expert witness Lousich, such
legalities were not required under Hong Kong laws. The trial court
also debunked HERAS contention that the principle of excussion
under Article 2058 of the Civil Code of the Philippines was
violated. It declared that matters of substance are subject to the law
of the place where the transaction occurred; in this case, Hong Kong
laws must govern.
The trial court concluded that the Hong Kong court judgment should
be recognized and given effect in this jurisdiction for failure of
HERAS to overcome the legal presumption in favor of the foreign
judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to
pay to the plaintiff the following sums or their equivalents in
Philippine currency at the time of payment: US$1,810,265.40 plus
interest on the sum of US$1,500,000.00 at 9.875% per annum from
October 31, 1984 to December 28, 1984, and HK$905 as fixed cost,
with legal interests on the aggregate amount from December 28,
1984, and to pay attorneys fees in the sum of P80,000.00.
24
ASIAVEST moved for the reconsideration of the decision. It sought
an award of judicial costs and an increase in attorneys fees in the
amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the
motion and instead appealed the decision to the Court of Appeals,
which docketed the appeal as CA-G.R. CV No. 29513.
In its order[2] November 1990, the trial court granted ASIAVESTs
motion for reconsideration by increasing the award of attorneys fees
to US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT,
provided that ASIAVEST would pay the corresponding filing fees
for the increase. ASIAVEST appealed the order requiring prior
payment of filing fees. However, it later withdrew its appeal and paid
the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its
decision[3] reversing the decision of the trial court and dismissing
ASIAVESTs complaint without prejudice. It underscored the fact
that a foreign judgment does not of itself have any extraterritorial
application. For it to be given effect, the foreign tribunal should have
acquired jurisdiction over the person and the subject matter. If such
tribunal has not acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of
remedy and procedure such as those relating to service of summons
upon the defendant are governed by the lex fori, which was, in this
case, the law of Hong Kong. Relative thereto, it gave weight to
Lousichs testimony that under the Hong Kong law, the substituted
service of summons upon HERAS effected in the Philippines by the
clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid
provided that it was done in accordance with Philippine laws. It then
stressed that where the action is in personam and the defendant is in
the Philippines, the summons should be personally served on the
defendant pursuant to Section 7, Rule 14 of the Rules of
Court.[4]Substituted service may only be availed of where the
defendant cannot be promptly served in person, the fact of
impossibility of personal service should be explained in the proof of
service.It also found as persuasive HERAS argument that instead of
directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan
law office, who was not authorized by the judge of the court issuing
the summons, ASIAVEST should have asked for leave of the local
courts to have the foreign summons served by the sheriff or other
court officer of the place where service was to be made, or for special
reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that notice sent outside
the state to a non-resident is unavailing to give jurisdiction in an
action against him personally for money recovery.Summons should
have been personally served on HERAS in Hong Kong, for, as
claimed by ASIAVEST, HERAS was physically present in Hong
Kong for nearly 14 years. Since there was not even an attempt to
serve summons on HERAS in Hong Kong, the Hong Kong Supreme
Court did not acquire jurisdiction over HERAS. Nonetheless, it did
not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious
defense against [ASIAVESTs] claims or that [HERAS] ought to be
absolved of any liability, nevertheless, in view of the foregoing
discussion, there is a need to deviate from the findings of the lower
court in the interest of justice and fair play. This, however, is without
prejudice to whatever action [ASIAVEST] might deem proper in
order to enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was
necessary that evidence supporting the validity of the foreign
judgment be submitted, and that our courts are not bound to give

effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court
of Appeals erred in ruling that
I.
IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT
EVIDENCE SUPPORTING THE VALIDITY OF THE
JUDGMENT;
II.
THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE
UNDER PHILIPPINE LAW;
III.
SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON
HERAS IN HONG KONG;
IV.
THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED
WITH LEAVE OF PHILIPPINE COURTS;
V.
THE FOREIGN JUDGMENT CONTRAVENES PHILIPPINE
LAWS, THE PRINCIPLES OF SOUND MORALITY, AND THE
PUBLIC POLICY OF THE PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of
Court,[5] which was the governing law at the time this case was
decided by the trial court and respondent Court of Appeals, a foreign
judgment against a person rendered by a court having jurisdiction to
pronounce the judgment is presumptive evidence of a right as
between the parties and their successors in interest by the subsequent
title. However, the judgment may be repelled by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence
provides that in the absence of proof to the contrary, a court, or judge
acting as such, whether in the Philippines or elsewhere, is presumed
to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the
burden to repel it on grounds provided for in paragraph (b) of Section
50, Rule 39 of the Rules of Court is on the party challenging the
foreign judgment -- HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the
Hong Kong judgment. On the other hand, ASIAVEST presented
evidence to prove rendition, existence, and authentication of the
judgment by the proper officials. The judgment is thus presumed to
be valid and binding in the country from which it comes, until the
contrary is shown.[6]Consequently, the first ground relied upon by
ASIAVEST has merit. The presumption of validity accorded foreign
judgment would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that
the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of
remedy and procedure such as those relating to the service of process
upon the defendant are governed by the lex fori or the law of the
forum,[7] i.e., the law of Hong Kong in this case. HERAS insisted
25
that according to his witness Mr. Lousich, who was presented as an
expert on Hong Kong laws, there was no valid service of summons
on him.
In his counter-affidavit,[8] which served as his direct testimony per
agreement of the parties,[9] Lousich declared that the record of the
Hong Kong case failed to show that a writ of summons was served
upon HERAS in Hong Kong or that any such attempt was
made. Neither did the record show that a copy of the judgment of the
court was served on HERAS. He stated further that under Hong
Kong laws (a) a writ of summons could be served by the solicitor of
the claimant or plaintiff; and (b) where the said writ or claim was not
contested, the claimant or plaintiff was not required to present proof
under oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich testified
that the Hong Kong court authorized service of summons on HERAS
outside of its jurisdiction, particularly in the Philippines. He admitted
also the existence of an affidavit of one Jose R. Fernandez of the
Sycip Salazar Hernandez & Gatmaitan law firm stating that he
(Fernandez) served summons on HERAS on 13 November 1984 at
No. 6, 1st St., Quezon City, by leaving a copy with HERASs
son-in-law Dionisio Lopez.[10] On redirect examination, Lousich
declared that such service of summons would be valid under Hong
Kong laws provided that it was in accordance with Philippine
laws.[11]
We note that there was no objection on the part of ASIAVEST on the
qualification of Mr. Lousich as an expert on the Hong Kong
law. Under Sections 24 and 25, Rule 132 of the New Rules of
Evidence, the record of public documents of a sovereign authority,
tribunal, official body, or public officer may be proved by (1) an
official publication thereof or (2) a copy attested by the officer
having the legal custody thereof, which must be accompanied, if the
record is not kept in the Philippines, with a certificate that such
officer has the custody. The certificate may be issued by a secretary
of the embassy or legation, consul general, consul, vice consul, or
consular agent, or any officer in the foreign service of the Philippines
stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. The attestation must state, in
substance, that the copy is a correct copy of the original, or a specific
part thereof, as the case may be, and must be under the official seal
of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to
prove a foreign law. An authority[12] on private international law
thus noted:
Although it is desirable that foreign law be proved in accordance
with the above rule, however, the Supreme Court held in the case
of Willamette Iron and Steel Works v. Muzzal,[13] that Section 41,
Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does
not exclude the presentation of other competent evidence to prove the
existence of a foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-at-law of San
Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et
al.,[14] upheld the Tax Court in considering the pertinent law of
California as proved by the respondents witness. In that case, the
counsel for respondent testified that as an active member of the
California Bar since 1951, he is familiar with the revenue and
taxation laws of the State of California. When asked by the lower
court to state the pertinent California law as regards exemption of
intangible personal properties, the witness cited Article 4, Sec. 13851
(a) & (b) of the California Internal and Revenue Code as published in

Derrings California Code, a publication of Bancroft-Whitney Co.,
Inc. And as part of his testimony, a full quotation of the cited section
was offered in evidence by respondents. Likewise, in several
naturalization cases, it was held by the Court that evidence of the law
of a foreign country on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule of practice, may
be allowed and used as basis for favorable action, if, in the light of all
the circumstances, the Court is satisfied of the authenticity of the
written proof offered.[15] Thus, in a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that
law.[16]
There is, however, nothing in the testimony of Mr. Lousich that
touched on the specific law of Hong Kong in respect of service of
summons either in actions in rem or in personam, and where the
defendant is either a resident or nonresident of Hong Kong. In view
of the absence of proof of the Hong Kong law on this particular issue,
the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the
Hong Kong law on the matter is similar to the Philippine law.[17]
As stated in Valmonte vs. Court of Appeals,[18] it will be helpful to
determine first whether the action is in personam, in rem, or quasi in
rem because the rules on service of summons under Rule 14 of the
Rules of Court of the Philippines apply according to the nature of the
action.
An action in personam is an action against a person on the basis of
his personal liability. An action in rem is an action against the thing
itself instead of against the person.[19] An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien
burdening the property.[20]
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide the
case. Jurisdiction over the person of a resident defendant who does
not voluntarily appear in court can be acquired by personal service of
summons as provided under Section 7, Rule 14 of the Rules of
Court. If he cannot be personally served with summons within a
reasonable time, substituted service may be made in accordance with
Section 8 of said Rule. If he is temporarily out of the country, any of
the following modes of service may be resorted to: (1) substituted
service set forth in Section 8;[21] (2) personal service outside the
country, with leave of court; (3) service by publication, also with
leave of court;[22] or (4) any other manner the court may deem
sufficient.[23]
However, in an action in personam wherein the defendant is
a non-resident who does not voluntarily submit himself to the
authority of the court, personal service of summons within the state is
essential to the acquisition of jurisdiction over her person.[24] This
method of service is possible if such defendant is physically present
in the country. If he is not found therein, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and
decide the case against him.[25] An exception was laid down
in Gemperle v. Schenker[26] wherein a non-resident was served with
summons through his wife, who was a resident of the Philippines and
who was his representative and attorney-in-fact in a prior civil case
filed by him; moreover, the second case was a mere offshoot of the
first case.
On the other hand, in a proceeding in rem or quasi in rem,
jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires
jurisdiction over the res. Nonetheless, summons must be served upon
the defendant not for the purpose of vesting the court with
26
jurisdiction but merely for satisfying the due process
requirements.[27] Thus, where the defendant is a non-resident who is
not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of
which is property in the Philippines in which the defendant has or
claims a lien or interest; (3) the action seeks the exclusion of the
defendant from any interest in the property located in the Philippines;
or (4) the property of the defendant has been attached in the
Philippines -- service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also
with leave of court; or (c) any other manner the court may deem
sufficient.[28]
In the case at bar, the action filed in Hong Kong against HERAS
was in personam, since it was based on his personal guarantee of the
obligation of the principal debtor. Before we can apply the foregoing
rules, we must determine first whether HERAS was a resident of
Hong Kong.
Fortunata de la Vega, HERASs personal secretary in Hong Kong
since 1972 until 1985,[29] testified that HERAS was the President
and part owner of a shipping company in Hong Kong during all those
times that she served as his secretary. He had in his employ a staff of
twelve.[30] He had business commitments, undertakings,
conferences, and appointments until October 1984 when [he] left
Hong Kong for good.[31] HERASs other witness, Russel Warren
Lousich, testified that he had acted as counsel for HERAS for a
number of commercial matters.[32] ASIAVEST then infers that
HERAS was a resident of Hong Kong because he maintained a
business there.
It must be noted that in his Motion to Dismiss,[33] as well as in his
Answer[34] to ASIAVESTs complaint for the enforcement of the
Hong Kong court judgment, HERAS maintained that the Hong Kong
court did not have jurisdiction over him because the fundamental rule
is that jurisdiction in personam over non-resident defendants, so as to
sustain a money judgment, must be based upon personal service of
summons within the state which renders the judgment.[35]
For its part, ASIAVEST, in its Opposition to the Motion to
Dismiss[36] contended: The question of Hong Kong courts want of
jurisdiction is therefore a triable issue if it is to be pleaded by the
defendant to repel the foreign judgment. Facts showing jurisdictional
lack (e.g. that the Hong Kong suit was in personam, that defendant
was not a resident of Hong Kong when the suit was filed or that he
did not voluntarily submit to the Hong Kong courts jurisdiction)
should be alleged and proved by the defendant.[37]
In his Reply (to the Opposition to Motion to Dismiss),[38] HERAS
argued that the lack of jurisdiction over his person was corroborated
by ASIAVESTs allegation in the complaint that he has his residence
at No. 6, 1st St., New Manila, Quezon City, Philippines. He then
concluded that such judicial admission amounted to evidence that he
was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with
stipulations of facts, among which was that the residence of
defendant, Antonio Heras, is New Manila, Quezon City.[39]
We note that the residence of HERAS insofar as the action for the
enforcement of the Hong Kong court judgment is concerned, was
never in issue. He never challenged the service of summons on him
through a security guard in his Quezon City residence and through a
lawyer in his office in that city. In his Motion to Dismiss, he did not
question the jurisdiction of the Philippine court over his person on
the ground of invalid service of summons. What was in issue was his
residence as far as the Hong Kong suit was concerned. We therefore
conclude that the stipulated fact that HERAS is a resident of New
Manila, Quezon City, Philippines refers to his residence at the time
 27

jurisdiction over his person was being sought by the Hong Kong
court. With that stipulation of fact, ASIAVEST cannot now claim
that HERAS was a resident of Hong Kong at the time.

Accordingly, since HERAS was not a resident of Hong Kong and the
action against him was, indisputably, one in personam, summons
should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and
did not confer on the Hong Kong court jurisdiction over his person. It
follows that the Hong Kong court judgment cannot be given force
and effect here in the Philippines for having been rendered without
jurisdiction.

Even assuming that HERAS was formerly a resident of Hong Kong,

he was no longer so in November 1984 when the extraterritorial
service of summons was attempted to be made on him. As declared
by his secretary, which statement was not disputed by ASIAVEST,
HERAS left Hong Kong in October 1984 for good.[40] His absence
in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for
leave to effect service in the Philippines, and upon obtaining a
favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the
Philippines.

In Brown v. Brown,[41] the defendant was previously a resident of

the Philippines. Several days after a criminal action for concubinage
was filed against him, he abandoned the Philippines. Later, a
proceeding quasi in rem was instituted against him. Summons in the
latter case was served on the defendants attorney-in-fact at the latters
address. The Court held that under the facts of the case, it could not
be said that the defendant was still a resident of the Philippines
because he ha[d] escaped to his country and [was] therefore an
absentee in the Philippines. As such, he should have been summoned
in the same manner as one who does not reside and is not found in
the Philippines.

Similarly, HERAS, who was also an absentee, should have been

served with summons in the same manner as a non-resident not
found in Hong Kong. Section 17, Rule 14 of the Rules of Court
providing for extraterritorial service will not apply because the suit
against him was in personam. Neither can we apply Section 18,
which allows extraterritorial service on a resident defendant who is
temporarily absent from the country, because even if HERAS be
considered as a resident of Hong Kong, the undisputed fact remains
that he left Hong Kong not only temporarily but for good.

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered

DENYING the petition in this case and AFFIRMING the assailed
judgment of the Court of Appeals in CA-G.R. CV No. 29513.

No costs. SO ORDERED.

[G.R. Nos. 121576-78. June 16, 2000]
BANCO DO BRASIL, petitioner, vs. THE COURT OF
APPEALS, HON. ARSENIO M. GONONG, and CESAR S.
URBINO, SR., respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision1 [Penned by Associate Justice Jainal D. Rasul and
concurred in by Associate Justices Segundino G. Chua and Consuelo
Ynares-Santiago, now Associate Justice of the Supreme Court, in
CA-G.R. S.P. Nos. 24669, 28387 & 29317, Rollo, pp. 33-47.] and
the Resolution2 [Id., pp. 49-53.] of the Court of Appeals3 [Former
Special Eighth Division.] dated July 19, 1993 and August 15, 1995,
respectively, which reinstated the entire Decision4 [Penned by Judge
Arsenio M. Gonong, Civil Case No. 89-51451, Records, Vol. 2, pp.
517-528.] dated February 18, 1991 of the Regional Trial Court of
Manila, Branch 8, holding, among others, petitioner Banco do Brasil
liable to private respondent Cesar Urbino, Sr. for damages amounting
to $300,000.00.5 [The Appellate Court erroneously declared in its
decision that the amount of P300,000.00 was awarded by the trial
court, Rollo, p. 36.]
At the outset, let us state that this case should have been consolidated
with the recently decided case of Vlason Enterprises Corporation v.
Court of Appeals and Duraproof Services, represented by its General
Manager, Cesar Urbino Sr.6 [G.R. Nos. 121662-64, July 6, 1999,
Third Division, penned by Associate Justice Artemio V. Panganiban
and concurred in by Associate Justices Jose C. Vitug, Fidel P.
Purisima, and Minerva P. Gonzaga-Reyes.], for these two (2) cases
involved the same material antecedents, though the main issue
proffered in the present petition vary with the Vlason case.
The material antecedents, as quoted from the Vlason7 [Decision in
G.R. Nos. 121662-64, pp. 3-13.] case, are:
Poro Point Shipping Services, then acting as the local agent of
Omega Sea Transport Company of Honduras & Panama, a
Panamanian Company (hereafter referred to as Omega), requested
permission for its vessel M/V Star Ace, which had engine trouble, to
unload its cargo and to store it at the Philippine Ports Authority (PPA)
compound in San Fernando, La Union while awaiting transhipment
to Hongkong. The request was approved by the Bureau of
Customs.8 [Records, Vol. 1, pp. 27-31.] Despite the approval, the
customs personnel boarded the vessel when it docked on January 7,
1989, on suspicion that it was the hijacked M/V Silver Med owned
by Med Line Philippines Co., and that its cargo would be smuggled
into the country.9 [Records, Vol. 1, p. 32.] The district customs
collector seized said vessel and its cargo pursuant to Section 2301,
Tariff and Customs Code. A notice of hearing of SFLU Seizure
Identification No. 3-89 was served on its consignee, Singkong
Trading Co. of Hongkong, and its shipper, Dusit International Co.,
Ltd. of Thailand.
While seizure proceedings were ongoing, La Union was hit by three
typhoons, and the vessel ran aground and was abandoned. On June 8,
1989, its authorized representative, Frank Cadacio, entered into
salvage agreement with private respondent to secure and repair the
vessel at the agreed consideration of $1 million and "fifty percent
(50%) [of] the cargo after all expenses, cost and taxes."10 [Records,
Vol. 1, pp. 36-39.]
Finding that no fraud was committed, the District Collector of
Customs, Aurelio M. Quiray, lifted the warrant of seizure on July
1989.11 [Decision dated July 17, 1989, in SFLU Seizure
Identification No. 3-89; Records, Vol. 1, pp. 54-68.] However, in a
28
Second Indorsement dated November 11, 1989, then Customs
Commissioner Salvador M. Mison declined to issue a clearance for
Quirays Decision; instead, he forfeited the vessel and its cargo in
accordance with Section 2530 of the Tariff and Customs
Code.12 [2nd Indorsement dated November 1989; Records, Vol. 1,
pp. 70-71.] Accordingly, acting District Collector of Customs John S.
Sy issued a Decision decreeing the forfeiture and the sale of the
cargo in favor of the government.13 [Decision dated November 17,
1989, Records, Vol. 1, pp. 74-86.]
To enforce its preferred salvors lien, herein Private Respondent
Duraproof Services filed with the Regional Trial Court of Manila a
Petition for Certiorari, Prohibition and Mandamus14 [Docketed as
Civil Case No. 89-51451 and raffled to Branch 8; Records, Vol. 1, pp.
1-26.] assailing the actions of Commissioner Mison and District
Collector Sy. Also impleaded as respondents were PPA
Representative Silverio Mangaoang and Med Line Philippines, Inc.
On January 10, 1989, private respondent amended its
Petition15 [Ibid., pp. 122-145.] to include former District Collector
Quiray; PPA Port Manager Adolfo Ll. Amor, Jr.; x Vlason
Enterprises as represented by its president, Vicente Angliongto;
Singkong Trading Company as represented by Atty. Eddie
Tamondong; Banco Du Brasil; Dusit International Co.; Thai-Nan
Enterprises Ltd., and Thai-United Trading Co., Ltd.16 [Amended
Petition, id., pp. 122 & 128-129.] x x x
Summonses for the amended Petition were served on Atty. Joseph
Capuyan for Med Line Philippines: Anglionto (through his secretary,
Betty Bebero), Atty. Tamondong and Commissioner
Mison.17 [Sheriffs Return, id., pp. 160-164 & 171.] Upon motion of
the private respondent, the trial court allowed summons by
publication to be served upon defendants who were not residents and
had no direct representative in the country.18 [Id., pp. 153-156.]
On January 29, 1990, private respondent moved to declare
respondents in default, but the trial court denied the motion in its
February 23, 1990 Order19 [Id., pp. 214-215.], because Mangaoang
and Amor had jointly filed a Motion to Dismiss, while Mison and
Med Line had moved separately for an extension to file a similar
motion.20 [Eventually, both separately filed their motions to
dismiss.] Later it rendered an Order dated July 2, 1990, giving due
course to the motions to dismiss filed by Mangaoang and Amor on
the ground of litis pendentia, and by the commissioner and district
collector of customs on the ground of lack of
jurisdiction.21 [Records, Vol. 1, pp. 325-326.] In another Order, the
trial court dismissed the action against Med Line Philippines on the
ground of litis pendentia.22 [Order dated September 10, 1990;
Records, Vol. 2, p. 359.]
On two other occasions, private respondent again moved to declare
the following in default: [Vlason], Quiray, Sy and Mison on March
26, 1990;23 [Records, Vol. 1, pp. 237-238.] and Banco [do] Bra[s]il,
Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and
Thai-United Trading Co., Ltd. on August 24, 1990.24 [Ibid., pp.
351-352.] There is no record, however, that the trial court acted upon
the motions. On September 18, 1990, [private respondent] filed
another Motion for leave to amend the petition,25 [Records, Vol. 2,
pp. 370-371.] alleging that its counsel failed to include "necessary
and/or indispensable parties": Omega represented by Cadacio; and
M/V Star Ace represented by Capt. Nahon Rada, relief captain.
Aside from impleading these additional respondents, private
respondent also alleged in the Second (actually, third) Amended
Petition26 [Motion for Leave to Admit Second Amended Petition
and Supplemental Petition, ibid., p. 370; Second Amended Petition
with Supplemental Petition, ibid., pp. 372-398.] that the owners of
the vessel intended to transfer and alienate their rights and interest

over the vessel and its cargo, to the detriment of the private
respondent.
The trial court granted leave to private respondent to amend its
Petition, but only to exclude the customs commissioner and the
district collector.27 [Order dated September 28, 1990, Records, Vol.
2, p. 407.] Instead, private respondent filed the "Second Amended
Petition with Supplemental Petition" against Singkong Trading
Company; and Omega and M/V Star Ace,28 [Records, Vol. 2, pp.
414-415.] to which Cadacio and Rada filed a Joint
Answer.29 [Ibid., pp. 425-288.]
Declared in default in an Order issued by the trial court on January
23, 1991, were the following: Singkong Trading Co., Commissioner
Mison, M/V Star Ace and Omega.30 [Id.,p. 506.] Private respondent
filed, and the trial court granted, an ex parte Motion to present
evidence against the defaulting respondents.31 [Order dated
December 10, 1990, id., p. 492.] Only private respondent, Atty.
Tamondong, Commissioner Mison, Omega and M/V Star Ace
appeared in the next pretrial hearing; thus, the trial court declared the
other respondents in default and allowed private respondent to
present evidence against them.32 [Order dated January 23, 1991,
Records, Vol. 2, p. 506. The records (pp. 493-495), however, show
that only Duraproof Service, Singkong Trading and M/V Star Ace
were served summons.] Cesar Urbino, general manager of private
respondent, testified and adduced evidence against the other
respondents, x x x.33 [RTC Decision, p. 7; Rollo, p. 92; penned by
Judge Arsenio M. Gonong.]
On December 29, 1990, private respondent and Rada, representing
Omega, entered into a Memorandum of Agreement stipulating that
Rada would write and notify Omega regarding the demand for
salvage fees of private respondent; and that if Rada did not receive
any instruction from his principal, he would assign the vessel in favor
of the salvor.34 [Memorandum of Agreement, id., pp. 511-512.]
On February 18, 1991, the trial court disposed as follows:
"WHEREFORE, IN VIEW OF THE FOREGOING, based on the
allegations, prayer and evidence adduced, both testimonial and
documentary, the Court is convinced, that, indeed,
defendants/respondents are liable to [private respondent] in the
amount as prayed for in the petition for which it renders judgment as
follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada,
[r]elief [c]aptain of the vessel and Omega Sea Transport Company,
Inc., represented by Frank Cadacio[,] is ordered to refrain from
alienating or [transferring] the vessel M/V Star Ace to any third
parties;
2. Singkong Trading Company to pay the following:
a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00 based
on xxx Lloyds Standard Form of Salvage Agreement;
c. Preservation, securing and guarding fees on the vessel in the
amount of $225,000.00;
d. Maintenance fees in the amount of P2,685,000.00;
e. Salaries of the crew from August 16, 1989 to December 1989 in
the amount of $43,000.00 and unpaid salaries from January 1990 up
to the present;
f. Attorneys fees in the amount of P656,000.00;
3. [Vlason] Enterprises to pay [private respondent] in the amount of
P3,000,000.00 for damages;
29
4. Banco [Du] Brasil to pay [private respondent] in the amount of
$300,000.00 in damages;35 [Italics supplied.] and finally,
5. Costs of [s]uit."
Subsequently, upon the motion of Omega, Singkong Trading Co.,
and private respondent, the trial court approved a Compromise
Agreement36 [Records, Vol. 2, pp. 535-538.] among the movants,
reducing by 20 percent the amounts adjudged. For their part,
respondents-movants agreed not to appeal the Decision.37 [Order
dated March 6, 1991, ibid., pp. 539-541. Private respondent entered
into two separate compromise agreements with Singkong Trading Co.
(id., pp. 535-536) and another with Omega (id., pp. 537-538). Both
agreements were dated March 4, 1991.] On March 8, 1991, private
respondent moved for the execution of judgment, claiming that the
trial court Decision had already become final and executory. The
Motion was granted and a Writ of Execution was issued. To satisfy
the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio
Camañgon were deputized on March 13, 1991 to levy and to sell on
execution the defendants vessel and personal property.
xxx
On March 18, 1991, the Bureau of Customs also filed an ex parte
Motion to recall the execution, and to quash the notice of levy and
the sale on execution. Despite this Motion, the auction sale was
conducted on March 21, 1991 by Sheriff Camañgon, with private
respondent submitting the winning bid. The trial court ordered the
deputy sheriffs to cease and desist from implementing the Writ of
Execution and from levying on the personal property of the
defendants. Nevertheless, Sheriff Camañgon issued the
corresponding Certificate of Sale on March 27, 1991.
On April 10, 1991, petitioner Banco do Brasil filed, by special
appearance, an Urgent Motion to Vacate Judgement and to Dismiss
Case38 [Rollo, pp. 67-73.] on the ground that the February 18, 1991
Decision of the trial court is void with respect to it for having been
rendered without validly acquiring jurisdiction over the person of
Banco do Brasil. Petitioner subsequently amended its
petition39 [Rollo, pp. 74-80.] to specifically aver that its special
appearance is solely for the purpose of questioning the Courts
exercise of personal jurisdiction.
On May 20, 1991, the trial court issued an Order40 [Rollo, pp.
81-82.] acting favorably on petitioners motion and set aside as
against petitioner the decision dated February 18, 1991 for having
been rendered without jurisdiction over Banco do Brasils person.
Private respondent sought reconsideration41 [Records, Vol. 3, pp.
103-105.] of the Order dated May 20, 1991. However, the trial court
in an Order42 [Rollo, p. 83.] dated June 21, 1991 denied said motion.
Meanwhile, a certiorari petition43 [Docketed as CA-G.R. SP No.
24669.] was filed by private respondent before public respondent
Court of Appeals seeking to nullify the cease and desist Order dated
April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2) more
separate petitions for certiorari were subsequently filed by private
respondent. The second petition44 [Docketed as CA-G.R. SP No.
28387.] sought to nullify the Order45 [Penned by Judge Bernardo P.
Pardo, then Executive Judge, and now Associate Justice of the
Supreme Court.] dated June 26, 1992 setting aside the Deputy
Sheriffs return dated April 1, 1991 as well as the certificate of sale
issued by Deputy Sheriff Camañgon. The third petition46 [Docketed
as CA-G.R. SP No. 29317.] sought to nullify the Order dated
October 5, 1992 of the Court of Tax Appeals directing the
Commissioner of Customs to place Bureau of Customs and PNP
officers and guards to secure the M/V Star Ace and its cargoes, make
inventory of the goods stored in the premises as indicated to belong
to the private respondent. Likewise challenged was the Order dated

August 17, 1992 authorizing the sale of M/V Star Ace and its
cargoes.
These three (3) petitions were consolidated and on July 19, 1993, the
appellate court rendered its Decision47 [See Note 1, supra.] granting
private respondents petitions, thereby nullifying and setting aside the
disputed orders and effectively "giving way to
the entire [decision dated February 18, 1991 of the x x x Regional
Trial Court of Manila, Branch 8, in Civil Case No. 89-51451
which remains valid, final and executory, if not yet wholly
executed."48 [Rollo, p. 46.]
Private respondent Urbino, Vlason Enterprises and petitioner Banco
do Brasil filed separate motions for reconsideration. For its part,
petitioner Banco do Brasil sought reconsideration, insofar as its
liability for damages, on the ground that there was no valid service of
summons as service was on the wrong party the ambassador of Brazil.
Hence, it argued, the trial court did not acquire jurisdiction over
petitioner Banco do Brasil.49 [Rollo, pp. 107.] Nonetheless, the
appellate court denied the motions for reconsideration in its
Resolution50 [See Note 2, supra.] dated August 15, 1995.
Hence, the instant petition.
Petitioner Banco do Brasil takes exception to the appellate courts
declaration that the suit below is in rem, not in personam,51 [Rollo,
pp. 19-21.] thus, service of summons by publication was sufficient
for the court to acquire jurisdiction over the person of petitioner
Banco do Brasil, and thereby liable to private respondent Cesar
Urbino for damages claimed, amounting to $300,000.00. Petitioner
further challenges the finding that the February 18, 1991 decision of
the trial court was already final and thus, cannot be modified or
assailed.52 [Rollo, p. 22-23.]
Petitioner avers that the action filed against it is an action for
damages, as such it is an action in personam which requires personal
service of summons be made upon it for the court to acquire
jurisdiction over it. However, inasmuch as petitioner Banco do Brasil
is a non-resident foreign corporation, not engaged in business in the
Philippines, unless it has property located in the Philippines which
may be attached to convert the action into an action in rem, the court
cannot acquire jurisdiction over it in respect of an action in
personam.
The petition bears merit, thus the same should be as it is hereby
granted.
First. When the defendant is a nonresident and he is not found in the
country, summons may be served extraterritorially in accordance
with Rule 14, Section 1753 [Section 17. Extraterritorial service
When the defendant does not reside and is not found in the
Philippines and the action affects the personal status of the plaintiff
or relates to, or the subject of which, is property within the
Philippines, in which the defendant has or claims a lien or interest,
actual or contingent, or in which relief demanded consists, wholly or
in part, in excluding the defendant from any interest therein, or the
property of the defendant has been attached in the Philippines,
service may, by leave of court, be effected out of the Philippines by
personal service as under section 7; or by publication in a newspaper
of general circulation in such places and for such time as the court
may order, in which case a copy of the summons and order of the
court shall be sent by registered mail to the last known address of the
defendant, or in any other manner the court may deem sufficient.
Any order granting such leave shall specify a reasonable time, which
shall not be less than sixty (60) days after notice, within which the
defendant must answer.] of the Rules of Court. Under this provision,
there are only four (4) instances when extraterritorial service of
summons is proper, namely: "(1) when the action affects the personal
status of the plaintiffs; (2) when the action relates to, or the subject of
30
which is property, within the Philippines, in which the defendant
claims a lien or interest, actual or contingent; (3) when the relief
demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines;
and (4) when the defendant non-residents property has been attached
within the Philippines."54 [Ibid., now Sec. 15 of the 1997 Rules of
Civil Procedure.] In these instances, service of summons may be
effected by (a) personal service out of the country, with leave of
court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.55 [Ibid..]
Clear from the foregoing, extrajudicial service of summons apply
only where the action is in rem, an action against the thing itself
instead of against the person, or in an action quasi in rem, where an
individual is named as defendant and the purpose of the proceeding
is to subject his interest therein to the obligation or loan burdening
the property. This is so inasmuch as, in in rem and quasi in
rem actions, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court provided that the court
acquires jurisdiction over the res.56[Asiavest Limited v. Court of
Appeals, 296 SCRA 539, 552-554 [1998]; Valmonte v. Court of
Appeals, 252 SCRA 92, 99-102 [1996].]
However, where the action is in personam, one brought against a
person on the basis of his personal liability, jurisdiction over the
person of the defendant is necessary for the court to validly try and
decide the case. When the defendant is a non-resident, personal
service of summons within the state is essential to the acquisition of
jurisdiction over the person.57 [The Dial Corporation v. Soriano, 161
SCRA 737, 743 [1988] citing Boudard v. Tait, 67 Phil 170, 174
[1939].] This cannot be done, however, if the defendant is not
physically present in the country, and thus, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and
decide the case against him.58 [Asiavest Limited v. Court of
Appeals, supra. at 554.]
In the instant case, private respondents suit against petitioner is
premised on petitioners being one of the claimants of the subject
vessel M/V Star Ace.59 [Records, Vol. 1, pp. 128-129.] Thus, it can
be said that private respondent initially sought only to exclude
petitioner from claiming interest over the subject vessel M/V Star
Ace. However, private respondent testified during the presentation of
evidence that, for being a nuisance defendant, petitioner caused
irreparable damage to private respondent in the amount of
$300,000.00.60 [Records, Vol. 2, p. 567.] Therefore, while the action
is in rem, by claiming damages, the relief demanded went beyond
the res and sought a relief totally alien to the action.
It must be stressed that any relief granted in rem or quasi in
rem actions must be confined to the res, and the court cannot
lawfully render a personal judgment against the
defendant.61[Villareal v. Court of Appeals, 295 SCRA 511, 525
[1998].] Clearly, the publication of summons effected by private
respondent is invalid and ineffective for the trial court to acquire
jurisdiction over the person of petitioner, since by seeking to recover
damages from petitioner for the alleged commission of an injury to
his person or property62 [The Dial Corporation v. Soriano, supra. at
742 citing Hernandez v. Development Bank of the Phil., 71 SCRA
290, 292-293 [1976].] caused by petitioners being a nuisance
defendant, private respondents action became in personam. Bearing
in mind the in personam nature of the action, personal or, if not
possible, substituted service of summons on petitioner, and not
extraterritorial service, is necessary to confer jurisdiction over the
person of petitioner and validly hold it liable to private respondent
for damages. Thus, the trial court had no jurisdiction to award
damages amounting to $300,000.00 in favor of private respondent
and as against herein petitioner.
 31

Second. We settled the issue of finality of the trial courts decision

dated February 18, 1991 in the Vlason case, wherein we stated that,
considering the admiralty case involved multiple defendants, "each
defendant had a different period within which to appeal, depending
on the date of receipt of decision."63 [Decision in G.R. Nos.
121662-64, p. 27.] Only upon the lapse of the reglementary period to
appeal, with no appeal perfected within such period, does the
decision become final and executory.64 [Ibid.]

In the case of petitioner, its Motion to Vacate Judgment and to

Dismiss Case was filed on April 10, 1991, only six (6) days after it
learned of the existence of the case upon being informed by the
Embassy of the Federative Republic of Brazil in the Philippines, on
April 4, 1991, of the February 18, 1991 decision.65 [Rollo, pp.
67-80.] Thus, in the absence of any evidence on the date of receipt of
decision, other than the alleged April 4, 1991 date when petitioner
learned of the decision, the February 18, 1991 decision of the trial
court cannot be said to have attained finality as regards the petitioner.

WHEREFORE, the subject petition is hereby GRANTED. The

Decision and the Resolution of the Court of Appeals dated July 19,
1993 and August 15, 1995, respectively, in CA-G.R. SP Nos. 24669,
28387 and 29317 are hereby REVERSED and SET ASIDE insofar as
they affect petitioner Banco do Brasil. The Order dated May 20,
1991 of the Regional Trial Court of Manila, Branch 8 in Civil Case
No. 89-51451 is REINSTATED. SO ORDERED.

[G.R. No. 150656. April 29, 2003]
MARGARITA ROMUALDEZ-LICAROS, petitioner, vs.
ABELARDO B. LICAROS, respondent.
CARPIO, J.:
This is a petition for review on certiorari[1] to annul the
Decision[2] dated 9 August 2001 of the Court of Appeals in CA-G.R.
SP No. 58487, as well as the Resolution dated 23 October 2001
denying the motion for reconsideration. The Court of Appeals
dismissed the petition to annul the following decisions[3] rendered
by Branch 143 of the Regional Trial Court of Makati:
(1) The Decision dated 27 December 1990[4] granting the
dissolution of the conjugal partnership of gains of the spouses
Abelardo B. Licaros and Margarita Romualdez-Licaros;
(2) The Decision dated 8 November 1991[5] declaring the marriage
between the same spouses null and void.
The Facts
The antecedent facts as found by the Court of Appeals are as follows:
x x x Abelardo Licaros (Abelardo, for short) and Margarita
Romualdez-Licaros (Margarita, hereafter) were lawfully married on
December 15, 1968. Out of this marital union were born Maria
Concepcion and Abelardo, Jr. Ironically, marital differences,
squabbles and irreconcilable conflicts transpired between the spouses,
such that sometime in 1979, they agreed to separate from bed and
board.
In 1982, Margarita left for the United States and there, to settle down
with her two (2) children. In the United States, on April 26, 1989,
Margarita applied for divorce before the Superior Court of California,
County of San Mateo (Annex 1, Rejoinder, pp. 164-165) where she
manifested that she does not desire counseling at that time (Quotation,
p. 166, Rollo). On August 6, 1990, Margarita was granted the decree
of divorce (Annex 2, Answer, p. 108, Rollo) together with a
distribution of properties between her and Abelardo (pp. 167-168,
Rollo).
Not long after, on August 17, 1990, Abelardo and Margarita
executed an Agreement of Separation of Properties (pp. 60-64,
Rollo). This was followed-up by a petition filed on August 21, 1990
before the Regional Trial Court of Makati for the dissolution of the
conjugal partnership of gains of the spouses and for the approval of
the agreement of separation of their properties.This was docketed as
Special Proceeding No. 2551. On December 27, 1990, a decision was
issued granting the petition and approving the separation of property
agreement.
For his part, on June 24, 1991, Abelardo commenced Civil Case No.
91-1757, for the declaration of nullity of his marriage with Margarita,
based on psychological incapacity under the New Family Code. As
Margarita was then residing at 96 Mulberry Lane, Atherton,
California, U.S.A., Abelardo initially moved that summons be served
through the International Express Courier Service. The court a
quo denied the motion. Instead, it ordered that summons be served by
publication in a newspaper of general circulation once a week for
three (3) consecutive weeks, at the same time furnishing respondent a
copy of the order, as well as the corresponding summons and a copy
of the petition at the given address in the United States through the
Department of Foreign Affairs, all at the expense of
Abelardo. Respondent was given sixty (60) days after publication to
file a responsive pleading.
32
On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted
his Officers Return quoted hereunder:
OFFICERS RETURN
THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of
summons and complaint with annexes together with order dated June
28, 1991 issued by the Court in the above-entitled case upon
defendant Margarita Romualdez-Licaros c/o DFA. (sent by
Mail) thru Pat G. Martines receiving Clerk of Department of Foreign
Affairs a person authorized to receive this kind of process who
acknowledged the receipt thereof at ADB Bldg., Roxas Blvd., Pasay
City, Metro Manila. (p. 40, Rollo)
As required by law, the case was referred to Trial Prosecutor
Bruselas, Jr. to find out any possible collusion between the parties in
the case. Thereafter, with the negative report of collusion, Abelardo
was allowed to present his evidence ex-parte. On November 8, 1991,
the Decision (Annex A, Petition) was handed down in Civil Case
No. 91-1757 declaring the marriage between Abelardo and Margarita
null and void.
Almost nine (9) years later, on April 28, 2000, the petition at bench
was commenced when Margarita received a letter dated November
18, 1991 from a certain Atty. Angelo Q. Valencia informing her that
she no longer has the right to use the family name Licaros inasmuch
as her marriage to Abelardo had already been judicially dissolved by
the Regional Trial Court of Makati on November 8,
1991. Asseverating to have immediately made some verifications and
finding the information given to be true, petitioner commenced the
instant petition on the following grounds:
(A) THERE WAS EXTRINSIC FRAUD IN THE PREPARATION
AND FILING BY ABELARDO OF THE PETITION FOR
DISSOLUTION OF THE CONJUGAL PARTNERSHIP OF GAINS
AND ITS ANNEX, THE AGREEMENT OF SEPARATION OF
PROPERTIES.
(B) THE TRIAL COURT LACKED JURISDICTION TO HEAR
AND DECIDE THE PETITION FOR DECLARATION OF
NULLITY OF MARRIAGE.[6]
The Ruling of the Court of Appeals
The Court of Appeals debunked the claim of Margarita that there was
extrinsic fraud in the preparation and filing by Abelardo of
the Petition for Dissolution of Conjugal Partnership of Gains and its
annex, the Agreement of Separation of Properties. The Court of
Appeals stated:
x x x, the extrinsic fraud alluded to consists of Abelardo coercing
Margarita into signing the petition to dissolve their conjugal
partnership of gains together with the agreement of separation of
properties, by threatening to cut-off all financial and material support
of their children then still studying in the United States; that
petitioner had no hand directly or indirectly in the preparation of the
petition and agreement of separation of properties; that petitioner
never met the counsel for the petitioner, nor the notary public who
notarized the deed; and, petitioner never received any notice of the
pendency of the petition nor a copy of the decision.
Antithetically, a meticulous perusal of the controversial petition
(Annex B-1) and the agreement of separation of properties (pp. 60-64,
Rollo) readily shows that the same were signed by the petitioner on
the proper space after the prayer and on the portion for the
verification of the petition. The same is true with the agreement of
separation of properties. What is striking to note is that on August 6,
1990, Margarita appeared before Amado P. Cortez, Consul of the
Republic of the Philippines at the San Francisco, California, United
States Consulate Office, to affirm and acknowledge before said

official that she executed the agreement of separation of properties of
her own free will and deed, after being informed of the contents
thereof. And yet, there is no showing that Abelardo was with her at
the Philippine Consulate Office in confirming the separation of
property agreement. Moreover, on page 2 of the same agreement, it is
specifically stated that such property separation document shall be
subject to approval later on by the proper court of competent
jurisdiction. The clear import of this is that the agreement must have
to be submitted before the proper court for approval, which explains
and confirms petitioners signature on the petition filed in court.
In main, We see no indication nor showing of coercion or fraud from
these facts, which could very well be considered as extrinsic or
collateral fraud to justify a petition under Rule 47.From all
indications, the pretended coerced documents were rather freely and
voluntarily executed by the parties therein knowing fully well the
imports thereof. This conclusion finds more weight if We consider
the fact that the separation of property was fully implemented and
enforced, when apparently both parties correspondingly received the
properties respectively assigned to each of them under the said
document.[7]
The Court of Appeals also rejected Margaritas claim that the trial
court lacked jurisdiction to hear and decide the Petition for
Declaration of Nullity of Marriage for improper service of summons
on her. The case involves the marital status of the parties, which is an
action in rem or quasi in rem. The Court of Appeals ruled that in
such an action the purpose of service of summons is not to vest the
trial court with jurisdiction over the person of the defendant, but only
to comply with due process. The Court of Appeals concluded that
any irregularity in the service of summons involves due process
which does not destroy the trial courts jurisdiction over
the res which is the parties marital status. Neither does such
irregularity invalidate the judgment rendered in the case. Thus, the
Court of Appeals dismissed the petition for annulment of judgment,
stating that:
At bar, the case involves the personal (marital) status of the plaintiff
and the defendant. This status is the res over which the Philippine
court has acquired jurisdiction. This is also the kind of action which
the Supreme Court had ruled that service of summons may be served
extraterritorially under Section 15 (formerly Section 17) of Rule 14
and where such service of summons is not for the purpose of vesting
the trial court with jurisdiction over the person of the defendant but
only for the purpose of complying with the requirements of fair play
and due process. A fortiori, the court a quo had properly acquired
jurisdiction over the person of herein petitioner-defendant when
summons was served by publication and a copy of the summons, the
complaint with annexes, together with the Order of June 28, 1991,
was served to the defendant through the Department of Foreign
Affairs by registered mail and duly received by said office to top it
all. Such mode was upon instruction and lawful order of the court
and could even be treated as any other manner the court may deem
sufficient.[8]
Hence, the instant petition.
The Issues
The issues raised by Margarita are restated as follows:
I. Whether Margarita was validly served with summons in the case
for declaration of nullity of her marriage with Abelardo;
II. Whether there was extrinsic fraud in the preparation and filing by
Abelardo of the Petition for Dissolution of the Conjugal Partnership
of Gains and its annex, the Agreement of Separation of Properties.
The Courts Ruling
33
The petition is bereft of merit.
First Issue: Validity of the Service of Summons on Margarita
Margarita insists that the trial court never acquired jurisdiction over
her person in the petition for declaration of nullity of marriage since
she was never validly served with summons. Neither did she appear
in court to submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person
of a non-resident defendant in an action in rem or quasi in rem is not
necessary. The trial and appellate courts made a clear factual finding
that there was proper summons by publication effected through the
Department of Foreign Affairs as directed by the trial court. Thus,
the trial court acquired jurisdiction to render the decision declaring
the marriage a nullity.
Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the
court acquires jurisdiction over his person.[9]
As a rule, when the defendant does not reside and is not found in the
Philippines, Philippine courts cannot try any case against him
because of the impossibility of acquiring jurisdiction over his person
unless he voluntarily appears in court. But when the case is one of
actions in rem or quasi in rem enumerated in Section 15,[10] Rule 14
of the Rules of Court, Philippine courts have jurisdiction to hear and
decide the case. In such instances, Philippine courts have jurisdiction
over the res, and jurisdiction over the person of the non-resident
defendant is not essential.[11]
Actions in personam[12] and actions in rem or quasi in rem differ in
that actions in personam are directed against specific persons and
seek personal judgments. On the other hand, actions in rem or quasi
in rem are directed against the thing or property or status of a person
and seek judgments with respect thereto as against the whole
world.[13]
At the time Abelardo filed the petition for nullity of the marriage in
1991, Margarita was residing in the United States. She left the
Philippines in 1982 together with her two children. The trial court
considered Margarita a non-resident defendant who is not found in
the Philippines. Since the petition affects the personal status of the
plaintiff, the trial court authorized extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court. The term personal
status includes family relations, particularly the relations between
husband and wife.[14]
Under Section 15 of Rule 14, a defendant who is a non-resident and
is not found in the country may be served with summons by
extraterritorial service in four instances: (1) when the action affects
the personal status of the plaintiff; (2) when the action relates to, or
the subject of which is property within the Philippines, in which the
defendant has or claims a lien or interest, actual or contingent; (3)
when the relief demanded consists, wholly or in part, in excluding
the defendant from any interest in property located in the Philippines;
or (4) when the property of the defendant has been attached within
the Philippines.
In these instances, extraterritorial service of summons may be
effected under any of three modes: (1) by personal service out of the
country, with leave of court; (2) by publication and sending a copy of
the summons and order of the court by registered mail to the
defendants last known address, also with leave of court; or (3) by any
other means the judge may consider sufficient.
Applying the foregoing rule, the trial court required extraterritorial
service of summons to be effected on Margarita in the following
manner:
 34

x x x, service of Summons by way of publication in a newspaper of
general circulation once a week for three (3) consecutive weeks, at
the same time, furnishing respondent copy of this Order as well as
the corresponding Summons and copy of the petition at her given
address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru
the Department of Foreign Affairs, all at the expense of
petitioner.[15] (Emphasis ours)
The trial courts prescribed mode of extraterritorial service does not
fall under the first or second mode specified in Section 15 of Rule 14,
but under the third mode. This refers to any other means that the
judge may consider sufficient.
The Process Servers Return of 15 July 1991 shows that the summons
addressed to Margarita together with the complaint and its annexes
were sent by mail to the Department of Foreign Affairs with
acknowledgment of receipt. The Process Servers certificate of
service of summons is prima facie evidence of the facts as set out in
the certificate.[16] Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court stated
in its Decision dated 8 November 1991 that compliance with the
jurisdictional requirements hav(e) (sic) been duly established. We
hold that delivery to the Department of Foreign Affairs was sufficient
compliance with the rule. After all, this is exactly what the trial court
required and considered as sufficient to effect service of summons
under the third mode of extraterritorial service pursuant to Section 15
of Rule 14.
In the instant case, Margarita acknowledged the Agreement before
Consul Cortez. The certificate of acknowledgment signed by Consul
Cortez states that Margarita personally appeared before him and
acknowledged before me that SHE executed the same of her own
free will and deed.[19] Thus, there is a prima facie presumption that
Margarita freely and voluntarily executed the Agreement. Margarita
has failed to rebut this prima facie presumption with clear and
convincing proof of coercion on the part of Abelardo.
A document acknowledged before a notary public is prima
facie evidence of the due and regular execution of the
document.[20] A notarized document has in its favor the presumption
of regularity in its execution, and to contradict the same, there must
be evidence that is clear, convincing and more than merely
preponderant.[21]
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP
No. 58487 dismissing the petition to annul judgment is AFFIRMED.
SO ORDERED.

Second Issue: Validity of the Judgment Dissolving the

Conjugal Partnership of Gains

Margarita claims that Abelardo coerced her into signing the Petition
for Dissolution of the Conjugal Partnership of Gains (Petition) and its
annex, the Agreement of Separation of
Properties (Agreement). Abelardo allegedly threatened to cut off all
financial and material support to their children if Margarita did not
sign the documents.

The trial court did not find anything amiss in the Petition and
Agreement that Abelardo filed, and thus the trial court approved the
same. The Court of Appeals noted that a meticulous perusal of the
Petition and Agreement readily shows that Margarita signed the same
on the proper space after the prayer and on the portion for the
verification of the petition. The Court of Appeals observed further
that on 6 August 1990, Margarita appeared before Consul Amado
Cortez in the Philippine Consulate Office in San Francisco,
California, to affirm that she executed the Agreement of her own free
will. There was no showing that Abelardo was at that time with her at
the Philippine Consulate Office. Abelardo secured judicial approval
of the Agreement as specifically required in the Agreement.

The Court is bound by the factual findings of the trial and appellate
courts that the parties freely and voluntarily executed the documents
and that there is no showing of coercion or fraud. As a rule, in an
appeal by certiorari under Rule 45, the Court does not pass upon
questions of fact as the factual findings of the trial and appellate
courts are binding on the Court. The Court is not a trier of facts. The
Court will not examine the evidence introduced by the parties below
to determine if the trial and appellate courts correctly assessed and
evaluated the evidence on record.[17]

The due and regular execution of an instrument acknowledged before

an officer authorized to administer oaths cannot be overthrown by
bare allegations of coercion but only by clear and convincing
proof.[18] A person acknowledging an instrument before an officer
authorized to administer oaths acknowledges that he freely and
voluntarily executed the instrument, giving rise to a prima
facie presumption of such fact.

[G.R. No. 127692. March 10, 2004]
FORTUNATO GOMEZ and AURORA GOMEZ, petitioners, vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO
TROCINO, respondents.
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the decision[1] of the Court of
Appeals dated September 30, 1996, in CA-G.R. SP No. 40067,
nullifying the decision and orders of
the Regional Trial Court of Cebu City (Branch 10) in Civil Case No.
CEB-11103, for want of jurisdiction.
Civil Case No. CEB-11103 is an action for specific performance
and/or rescission filed by herein petitioners, spouses Fortunato and
Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which
include herein respondents and their mother Caridad Trocino.[2]
Filed on December 16, 1991, the complaint alleges: Some time in
1975, the spouses Jesus and Caridad Trocino mortgaged two parcels
of land covered by TCT Nos. 10616 and 31856 to Dr. Clarence
Yujuico. The mortgage was subsequently foreclosed and the
properties sold at public auction on July 11, 1988, and before the
expiry of the redemption period, the spouses Trocino sold the
property to petitioners on December 12, 1989, who in turn, redeemed
the same from Dr. Yujuico. The spouses Trocino, however, refused
to convey ownership of the properties to petitioners, hence, the
complaint.
On January 10, 1992, the trial courts Process Server served summons
on respondents, in the manner described in his Return of Service, to
wit:
Respectfully returned to the Branch Clerk of Court, Regional Trial
Court of Cebu, Branch 10, the herein attached original summons
issued in the above-entitled case with the information that on January
8, 1992 summons and copies of the complaint were served to the
defendants Jacob, Jesus Jr., Adolfo, Mariano, Consolacion, Alice,
Racheal thru defendant Caridad Trocino at their given address at
Maria Cristina Extension (besides Sacred Heart School for Girls),
Cebu City, evidence by her signature found at the lower portion of
the original summons.[3]
WHEREFORE I, respectfully return the original summons duly
served to the court of origin.
Cebu City, Philippines, January 10, 1992.
(signed)
DELFIN D. BARNIDO
RTC Process Server
On January 27, 1992, the defendants, through their counsel Atty.
Expedito P. Bugarin, filed their Answer. Defendant Caridad A.
Trocino, respondents mother, verified said pleading.[4]
After trial on the merits, the RTC rendered its decision on March
1993, with the following disposition:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against the defendants.
The latter are hereby ordered to jointly and severally execute a Deed
of Sale in favor of the plaintiffs and to deliver the owners duplicate
copies of TCT Nos. 10616 and 31856, covering the properties sold,
to the plaintiffs within ten (10) days from the finality of the judgment,
35
after which plaintiffs shall pay in turn to the defendants the balance
of P2,000,000.00. Otherwise, the sale is rescinded and revoked and
the defendants are directed to return to the plaintiffs the amount
of P500,000.00, with interest of 12% per annum computed
from December 6, 1989, until the full amount is paid.
In addition thereto, defendants are to pay jointly and severally to the
plaintiffs, the amount of P50,000.00 as moral damages; P20,000.00
as exemplary damages; P40,000.00 by way of attorneys fees;
and P10,000.00 as litigation expenses.
SO ORDERED.[5]
Due to the defendants failure to deliver the owners duplicate of TCT
Nos. 10616 and 31856, the RTC issued an order on August 29,
1995 declaring said titles null and void, and ordering the Register of
Deeds of Cebu City to issue new titles in the name of herein
petitioners.[6]
Thereafter, or on March 13, 1996, respondents Adolfo and Mariano
Trocino filed with the Court of Appeals, a petition for the annulment
of the judgment rendered by the RTC-Cebu (Branch 10) in Civil
Case No. CEB-11103. Private respondents alleged that the trial
courts decision is null and void on the ground that it did not acquire
jurisdiction over their persons as they were not validly served with a
copy of the summons and the complaint. According to them, at the
time summons was served on them, Adolfo Trocino was already
in Ohio, U.S.A., and has been residing there for 25 years, while
Mariano Trocino was in Talibon, Bohol, and has been residing there
since 1986. They also refuted the receipt of the summons by Caridad
A. Trocino, and the representation made by Atty. Bugarin in their
behalf. Respondents also contended that they have a meritorious
defense.[7] Petitioners filed their Comment/Answer to the
petition.[8]
On September 30, 1996, the Court of Appeals issued the assailed
Decision granting the petition and annulling the decision of the
RTC-Cebu (Branch 10). The decretal portion of the decision reads:
WHEREFORE, the decision of
the Regional Trial Court of Cebu City, Branch 10, in Civil Case No.
CEB-11103 as well as all Orders issued to implement the same are
hereby ANNULLED AND SET ASIDE. The Register of Deeds of
Cebu City is hereby ENJOINED from cancelling Transfer
Certificates of Title Nos. 10616 and 31856. No pronouncement as to
costs.
SO ORDERED.[9]
Their motion for reconsideration having been denied by the Court of
Appeals, petitioners filed the present petition, setting forth the
following assignment of errors:
I. THE COURT OF APPEALS ERRED IN FINDING LACK OF
PRIOR KNOWLEDGE ON THE PART OF RESPONDENTS
TROCINO, REGARDING THE PROCEEDINGS BEFORE THE
RTC OF CEBU CITY AND IN NOT DISMISSING THE
PETITION FOR VIOLATION OF SUPREME COURT CIRCULAR
04-94.
II. THE COURT OF APPEALS ERRED IN DECLARING THE
NEED FOR PERSONAL AND/OR EXTRATERRITORIAL
SERVICE OF SUMMONS, DESPITE THE NATURE OF THE
CAUSE OF ACTION BEING ONE IN REM.
III. THE COURT OF APPEALS ERRED IN ANNULLING THE
JUDGMENT, CAUSING FURTHER USELESS LITIGATION
AND UNNECESSARY EXPENSE ON PETITIONERS AND
RESPONDENTS, ESPECIALLY SINCE RESPONDENTS HAVE

NOT SHOWN ANY VALID DEFENSE AS GROUND FOR
REVERSAL OF JUDGMENT OF THE RTC.
IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS
JUDGMENT IS APPLICABLE IN FAVOR OF CARIDAD
TROCINO.[10]
Summons is a writ by which the defendant is notified of the action
brought against him. Service of such writ is the means by which the
court acquires jurisdiction over his person.[11] Any judgment
without such service in the absence of a valid waiver is null and
void.[12]
The resolution of the present petition hinges on the issue of whether
or not summons was effectively served on respondents. If in the
affirmative, the trial court had validly acquired jurisdiction over their
persons and therefore its judgment is valid.
To resolve whether there was valid service of summons on
respondents, the nature of the action filed against them must first be
determined. As the Court explained in Asiavest Limited vs. Court of
Appeals, it will be helpful to determine first whether the action is in
personam, in rem, or quasi in rem because the rules on service of
summons under Rule 14 of the Rules of Court of the Philippines
apply according to the nature of the action.[13]
In actions in personam, summons on the defendant must be served by
handing a copy thereof to the defendant in person, or, if he refuses to
receive it, by tendering it to him. This is specifically provided in
Section 7, Rule 14 of the Rules of Court,[14] which states:
SEC. 7. Personal service of summons.-- The summons shall be
served by handing a copy thereof to the defendant in person or, if he
refuses to receive it, by tendering it to him.
If efforts to find defendant personally makes prompt service
impossible, substituted service may be effected by leaving copies of
the summons at the defendant's dwelling house or residence with
some person of suitable age and discretion then residing therein, or
by leaving the copies at the defendant's office or regular place of
business with some competent person in charge thereof.[15] In
substituted service, it is mandated that the fact of impossibility of
personal service should be explained in the proof of service.[16]
When the defendant in an action in personam is a non-resident who
does not voluntarily submit himself to the authority of the court,
personal service of summons within the State is essential to the
acquisition of jurisdiction over his person. This cannot be done if the
defendant is not physically present in the country, and thus, the court
cannot acquire jurisdiction over his person and therefore cannot
validly try and decide the case against him.[17] An exception was
accorded in Gemperle vs. Schenkerwherein service of summons
through the non-residents wife, who was a resident of the Philippines,
was held valid, as the latter was his representative and
attorney-in-fact in a prior civil case filed by the non-resident, and the
second case was merely an offshoot of the first case.[18]
Meanwhile, in actions in rem or quasi in rem, jurisdiction over the
person of the defendant is not a prerequisite to confer jurisdiction on
the court provided that the court acquires jurisdiction over the res,
although summons must be served upon the defendant in order to
satisfy the due process requirements.[19] Thus, where the defendant
is a non-resident who is not found in the Philippines, and (1) the
action affects the personal status of the plaintiff; (2) the action relates
to, or the subject matter of which is property in the Philippines in
which the defendant has or claims a lien or interest; (3) the action
seeks the exclusion of the defendant from any interest in the property
located in the Philippines; or (4) the property of the defendant has
been attached in the Philippines, summons may be served
36
extraterritorially by (a) personal service out of the country, with
leave of court; (b) publication, also with leave of court; or (c) any
other manner the court may deem sufficient.[20]
In the present case, petitioners cause of action in Civil Case No.
CEB-11103 is anchored on the claim that the spouses Jesus and
Caridad Trocino reneged on their obligation to convey ownership of
the two parcels of land subject of their sale. Thus, petitioners pray in
their complaint that the spouses Trocino be ordered to execute the
appropriate deed of sale and that the titles be delivered to them
(petitioners); or in the alternative, that the sale be revoked and
rescinded; and spouses Trocino ordered to return to petitioners their
down payment in the amount of P500,000.00 plus interests. The
action instituted by petitioners affect the parties alone, not the whole
world.Hence, it is an action in personam, i.e., any judgment therein is
binding only upon the parties properly impleaded.[21]
Contrary to petitioners belief, the complaint they filed for specific
performance and/or rescission is not an action in rem. While it is a
real action because it affects title to or possession of the two parcels
of land covered by TCT Nos. 10616 and 31856, it does not
automatically follow that the action is already one in
rem. In Hernandez vs. Rural Bank of Lucena, Inc., the Court made
the following distinction:
In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract or the recovery of damages.
In a real action, the plaintiff seeks the recovery of real property, or,
as indicated in section 2(a) of Rule 4, a real action is an action
affecting title to real property or for the recovery of possession, or for
partition or condemnation of, or foreclosure of a mortgage on, real
property.
An action in personam is an action against a person on the basis of
his personal liability, while an action in rem is an action against the
thing itself, instead of against the person. Hence, a real action may at
the same time be an action in personam and not necessarily an action
in rem.[22]
The objective sought in petitioners complaint was to establish a claim
against respondents for their alleged refusal to convey to them the
title to the two parcels of land that they inherited from their father,
Jesus Trocino, who was one of the sellers of the properties to
petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an
action in personam because it is an action against persons, namely,
herein respondents, on the basis of their personal liability. As such,
personal service of summons upon the defendants is essential in
order for the court to acquire of jurisdiction over their persons.[23]
A distinction, however, must be made with regard to service of
summons on respondents Adolfo Trocino and Mariano
Trocino. Adolfo Trocino, as records show, is already a resident
of Ohio, U.S.A. for 25 years. Being a non-resident, the court cannot
acquire jurisdiction over his person and validly try and decide the
case against him.
On the other hand, Mariano Trocino has been in Talibon, Bohol since
1986. To validly acquire jurisdiction over his person, summons must
be served on him personally, or through substituted service, upon
showing of impossibility of personal service. Such impossibility, and
why efforts exerted towards personal service failed, should be
explained in the proof of service. The pertinent facts and
circumstances attendant to the service of summons must be stated in
the proof of service or Officers Return.Failure to do so would
invalidate all subsequent proceedings on jurisdictional grounds.[24]
In the present case, the process server served the summons and
copies of the complaint on respondents Jacob, Jesus, Jr., Adolfo,
Mariano, Consolacion, Alice and Racheal,[25] through their mother,
 37

Caridad Trocino.[26] The return did not contain any particulars as to
the impossibility of personal service on Mariano Trocino within a
reasonable time. Such improper service renders the same ineffective.
Due process of law requires personal service to support a personal
judgment, and, when the proceeding is strictly in personam brought
to determine the personal rights and obligations of the parties,
personal service within the state or a voluntary appearance in the
case is essential to the acquisition of jurisdiction so as to constitute
compliance with the constitutional requirement of due process.[27]
This Courts decision is therefore applicable to all the defendant heirs
with the exception of defendant Caridad Trocino considering that it
was the latter who entered into the alleged sale without the consent of
her husband. She is therefore estopped from questioning her own
authority to enter into the questioned sale. Moreover, Caridad
Trocino was validly served with summons and was accorded due
process.[31]
WHEREFORE, the petition for review is DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 40067 is AFFIRMED.

Moreover, inasmuch as the sheriffs return failed to state the facts and Costs against petitioners. SO ORDERED.
circumstances showing the impossibility of personal service of
summons upon respondents within a reasonable time, petitioners
should have sought the issuance of an alias summons. Under Section
5, Rule 14 of the Rules of Court, alias summons may be issued when
the original summons is returned without being served on any or all
of the defendants.[28] Petitioners, however, did not do so, and they
should now bear the consequences of their lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents
without any exception does not transform the ineffective service of
summons into a valid one. It does not constitute a valid waiver or
even a voluntary submission to the trial courts jurisdiction. There
was not even the slightest proof showing that respondents authorized
Atty. Bugarins appearance for and in their behalf. As found by the
Court of Appeals:

While Caridad Trocino may have engaged the services of Atty.

Bugarin, it did not necessarily mean that Atty. Bugarin also had the
authority to represent the defendant heirs. The records show that in
all the pleadings which required verification, only Caridad Trocino
signed the same. There was never a single instance where defendant
heirs signed the pleading. The fact that a pleading is signed by one
defendant does not necessarily mean that it is binding on a
co-defendant. Furthermore, Caridad Trocino represented herself as
the principal defendant in her Motion to Withdraw Appeal. (Rollo, p.
80)

Since the defendant heirs are co-defendants, the trial court should
have verified the extent of Atty. Bugarins authority when petitioners
failed to appear as early as the pre-trial stage, where the parties are
required to appear. The absence of the defendant heirs should have
prompted the trial court to inquire from the lawyer whether he was
also representing the other petitioners.As co-defendant and co-heirs
over the disputed properties, the defendant heirs had every right to be
present during the trial. Only Caridad Trocino appeared and testified
on her own behalf.All the defenses raised were her own, not the
defendant heirs.[29]

Consequently, the judgment sought to be executed against

respondents were rendered without jurisdiction as there was neither a
proper service of summons nor was there any waiver or voluntary
submission to the trial courts jurisdiction. Hence, the same is void,
with regard to private respondents except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and
Caridad Trocino who sold the properties to petitioners, their right to
proceed against Jesus Trocino when he died was passed on to his
heirs, which includes respondents and Caridad Trocino. Such
transmission of right occurred by operation of law, more particularly
by succession, which is a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of the
inheritance of a person are transmitted.[30]When the process server
personally served the summons on Caridad Trocino, the trial court
validly acquired jurisdiction over her person alone. Hence, the trial
courts decision is valid and binding with regard to her, but only in
proportion to Caridad Trocinos share. As aptly stated by the Court of
Appeals:

ST. AVIATION V GRAND AIR INTERNATIONAL
SANDOVAL-GUTIERREZ, J.:
Challenged in the instant Petition for Review on Certiorari are the
Decision of the Court of Appeals dated July 30, 1999 and its
Resolution dated September 29, 1999 in CA-G.R. SP No. 51134
setting aside the Orders dated October 30, 1998 and December 16,
1998 of the Regional Trial Court (RTC), Branch 117, Pasay City in
Civil Case No. 98-1389.
St. Aviation Services Co., Pte., Ltd., petitioner, is a foreign
corporation based in Singapore. It is engaged in the manufacture,
repair, and maintenance of airplanes and aircrafts. Grand
International Airways, Inc., respondent, is a domestic corporation
engaged in airline operations.
Sometime in January 1996, petitioner and respondent executed an
Agreement for the Maintenance and Modification of Airbus A 300
B4-103 Aircraft Registration No. RP-C8882 (First Agreement).
Under this stipulation, petitioner agreed to undertake maintenance
and modification works on respondents aircraft. The parties agreed
on the mode and manner of payment by respondent of the contract
price, including interest in case of default. They also agreed that the
construction, validity and performance thereof shall be governed by
the laws of Singapore. They further agreed to submit any suit arising
from their agreement to the non-exclusive jurisdiction of
the Singapore courts.
At about the same time, or on January 12, 1996, the parties verbally
agreed that petitioner will repair and undertake maintenance works
on respondents other aircraft, Aircraft No. RP-C8881; and that the
works shall be based on a General Terms of Agreement (GTA). The
GTA terms are similar to those of their First Agreement.
Petitioner undertook the contracted works and thereafter promptly
delivered the aircrafts to respondent. During the period from March
1996 to October 1997, petitioner billed respondent in the total
amount of US$303,731.67 or S$452,560.18. But despite petitioners
repeated demands, respondent failed to pay, in violation of the terms
agreed upon.
On December 12, 1997, petitioner filed with the High Court of
the Republic of Singapore an action for the sum of S$452,560.18,
including interest and costs, against respondent, docketed as Suit No.
2101. Upon petitioners motion, the court issued a Writ of Summons
to be served extraterritorially or outside Singapore upon
respondent. The court sought the assistance of the sheriff
of Pasay City to effect service of the summons upon
respondent. However, despite receipt of summons, respondent failed
to answer the claim.
On February 17, 1998, on motion of petitioner, the Singapore High
Court rendered a judgment by default against respondent.
On August 4, 1998, petitioner filed with the RTC, Branch
117, Pasay City, a Petition for Enforcement of Judgment, docketed as
Civil Case No. 98-1389.
Respondent filed a Motion to Dismiss the Petition on two grounds: (1)
the Singapore High Court did not acquire jurisdiction over its person;
and (2) the foreign judgment sought to be enforced is void for having
been rendered in violation of its right to due process.
On October 30, 1998, the RTC denied respondents motion to dismiss,
holding that neither one of the two grounds (of Grand) is among the
grounds for a motion to dismiss under Rule 16 of the 1997 Rules of
Civil Procedure.
38
Respondent filed a motion for reconsideration but was denied by the
RTC in its Order dated December 16, 1998.
On February 15, 1999, respondent filed with the Court of Appeals a
Petition for Certiorari assailing the RTC Order denying its motion to
dismiss.Respondent alleged that the extraterritorial service of
summons on its office in the Philippines is defective and that
the Singapore court did not acquire jurisdiction over its person. Thus,
its judgment sought to be enforced is void. Petitioner, in its comment,
moved to dismiss the petition for being unmeritorious.
On July 30, 1999, the Court of Appeals issued its Decision granting
the petition and setting aside the Orders dated October 30,
1998 and December 16, 1998 of the RTC without prejudice to the
right of private respondent to initiate another proceeding before the
proper court to enforce its claim. It found:
In the case at bar, the complaint does not involve the personal status
of plaintiff, nor any property in which the defendant has a claim or
interest, or which the private respondent has attached but purely an
action for collection of debt. It is a personal action as well as an
action in personam, not an action in rem or quasi in rem. As a
personal action, the service of summons should be personal or
substituted, not extraterritorial, in order to confer jurisdiction on the
court.
Petitioner seasonably filed a motion for reconsideration but it was
denied on September 29, 1999.
Hence, the instant Petition for Review on Certiorari.
The issues to be resolved are: (1) whether the Singapore High Court
has acquired jurisdiction over the person of respondent by the service
of summons upon its office in the Philippines; and (2) whether the
judgment by default in Suit No. 2101 by the Singapore High Court is
enforceable in the Philippines.
Generally, in the absence of a special contract, no sovereign is bound
to give effect within its dominion to a judgment rendered by a
tribunal of another country; however, under the rules of comity,
utility and convenience, nations have established a usage among
civilized states by which final judgments of foreign courts of
competent jurisdiction are reciprocally respected and rendered
efficacious under certain conditions that may vary in different
countries.[1] Certainly, the Philippine legal system has long ago
accepted into its jurisprudence and procedural rules the viability of
an action for enforcement of foreign judgment, as well as the
requisites for such valid enforcement, as derived from internationally
accepted doctrines.[2]
The conditions for the recognition and enforcement of a foreign
judgment in our legal system are contained in Section 48, Rule 39 of
the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 48. Effect of foreign judgments. The effect of a judgment or
final order of a tribunal of a foreign country, having jurisdiction to
render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a
specific thing, the judgment or final order is conclusive upon the title
to the thing; and
(b) In case of a judgment or final order against a
person, the judgment or final order is presumptive evidence of a right
as between the parties and their successors in interest by a
subsequent title;
 39

In either case, the judgment or final order may be repelled by

evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.

Under the above Rule, a foreign judgment or order against a person

is merely presumptive evidence of a right as between the parties. It
may be repelled, among others, by want of jurisdiction of the issuing
authority or by want of notice to the party against whom it is
enforced. The party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.[3]

Respondent, in assailing the validity of the judgment sought to be

enforced, contends that the service of summons is void and that
the Singapore court did not acquire jurisdiction over it.

Generally, matters of remedy and procedure such as those relating to

the service of process upon a defendant are governed by
the lex fori or the internal law of the forum,[4] which in this case is
the law of Singapore. Here, petitioner moved for leave of court to
serve a copy of the Writ of Summons outside Singapore. In an Order
dated December 24, 1997, the Singapore High Court granted leave to
serve a copy of the Writ of Summons on the Defendant by a method
of service authorized by the law of the Philippines for service of any
originating process issued by the Philippines at ground floor, APMC
Building, 136 Amorsolo corner Gamboa Street, 1229 Makati City, or
elsewhere in the Philippines.[5] This service of summons
outside Singapore is in accordance with Order 11, r. 4(2) of the Rules
of Court 1996[6] of Singapore, which provides.

(2) Where in accordance with these Rules, an originating process is

to be served on a defendant in any country with respect to which
there does not subsist a Civil Procedure Convention providing for
service in that country of process of the High Court, the originating
process may be served

a) through the government of that country, where that government is

willing to effect service;

b) through a Singapore Consular authority in that country, except

where service through such an authority is contrary to the law of the
country; or

c) by a method of service authorized by the law of that country for

service of any originating process issued by that country.

In the Philippines, jurisdiction over a party is acquired by service of

summons by the sheriff,[7] his deputy or other proper court officer
either personally by handing a copy thereof to the defendant[8] or by
substituted service.[9] In this case, the Writ of Summons issued by
the Singapore High Court was served upon respondent at its office
located at Mercure Hotel (formerly Village Hotel), MIA Road, Pasay
City. The Sheriffs Return shows that it was received on May 2,
1998by Joyce T. Austria, Secretary of the General Manager of
respondent company.[10] But respondent completely ignored the
summons, hence, it was declared in default.

Considering that the Writ of Summons was served upon respondent

in accordance with our Rules, jurisdiction was acquired by the
Singapore High Court over its person. Clearly, the judgment of
default rendered by that court against respondent is valid.

WHEREFORE, we GRANT the petition. The challenged Decision

and Resolution of the Court of Appeals in CA-G.R. SP No. 51134
are SET ASIDE. The RTC, Branch 117, Pasay City is
hereby DIRECTED to hear Civil Case No. 98-1389 with dispatch.
SO ORDERED.

G.R. No. 156848 October 11, 2007
PIONEER INTERNATIONAL, LTD., petitioner, vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding
Judge of Regional Trial Court, Branch 147, Makati City, and
ANTONIO D. TODARO, respondents.
CARPIO, J.:
This is a petition for review on certiorari1 of the Decision2 dated 27
September 2001 and of the Resolution3 dated 14 January 2003 of the
Court of Appeals (appellate court) in CA-G.R. SP No. 54062. The
Decision affirmed the Orders4 dated 4 January 19995 and 3 June
19996 of Branch 147 of the Regional Trial Court of Makati City
(trial court) in Civil Case No. 98-124. The trial court denied the
motion to dismiss filed by Pioneer International, Ltd. (PIL)7in its
special appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint
for sum of money and damages with preliminary attachment against
PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer Philippines
Holdings, Inc. (PPHI), John G. McDonald (McDonald), and Philip J.
Klepzig (Klepzig). PIL and its co-defendants were served copies of
the summons and of the complaint at PPHI and PCPI’s office in
Alabang, Muntinlupa, through Cecille L. De Leon (De Leon), who
was Klepzig’s Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under
Australian laws, while PCPI and PPHI are corporations duly
organized under Philippine laws. PIL is engaged in the ready-mix
and concrete aggregates business and has established a presence
worldwide. PIL established PPHI as the holding company of the
stocks of its operating company in the Philippines, PCPI. McDonald
is the Chief Executive Officer of PIL’s Hong Kong office while
Klepzig is the President and Managing Director of PPHI and PCPI.
For his part, Todaro further alleged that he was the managing director
of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to his
resignation in February 1996.
Before Todaro filed his complaint, there were several meetings and
exchanges of letters between Todaro and the officers of Pioneer
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK, PPHI,
and PIL. According to Todaro, PIL contacted him in May 1996 and
asked if he could join it in establishing a pre-mixed concrete plant
and in overseeing its operations in the Philippines. Todaro confirmed
his availability and expressed interest in joining PIL. Todaro met
with several of PIL’s representatives and even gave PIL the names of
three of his subordinates in Betonval whom he would like to join him
in PIL.
Todaro attached nine letters, marked as Annexes "A" to "I," to his
complaint. Annex "A"8 shows that on 15 July 1996, Todaro, under
the letterhead of Ital Tech Distributors, Inc., sent a letter to Max
Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited.
Todaro wrote that "[m]y aim is to run again a ready-mix concrete
company in the Philippines and not to be a part-time consultant.
Otherwise, I could have charged your company with a much higher
fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the
letterhead of Pioneer Concrete (Hong Kong) Limited, responded by
fax to Todaro’s faxed letter to McDonald and proposed that Todaro
"join Pioneer on a retainer basis for 2 to 3 months on the
understanding that [Todaro] would become a permanent employee if
as we expect, our entry proceeds." The faxed letter to McDonald
40
referred to by Lindsay is not found in the rollo and was not attached
to Todaro’s complaint.
Annex "C"10 shows that on the same date as that of Annex "B,"
Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
another letter to Lindsay of Pioneer Concrete (Hong Kong) Limited.
Todaro asked for a formal letter addressed to him about the proposed
retainer. Todaro requested that the letter contain a statement on his
remuneration package and on his permanent employment "with
PIONEER once it has established itself on a permanent basis in the
Philippines."
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro
confirmed the following to McDonald:
1. That I am accepting the proposal of PIONEER INT’L. as a
consultant for three (3) months, starting October 1, 1996, with a
retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by
PIONEER INT’L., on a permanent basis, as its Managing Director or
CEO in the Philippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3. That Gino Martinel and the Sales Manager – Jun Ong, will be
hired as well, on a permanent basis, by PIONEER as soon as the
company is established. Salary, likewise, will be accepted by both
PIONEER and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald,
under the letterhead of Pioneer Concrete Group HK, to Todaro of Ital
Tech Distributors, Inc. The first three paragraphs of McDonald’s
letter read:
Further to our recent meeting in Hong Kong, I am now able to
confirm my offer to engage you as a consultant to Pioneer
International Ltd. Should Pioneer proceed with an investment in the
Philippines, then Pioneer would offer you a position to manage the
premixed concrete operations.
Pioneer will probably be in a position to make a decision on
proceeding with an investment by mid January ‘97.
The basis for your consultancy would be:
Monthly fee USD 15,000 per month billed on monthly basis and
payable 15 days from billing date.
Additional pre-approved expenses to be reimbursed.
Driver and secretarial support-basis for reimbursement of this to be
agreed.
Arrangement to commence from 1st November ‘96, reflecting your
contributions so far and to continue until Pioneer makes a decision.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead of Ital
Tech Distributors, Inc., to McDonald of Pioneer Concrete Group HK
dated 19 November 1996. Todaro confirmed McDonald’s package
concerning the consultancy and reiterated his desire to be the
manager of Pioneer’s Philippine business venture.
Annex "G"14 shows Todaro’s faxed reply, under the letterhead of
Ital Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997.
Todaro informed McDonald that he was willing to extend assistance
to the Pioneer representative from Queensland. The tenor of the letter
revealed that Todaro had not yet occupied his expected position.
Annex "H"15 shows Klepzig’s letter, under the letterhead of PPHI, to
Todaro dated 18 September 1997. Klepzig’s message reads:

It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of
offer of permanent employment, leave me no alternative but to
withdraw these offers of employment with this company.
As you provided services under your previous agreement with our
Pioneer Hong Kong office during the month of August, I will see that
they pay you at the previous rates until the end of August. They have
authorized me on behalf of Pioneer International Ltd. to formally
advise you that the agreement will cease from August 31stas per our
previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell
(Folwell), PIL’s Executive General Manager of Australia and Asia,
to Todaro. Folwell confirmed the contents of Klepzig’s 18 September
1997 letter. Folwell’s message reads:
Thank you for your letter to Dr. Schubert dated 29th September 1997
regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your
association with Pioneer over the period from mid 1996 through to
September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in
regard to your request and expectation to be given permanent
employment with Pioneer Philippines Holdings, Inc. I am informed
that negotiations to reach agreement on appropriate terms and
conditions have not been successful.
The employment conditions you specified in your letter to John
McDonald dated 11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association
with you any further. Mr. Klepzig was authorized to terminate this
association and the letter he sent to you dated 18th September has my
support.
Thank you for your involvement with Pioneer. I wish you all the best
for the future. (Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaro’s
complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
separate motion to dismiss.17 PIL asserted that the trial court has no
jurisdiction over PIL because PIL is a foreign corporation not doing
business in the Philippines. PIL also questioned the service of
summons on it. Assuming arguendo that Klepzig is PIL’s agent in the
Philippines, it was not Klepzig but De Leon who received the
summons for PIL. PIL further stated that the National Labor
Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that
assuming that the trial court has jurisdiction over the subject matter
of the action, the complaint should be dismissed on the ground
of forum non-conveniens. Finally, PIL maintained that the complaint
does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial
court against PIL because PIL is a foreign corporation not doing
business in the Philippines and there was improper service of
summons on PIL.
Todaro filed a Consolidated Opposition dated 26 August 1998 to
refute PIL’s assertions. PIL filed, still by special appearance, a Reply
on 2 October 1998.
The Ruling of the Trial Court
41
On 4 January 1999, the trial court issued an order18 which ruled in
favor of Todaro. The trial court denied the motions to dismiss filed
by PIL, PCPI, PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a
complaint for lack of cause of action are tested on the strength of the
allegation of facts in the complaint. The trial court found that the
allegations in the complaint sufficiently establish a cause of action.
The trial court declared that Todaro’s cause of action is based on an
alleged breach of a contractual obligation and an alleged violation of
Articles 19 and 21 of the Civil Code. Therefore, the cause of action
does not lie within the jurisdiction of the NLRC but with the trial
court.
The trial court also asserted its jurisdiction over PIL, holding that PIL
did business in the Philippines when it entered into a contract with
Todaro. Although PIL questions the service of summons on Klepzig,
whom PIL claims is not its agent, the trial court ruled that PIL failed
to adduce evidence to prove its contention. Finally, on the issue
of forum non-conveniens, the trial court found that it is more
convenient to hear and decide the case in the Philippines because
Todaro resides in the Philippines and the contract allegedly breached
involves employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the
trial court’s 4 January 1999 order and for the deferment of filing its
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus
motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
PPHI, and Klepzig filed a joint reply. The trial court issued an
order19on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and
Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days
within which to file their respective answers.
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The Ruling of the Appellate Court
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate court’s
decision reads:
WHEREFORE, premises considered, the present petition for
certiorari is hereby DENIED DUE COURSE and accordingly
DISMISSED. The assailed Orders dated January 4, 1999 and June 3,
1999 of the Regional Trial Court of Makati City, Branch 147, in
Civil Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed21 PIL’s motion
for reconsideration for lack of merit. The appellate court stated that
PIL’s motion raised no new substantial or weighty arguments that
could impel the appellate court from departing or overturning its
previous decision. PIL then filed a petition for review on certiorari
before this Court.
The Issues
PIL raised the following issues before this Court:
A. [The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:
A.1. [PIL] is a foreign corporation "not doing business" in the
Philippines.
A.2. Moreover, the complaint does not contain appropriate
allegations of ultimate facts showing that [PIL] is doing or
transacting business in the Philippines.

A.3. Assuming arguendo that jurisdiction may be acquired over the
person of [PIL], [the trial court] still failed to acquire jurisdiction
since summons was improperly served on [PIL].
B. [Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the
case, including annexes, motions and all evidence on record.
C. [The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained
therein indubitably show that [Todaro] bases his claims on an alleged
breach of an employment contract. Thus, exclusive jurisdiction is
vested with the [NLRC].
D. Pursuant to the principle of forum non-conveniens, [the trial court]
committed grave abuse of discretion when it took cognizance of the
case.22
The Ruling of the Court
The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
service of summons, the rulings of the trial and appellate courts on
the issues raised by PIL are correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a
cause of action is the act or omission by which a party violates a right
of another.
The general rule is that the allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of
damages.23
In the present case, the summary of Todaro’s allegations states that
PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
PIL’s Philippine office. Todaro’s allegations are thus sufficient to
establish a cause of action. We quote with approval the trial court’s
ruling on this matter:
On the issue of lack of cause of action – It is well-settled that the
merits of a motion to dismiss a complaint for lack of cause of action
is tested on the strength of the allegations of fact contained in the
complaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil.
366 [1954]). This Court finds that the allegations of the complaint,
specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging as
follows:
"30. All of the acts set forth in the foregoing have been done with the
knowledge, consent and/or approval of the defendants who acted in
concert and/or in conspiracy with one another.
31. Under the circumstances, there is a valid contract entered into
between [Todaro] and the Pioneer Group, whereby, among others,
the Pioneer Group would employ [Todaro], on a permanent basis, to
manage and operate the ready-mix concrete operations, if the Pioneer
Group decides to invest in the Philippines.
42
32. The Pioneer Group has decided to invest in the Philippines. The
refusal of the defendants to comply with the Pioneer Group’s
undertaking to employ [Todaro] to manage their Philippine
ready-mix operations, on a permanent basis, is a direct breach of an
obligation under a valid and perfected contract.
33. Alternatively, assuming without conceding, that there was no
contractual obligation on the part of the Pioneer Group to employ
[Todaro] on a permanent basis, in their Philippine operations, the
Pioneer Group and the other defendants did not act with justice, give
[Todaro] his due and observe honesty and good faith and/or they
have willfully caused injury to [Todaro] in a manner that is contrary
to morals, good customs, and public policy, as mandated under Arts.
19 and 21 of the New Civil Code."
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or
not these allegations are true is immaterial for the court cannot
inquire into the truth thereof, the test being whether, given the
allegations of fact in the complaint, a valid judgment could be
rendered in accordance with the prayer in the complaint.24
It should be emphasized that the presence of a cause of action rests
on the sufficiency, and not on the veracity, of the allegations in the
complaint. The veracity of the allegations will have to be examined
during the trial on the merits. In resolving a motion to dismiss based
on lack of cause of action, the trial court is limited to the four corners
of the complaint and its annexes. It is not yet necessary for the trial
court to examine the truthfulness of the allegations in the complaint.
Such examination is proper during the trial on the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the
truthfulness of the allegations in the complaint. Section 1, Rule 16 of
the 1997 Rules of Civil Procedure does not
mention forum non-conveniens as a ground for filing a motion to
dismiss. The propriety of dismissing a case based on forum
non-conveniens requires a factual determination; hence, it is more
properly considered a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction on
this ground, the trial court should do so only after vital facts are
established to determine whether special circumstances require the
court’s desistance.25
Jurisdiction over PIL
PIL questions the trial court’s exercise of jurisdiction over it on two
levels. First, that PIL is a foreign corporation not doing business in
the Philippines and because of this, the service of summons on PIL
did not follow the mandated procedure. Second, that Todaro’s claims
are based on an alleged breach of an employment contract so Todaro
should have filed his complaint before the NLRC and not before the
trial court.
Transacting Business in the Philippines and
Service of Summons
The first level has two sub-issues: PIL’s transaction of business in
the Philippines and the service of summons on PIL. Section 12, Rule
14 of the 1997 Rules of Civil Procedure provides the manner by
which summons may be served upon a foreign juridical entity which
has transacted business in the Philippines. Thus:
Service upon foreign private juridical entity. — When the defendant
is a foreign juridical entity which has transacted business in the
Philippines, service may be made on its resident agent designated in
accordance with law for that purpose, or, if there be no such agent,
on the government official designated by law to that effect, or any of
its officers or agents within the Philippines.

As to the first sub-issue, PIL insists that its sole act of "transacting"
or "doing business" in the Philippines consisted of its investment in
PPHI. Under Philippine law, PIL’s mere investment in PPHI does not
constitute "doing business." However, we affirm the lower courts’
ruling and declare that, based on the allegations in Todaro’s
complaint, PIL was doing business in the Philippines when it
negotiated Todaro’s employment with PPHI. Section 3(d) of
Republic Act No. 7042, Foreign Investments Act of 1991, states:
The phrase "doing business" shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totaling one hundred eighty [180] days or more;
participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or
officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account;
(Emphases added)
PIL’s alleged acts in actively negotiating to employ Todaro to run its
pre-mixed concrete operations in the Philippines, which acts are
hypothetically admitted in PIL’s motion to dismiss, are not mere acts
of a passive investor in a domestic corporation. Such are managerial
and operational acts in directing and establishing commercial
operations in the Philippines. The annexes that Todaro attached to his
complaint give us an idea on the extent of PIL’s involvement in the
negotiations regarding Todaro’s employment. In Annex "E,"
McDonald of Pioneer Concrete Group HK confirmed his offer to
engage Todaro as a consultant of PIL. In Annex "F," Todaro
accepted the consultancy. In Annex "H," Klepzig of PPHI stated that
PIL authorized him to tell Todaro about the cessation of his
consultancy. Finally, in Annex "I," Folwell of PIL wrote to Todaro to
confirm that "Pioneer" no longer wishes to be associated with Todaro
and that Klepzig is authorized to terminate this association. Folwell
further referred to a Dr. Schubert and to Pioneer Hong Kong. These
confirmations and references tell us that, in this instance, the various
officers and companies under the Pioneer brand name do not work
independently of each other. It cannot be denied that PIL had
knowledge of and even authorized the non-implementation of
Todaro’s alleged permanent employment. In fact, in the letters to
Todaro, the word "Pioneer" was used to refer not just to PIL alone
but also to all corporations negotiating with Todaro under the Pioneer
name.
As further proof of the interconnection of the various Pioneer
corporations with regard to their negotiations with Todaro,
McDonald of Pioneer Concrete Group HK confirmed Todaro’s
engagement as consultant of PIL (Annex "E") while Folwell of PIL
stated that Todaro rendered consultancy services to Pioneer HK
(Annex "I"). In this sense, the various Pioneer corporations were not
acting as separate corporations. The behavior of the various Pioneer
corporations shoots down their defense that the corporations have
separate and distinct personalities, managements, and operations. The
various Pioneer corporations were all working in concert to negotiate
an employment contract between Todaro and PPHI, a domestic
corporation.
43
Finally, the phrase "doing business in the Philippines" in the former
version of Section 12, Rule 14 now reads "has transacted business in
the Philippines." The scope is thus broader in that it is enough for the
application of the Rule that the foreign private juridical entity "has
transacted business in the Philippines."26
As to the second sub-issue, the purpose of summons is not only to
acquire jurisdiction over the person of the defendant, but also to give
notice to the defendant that an action has been commenced against it
and to afford it an opportunity to be heard on the claim made against
it. The requirements of the rule on summons must be strictly
followed; otherwise, the trial court will not acquire jurisdiction over
the defendant.
When summons is to be served on a natural person, service of
summons should be made in person on the defendant.27 Substituted
service is resorted to only upon the concurrence of two requisites: (1)
when the defendant cannot be served personally within a reasonable
time and (2) when there is impossibility of prompt service as shown
by the statement in the proof of service in the efforts made to find the
defendant personally and that such efforts failed.28
The statutory requirements of substituted service must be followed
strictly, faithfully, and fully, and any substituted service other than
by the statute is considered ineffective. Substituted service is in
derogation of the usual method of service. It is a method
extraordinary in character and may be used only as prescribed and in
the circumstances authorized by the statute.29 The need for strict
compliance with the requirements of the rule on summons is also
exemplified in the exclusive enumeration of the agents of a domestic
private juridical entity who are authorized to receive summons.
At present, Section 11 of Rule 14 provides that when the defendant is
a domestic private juridical entity, service may be made on the
"president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel." The previous version of Section 11
allowed for the service of summons on the "president, manager,
secretary, cashier, agent, or any of its directors." The present Section
11 qualified "manager" to "general manager" and "secretary" to
"corporate secretary." The present Section 11 also removed "cashier,
agent, or any of its directors" from the exclusive enumeration.
When summons is served on a foreign juridical entity, there are three
prescribed ways: (1) service on its resident agent designated in
accordance with law for that purpose, (2) service on the government
official designated by law to receive summons if the corporation does
not have a resident agent, and (3) service on any of the corporation’s
officers or agents within the Philippines.30
In the present case, service of summons on PIL failed to follow any
of the prescribed processes. PIL had no resident agent in the
Philippines. Summons was not served on the Securities and
Exchange Commission (SEC), the designated government
agency,31 since PIL is not registered with the SEC. Summons for
PIL was served on De Leon, Klepzig’s Executive Assistant. Klepzig
is PIL’s "agent within the Philippines" because PIL authorized
Klepzig to notify Todaro of the cessation of his consultancy
(Annexes "H" and "I").32 The authority given by PIL to Klepzig to
notify Todaro implies that Klepzig was likewise authorized to
receive Todaro’s response to PIL’s notice. Todaro responded to
PIL’s notice by filing a complaint before the trial court.
However, summons was not served personally on Klepzig as agent of
PIL. Instead, summons was served on De Leon, Klepzig’s Executive
Assistant. In this instance, De Leon was not PIL’s agent but a mere
employee of Klepzig. In effect, the sheriff33 resorted to substituted
service. For symmetry, we apply the rule on substituted service of
summons on a natural person and we find that no reason was given to
justify the service of PIL’s summons on De Leon.
 44

Thus, we rule that PIL transacted business in the Philippines and

Klepzig was its agent within the Philippines. However, there was
improper service of summons on PIL since summons was not served
personally on Klepzig.

NLRC Jurisdiction

As to the second level, Todaro prays for payment of damages due

him because of PIL’s non-implementation of Todaro’s alleged
employment agreement with PPHI. The appellate court stated its
ruling on this matter, thus:

It could not be denied that there was no existing contract yet to speak
of between PIONEER INTL. and [Todaro]. Since there was an
absence of an employment contract between the two parties, this
Court is of the opinion and so holds that no employer-employee
relationship actually exists. Record reveals that all that was agreed
upon by [Todaro] and the Pioneer Concrete, acting in behalf of
PIONEER INTL., was the confirmation of the offer to engage the
services of the former as consultant of PIONEER INTL. (Rollo, p.
132). The failure on the part of PIONEER INTL. to abide by the said
agreement, which was duly confirmed by PIONEER INTL., brought
about a breach of an obligation on a valid and perfected agreement.
There being no employer-employee relationship established between
[PIL] and [Todaro], it could be said that the instant case falls within
the jurisdiction of the regular courts of justice as the money claim of
[Todaro] did not arise out of or in connection with [an]
employer-employee relationship.34

Todaro’s employment in the Philippines would not be with PIL but

with PPHI as stated in the 20 October 1997 letter of Folwell.
Assuming the existence of the employment agreement, the
employer-employee relationship would be between PPHI and Todaro,
not between PIL and Todaro. PIL’s liability for the
non-implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes of
action as stated in his complaint are, in addition to breach of contract,
based on "violation of Articles 19 and 21 of the New Civil Code" for
the "clear and evident bad faith and malice"35 on the part of
defendants. The NLRC’s jurisdiction is limited to those enumerated
under Article 217 of the Labor Code.36

WHEREFORE, the petition is PARTIALLY GRANTED. The

Decision dated 27 September 2001 and the Resolution dated 14
January 2003 of the appellate court are AFFIRMED with
the MODIFICATION that there was improper service of summons
on Pioneer International, Ltd. The case is remanded to the trial court
for proper service of summons and trial. No costs.

SO ORDERED.

G.R. No. 168747 October 19, 2007
VICTORIA REGNER, Petitioner, vs.
CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU
COUNTRY CLUB, Inc., Respondents.
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari seeks to reverse the
Decision1 dated 6 May 2005 of the Court of Appeals in CA-G.R. CV
No. 71028 entitled, "Victoria Regner v. Cynthia Logarta, Teresa R.
Tormis and Cebu Country Club, Inc.," which affirmed the Order
dated 9 November 2000 of the Regional Trial Court (RTC) of Cebu,
granting herein respondents’ motion to dismiss Civil Case No. CEB
23927. The Order dated 9 November 2000 of the RTC dismissed
herein petitioner’s complaint for declaration of nullity of a deed of
donation, for failure to serve summons on Cynthia Logarta, an
indispensable party therein.
Civil Case No. CEB. 23927 arose from the following factual
antecedents:
Luis Regner (Luis) had three daughters with his first wife, Anicita C.
Regner, namely, Cynthia Logarta (Cynthia) and Teresa Tormis
(Teresa), the respondents herein, and Melinda Regner-Borja
(Melinda).
Herein petitioner Victoria Regner (Victoria) is the second wife of
Luis.
During the lifetime of Luis, he acquired several properties, among
which is a share at Cebu Country Club Inc., evidenced by Proprietary
Ownership Certificate No. 0272. On 15 May 1998, Luis executed a
Deed2 of Donation in favor of respondents Cynthia and Teresa
covering Proprietary Ownership Certificate No. 0272 of the Cebu
Country Club, Inc.
Luis passed away on 11 February 1999.
On 15 June 1999, Victoria filed a Complaint3 for Declaration of
Nullity of the Deed of Donation with Prayer for Issuance of a Writ of
Preliminary Injunction and Temporary Restraining Order against
Cynthia and Teresa with the RTC, docketed as Civil Case No. CEB.
23927. Victoria alleged in her complaint that: on 17 March 1997,
Luis made a written declaration wherein he stated that due to his
illness and forgetfulness, he would not sign any document without
the knowledge of his lawyer, Atty. Francis Zosa; on 15 May 1998,
when Luis was already very ill and no longer of sound and disposing
mind, Cynthia and Teresa , conspiring and confederating with each
other, fraudulently made or caused to be fraudulently made a Deed of
Donation whereby they made it appear that Luis donated to them
Proprietary Ownership Certificate No. 0272; since Luis no longer
had the ability to write or affix his signature, Melinda, acting under
the influence of her sisters, Cynthia and Teresa, fraudulently
manipulated the hand of Luis so that he could affix his thumbmark
on the assailed Deed of Donation; on 8 February 1998, or three days
before the death of Luis, and when he was already in comatose
condition at the Cebu Doctors’ Hospital, Melinda, Teresa, and
Cynthia caused the preparation of an affidavit to the effect that Luis
affirmed the Deed of Donation he allegedly executed earlier by
lifting his hand to affix his thumbmark on the said affidavit.
Sheriff Melchor A. Solon served the summonses on Cynthia and
Teresa at the Borja Family Clinic in Tagbilaran City wherein
Melinda worked as a doctor, but Melinda refused to receive the
summonses for her sisters and informed the sheriff that their lawyer,
Atty. Francis Zosa, would be the one to receive the same.
45
Upon her arrival in the Philippines, on 1 June 2000, Teresa was
personally served the summons at Room 304, Regency Crest
Condominium, Banilad, Cebu City. She filed her Answer4 with
counterclaim with the RTC on 6 June 2000.
Subsequently, on 12 September 2002, Teresa filed a motion to
dismiss Civil Case No. CEB 23927 because of petitioner’s failure to
prosecute her action for an unreasonable length of time.
Petitioner opposed5 the motion and filed her own motion to set the
case for pre-trial, to which Teresa filed her rejoinder on the ground
that their sister, Cynthia, an indispensable party, had not yet been
served a summons. Thus, Teresa prayed for the dismissal of
petitioner’s complaint, as the case would not proceed without
Cynthia’s presence.
On 9 November 2000, the RTC issued an Order6 granting respondent
Teresa’s motion to dismiss, pertinent portions of which read:
Considering that the donees in the Deed of Donation are Cynthia R.
Logarta and Teresa R. Tormis, they are therefore an (sic)
indispensable party (sic). In the case of Quisumbing vs. Court of
Appeals, 189 SCRA 325, indispensable parties are those with such an
interest in the controversy that a final decree would necessarily affect
their rights so that the court could not proceed without their presence
Wherefore, in view of the foregoing, the instant case is hereby
dismissed without prejudice.
A motion for reconsideration was filed by petitioner, but the same
was denied in an Order dated 14 February 2001.
Aggrieved, petitioner appealed to the Court of Appeals. On 6 May
2005, the Court of Appeals rendered a Decision denying the appeal
and affirming in toto the order of dismissal of the complaint by the
RTC and the denial of the motion for reconsideration thereof. The
Court of Appeals ratiocinated that petitioner’s failure to move for an
extraterritorial service of summons constitutes failure to prosecute
for an unreasonable length of time, thus:
[T]he plaintiff-appellant [Victoria Regner] should have moved for
the extraterritorial service of summons for both defendants-appellees
Teresa R. Tormis and Cynthia R. Logarta as they were not residing
and were not found in the Philippines when plaintiff-appellant
[Victoria Regner] filed this case below. Although
defendant-appellant Teresa Tormis was personally served with
summons on June 1, 2000 when she came to the Philippines but the
same was only effected after a long wait or after the lapse of almost
one year from the date the complaint was filed on June 15, 1999. To
allow this practice would be to make the continuation of like
proceedings before the courts dependent on when the defendants
would be personally served with summons by the time they would
come to the Philippines, which would only unnecessarily delay the
proceedings and clog the court dockets as well. The afore-cited rule
was precisely crafted to meet situations similar to the present case to
avoid unnecessary delays.
It has to be emphasized that it is incumbent upon the plaintiff
[Victoria Regner] to move with leave of court for the extraterritorial
service of summons. Taking into account the considerable time that
had elapsed from the filing of the complaint on June 15, 1999 until
defendant-appellee Teresa R. Tormis, through counsel, filed a motion
to dismiss on September 12, 2000, or approximately fifteen (15)
months, without any act on the part of plaintiff-appellant [Victoria
Regner] to move for extraterritorial service of summons upon the
person of defendant-appellee Cynthia Logarta renders
plaintiff-appellant’s [Victoria Regner] complaint dismissible for
failure to prosecute her action for unreasonable length of time under
Section 3, Rule 17, Revised Rules of Court, x x x.7

Hence, this appeal via petition8 for review on certiorari filed by
petitioner raising the following assignment of errors:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
DELAY IN SERVING SUMMONS ON ONE OF THE
DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE
NOTWITHSTANDING THAT THE REST OF THE
CO-DEFENDANTS WERE DULY SERVED WITH SUMMONSES
THE COURT OF APPEALS ERRED IN NOT CONSIDERING
THAT THE ANSWER FILED BY ONE INDIVIDUAL
DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER
DEFENDANT WHO HAS NOT BEEN SERVED WITH
SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY
COMMON AMONG ALL DEFENDANTS.9
From the foregoing, this Court identifies the issues to be resolved in
this petition as: (1) Whether a co-donee is an indispensable party in
an action to declare the nullity of the deed of donation, and (2)
whether delay in the service of summons upon one of the defendants
constitutes failure to prosecute that would warrant dismissal of the
complaint.
A Court must acquire jurisdiction over the persons of indispensable
parties before it can validly pronounce judgments personal to the
parties. Courts acquire jurisdiction over a party plaintiff upon the
filing of the complaint. On the other hand, jurisdiction over the
person of a party defendant is assured upon the service of summons
in the manner required by law or otherwise by his voluntary
appearance. As a rule, if a defendant has not been summoned, the
court acquires no jurisdiction over his person, and a personal
judgment rendered against such defendant is null and void.10 A
decision that is null and void for want of jurisdiction on the part of
the trial court is not a decision in the contemplation of law and, hence,
it can never become final and executory.11
Rule 3, Section 7 of the Rules of Court, defines indispensable parties
as parties-in-interest without whom there can be no final
determination of an action. As such, they must be joined either as
plaintiffs or as defendants. The general rule with reference to the
making of parties in a civil action requires, of course, the joinder of
all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence
being a sine qua non for the exercise of judicial power.12 It is
precisely "when an indispensable party is not before the court [that]
the action should be dismissed."13 The absence of an indispensable
party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as
to those present.14
As we ruled in Alberto v. Mananghala15 :
In an action for recovery of property against a person who purchased
it from another who in turn acquired it from others by the same
means or by donation or otherwise, the predecessors of defendants
are indispensable parties if the transfers, if not voided, may bind
plaintiff. (Garcia vs. Reyes, 17 Phil. 127.) In the latter case, this
Court held:
In order to bring this suit duly to a close, it is imperative to determine
the only question raised in connection with the pending appeal, to wit,
whether all the persons who intervened in the matter of the transfers
and donation herein referred to, are or are not necessary parties to
this suit, since it is asked in the complaint that the said transfers and
donation be declared null and void – an indispensable declaration for
the purpose, in a proper case, of concluding the plaintiff to be the
sole owner of the house in dispute.
46
If such a declaration of annulment can directly affect the persons
who made and who were concerned in the said transfers, nothing
could be more proper and just than to hear them in the litigation, as
parties interested in maintaining the validity of those transactions,
and therefore, whatever be the nature of the judgment rendered,
Francisco Reyes, Dolores Carvajal, Alfredo Chicote, Vicente
Miranda, and Rafael Sierra, besides the said minors, must be
included in the case as defendants." (Garcia vs. Reyes, 17 Phil.,
130-131.)
It takes no great degree of legal sophistication to realize that Cynthia
and Teresa are indispensable parties to Civil Case No. CEB 23927.
Cynthia and Teresa allegedly derived their rights to the subject
property by way of donation from their father Luis. The central thrust
of the petitioner’s complaint in Civil Case No. CEB 23927 was that
Luis could not have donated Proprietary Ownership Certificate No.
0272 to his daughters Cynthia and Teresa, as Luis was already very
ill and no longer of sound and disposing mind at the time of donation
on 15 May 1997. Accordingly, the prayer in petitioner’s complaint
was for the trial court to declare null and void the Deed of Donation
and to restrain the Cebu Country Club, Inc. from transferring title
and ownership of Proprietary Ownership Certificate No. 0272 to
Cynthia and Teresa.
Thus, based on the Deed of Donation, Teresa and Cynthia are
co-owners of Proprietary Membership Certificate No. 0272 of Cebu
Country Club, Inc. The country club membership certificate is
undivided and it is impossible to pinpoint which specific portion of
the property belongs to either Teresa or Cynthia. Indeed, both Teresa
and Cynthia are indispensable parties in Civil Case No. CEB 23927.
An indispensable party has been defined as follows:
An indispensable party is a party who has such an interest in the
controversy or subject matter that a final adjudication cannot be
made, in his absence, without injuring or affecting that interest, a
party who has not only an interest in the subject matter of the
controversy, but also has an interest of such nature that a final decree
cannot be made without affecting his interest or leaving the
controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been
considered that an indispensable party is a person in whose absence
there cannot be a determination between the parties already before
the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before
it may properly go forward.
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the
other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also,
a person is not an indispensable party if his presence would merely
permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is
not a sufficient reason to declare a person to be an indispensable
party that his presence will avoid multiple litigation.16
In Servicewide Specialists, Incorporated v. Court of Appeals,17 this
Court held that no final determination of a case could be made if an
indispensable party is not legally present therein:
An indispensable party is one whose interest will be affected by the
court’s action in the litigation, and without whom no final
determination of the case can be had. The party’s interest in the
subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party to
the proceeding is an absolute necessity. In his absence there cannot
be a resolution of the dispute of the parties before the court which is
effective, complete, or equitable.

The rationale for treating all the co-owners of a property as
indispensable parties in a suit involving the co-owned property is
explained in Arcelona v. Court of Appeals18 :
As held by the Supreme Court, were the courts to permit an action in
ejectment to be maintained by a person having merely an undivided
interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners
not parties to the suit, and thus the defendant in possession of the
property might be harassed by as many succeeding actions of
ejectment, as there might be co-owners of the title asserted against
him. The purpose of this provision was to prevent multiplicity of
suits by requiring the person asserting a right against the defendant to
include with him, either as co-plaintiffs or as co-defendants, all
persons standing in the same position, so that the whole matter in
dispute may be determined once and for all in one litigation.
Applying the foregoing definitions and principles to the present case,
this Court finds that any decision in Civil Case No. CEB 23927
cannot bind Cynthia, and the Court cannot nullify the donation of the
property she now co-owns with Teresa, even if limited only to the
portion belonging to Teresa, to whom summons was properly served,
since ownership of the property is still pro indiviso. Obviously,
Cynthia is an indispensable party in Civil Case No. CEB 23927
without whom the lower court is barred from making a final
adjudication as to the validity of the entire donation. Without the
presence of indispensable parties to a suit or proceeding, a judgment
therein cannot attain finality.19
Being an indispensable party in Civil Case No. CEB 23927, the trial
court must also acquire jurisdiction over Cynthia’s person through
the proper service of summons.
Based on the foregoing disquisitions, the issue of whether the answer
filed by Teresa should benefit Cynthia who was not served summons
need not be discussed.
As to determine whether Cynthia was properly served a summons, it
will be helpful to determine first the nature of the action filed against
Cynthia and Teresa by petitioner Victoria, whether it is an action in
personam, in rem or quasi in rem. This is because the rules on service
of summons embodied in Rule 14 apply according to whether an
action is one or the other of these actions.
In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract or the recovery of
damages.20 In contrast, in a real action, the plaintiff seeks the
recovery of real property; or, as indicated in Section 2(a), Rule 4 of
the then Rules of Court, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property. An
action in personam is an action against a person on the basis of his
personal liability, while an action in rem is an action against the thing
itself, instead of against the person.21
In an action in personam, personal service of summons or, if this is
not possible and he cannot be personally served, substituted service,
as provided in Section 7, Rule 14 of the Rules of Court,22 is essential
for the acquisition by the court of jurisdiction over the person of a
defendant who does not voluntarily submit himself to the authority of
the court.23 If defendant cannot be served a summons because he is
temporarily abroad, but is otherwise a Philippine resident, service of
summons may, by leave of court, be made by
publication.24 Otherwise stated, a resident defendant in an action in
personam, who cannot be personally served a summons, may be
summoned either by means of substituted service in accordance with
Section 7, Rule 14 of the Rules of Court, or by publication as
provided in Sections 15 and 16 of the same Rule.
47
In all of these cases, it should be noted, defendant must be a resident
of the Philippines; otherwise an action in personam cannot be
brought because jurisdiction over his person is essential to make a
binding decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction
over the person of the defendant is not essential for giving the court
jurisdiction so long as the court acquires jurisdiction over the res. If
the defendant is a nonresident and he is not found in the country,
summons may be served extraterritorially in accordance with Section
15, Rule 14 of the Rules of Court, which provides:
Section 15. Extraterritorial service. - When the defendant does not
reside and is not found in the Philippines, and the action affects the
personal status of the plaintiff or relates to, or the subject of which is,
property within the Philippines, in which the defendant has or claims
a lien or interest, actual or contingent, or in which the relief
demanded consists, wholly or in part, in excluding the defendant
from any interest therein, or the property of the defendant has been
attached within the Philippines, service may, by leave of court, be
effected out of the Philippines by personal service as under Section 6;
or by publication in a newspaper of general circulation in such places
and for such time as the court may order, in which case a copy of the
summons and order of the court shall be sent by registered mail to
the last known address of the defendant, or in any other manner the
court may deem sufficient. Any order granting such leave shall
specify a reasonable time, which shall not be less than sixty (60) days
after notice, within which the defendant must answer.
As stated above, there are only four instances wherein a defendant
who is a non-resident and is not found in the country may be served a
summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiff; (2) when the action relates
to, or the subject of which is property within the Philippines, on
which the defendant claims a lien or an interest, actual or contingent;
(3) when the relief demanded in such action consists, wholly or in
part, in excluding the defendant from any interest in property located
in the Philippines; and (4) when the defendant non-resident’s
property has been attached within the Philippines. In these instances,
service of summons may be effected by (a) personal service out of
the country, with leave of court; (b) publication, also with leave of
court; or (c) any other manner the court may deem sufficient.25
In such cases, what gives the court jurisdiction in an action in rem or
quasi in rem is that it has jurisdiction over the res, i.e., the personal
status of the plaintiff who is domiciled in the Philippines or the
property litigated or attached. Service of summons in the manner
provided in Section 15, Rule 14 of the Rules of Court is not for the
purpose of vesting the court with jurisdiction, but for complying with
the requirements of fair play or due process, so that the defendant
will be informed of the pendency of the action against him; and the
possibility that property in the Philippines belonging to him, or in
which he has an interest, might be subjected to a judgment in favor of
the plaintiff and he can thereby take steps to protect his interest if he
is so minded.26
In petitioner’s Complaint in Civil Case No. CEB No. 23427, she
alleged that Cynthia is residing at 462 West Vine No. 201, Glendale,
California, 912041, U.S.A.; while Teresa is residing at 2408 South
Hacienda Boulevard, Hacienda Heights, California, but they usually
visit here in the Philippines and can be served summonses and other
processes at the Borja Family Clinic, Bohol. Pertinent portions of the
Complaint read:
2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married
to Ramon Logarta, resident (sic) 463 West Vine No.201, Glendale,
California, 912041, USA. She however usually visits in the

Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol;
3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age,
married to Antonio Tormis, and a resident of 2408 South Hacienda
Heights, California, 19745, U.S.A. She however usually visits in the
Philippines and can be served with summons and other processes of
this Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.27
Petitioner prayed for a declaration of nullity of the deed of donation,
to restrain Cebu Country Club, Inc. from transferring title and
ownership of Proprietary Ownership Certificate No. 0272 to Cynthia
and Teresa, and for moral and exemplary damages. Civil Case No.
CEB 23927 is evidently an action against Cynthia and Teresa on the
basis of their personal liability for the alleged fraudulent transfer of
the subject Country Club membership from Luis to their name. In
this sense, petitioner questions the participation and shares of
Cynthia and Teresa in the transferred Country Club membership.
Moreover, the membership certificate from the Cebu Country Club,
Inc. is a personal property. Thus, the action instituted by petitioner
before the RTC is in personam.
Being an action in personam, the general rule requires the personal
service of summons on Cynthia within the Philippines, but this is not
possible in the present case because Cynthia is a non-resident and is
not found within the Philippines.
As Cynthia is a nonresident who is not found in the Philippines,
service of summons on her must be in accordance with Section 15,
Rule 14 of the Rules of Court. Such service, to be effective outside
the Philippines, must be made either (1) by personal service; (2) by
publication in a newspaper of general circulation in such places and
for such time as the court may order, in which case a copy of the
summons and order of the court should be sent by registered mail to
the last known address of the defendant; or (3) in any other manner
which the court may deem sufficient. The third mode, like the first
two, must be made outside the Philippines, such as through the
Philippine Embassy in the foreign country where Cynthia resides.
Since in the case at bar, the service of summons upon Cynthia was
not done by any of the authorized modes, the trial court was correct
in dismissing petitioner’s complaint.
Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states –
SEC. 3. Dismissal due to fault of plaintiff. – If, for no justifiable
cause, the plaintiff fails to appear on the date of the presentation of
his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any
order of the court, the complaint may be dismissed upon motion of
the defendant or upon the court's own motion, without prejudice to
the right of the defendant to prosecute his counterclaim in the same
or in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by the court.
As can be gleaned from the rule, there are three instances when the
complaint may be dismissed due to the plaintiff's fault: (1) if he fails
to appear during a scheduled trial, especially on the date for the
presentation of his evidence in chief; (2) if he fails to prosecute his
action for an unreasonable length of time; and (3) if he fails to
comply with the rules or any order of the court.28
Considering the circumstances of the case, it can be concluded that
the petitioner failed to prosecute the case for an unreasonable length
of time. There is failure to prosecute when the plaintiff, being present,
is not ready or is unwilling to proceed with the scheduled trial or
when postponements in the past were due to the plaintiff's own
making, intended to be dilatory or caused substantial prejudice on the
part of the defendant.29
48
While a court can dismiss a case on the ground of failure to prosecute,
the true test for the exercise of such power is whether, under the
prevailing circumstances, the plaintiff is culpable for want of due
diligence in failing to proceed with reasonable promptitude.30 As to
what constitutes an "unreasonable length of time," within the
purview of the above-quoted provision, the Court has ruled that it
"depends upon the circumstances of each particular case," and that
"the sound discretion of the court" in the determination of said
question "will not be disturbed, in the absence of patent abuse"; and
that "the burden of showing abuse of judicial discretion is upon the
appellant since every presumption is in favor of the correctness of the
court's action."31 Likewise, the concept of promptness is a relative
term and must not unnecessarily be an inflexible one. It connotes an
action without hesitation and loss of time. As to what constitutes the
term is addressed to the consideration of the trial court, bearing in
mind that while actions must be disposed of with dispatch, the
essential ingredient is the administration of justice and not mere
speed.32
It is well to quote the doctrine laid in Padua v. Ericta,33 as
accentuated in the subsequent case Marahay v. Melicor34:
Courts should not brook undue delays in the ventilation and
determination of causes. It should be their constant effort to assure
that litigations are prosecuted and resolved with dispatch.
Postponements of trials and hearings should not be allowed except on
meritorious grounds; and the grant or refusal thereof rests entirely in
the sound discretion of the Judge. It goes without saying, however,
that discretion must be reasonably and wisely exercised, in the light
of the attendant circumstances. Some reasonable deferment of the
proceedings may be allowed or tolerated to the end that cases may be
adjudged only after full and free presentation of evidence by all the
parties, especially where the deferment would cause no substantial
prejudice to any part. The desideratum of a speedy disposition of
cases should not, if at all possible, result in the precipitate loss of a
party’s right to present evidence and either in plaintiff's being
non-suited or the defendant's being pronounced liable under an ex
parte judgment.
"[T]rial courts have x x x the duty to dispose of controversies after
trial on the merits whenever possible. It is deemed an abuse of
discretion for them, on their own motion, ‘to enter a dismissal which
is not warranted by the circumstances of the case’ (Municipality of
Dingras v. Bonoan, 85 Phil. 458-59 [1950]). While it is true that the
dismissal of an action on grounds specified under Section 3, Rule 17
of the Revised Rules of Court is addressed to their discretion (Flores
v. Phil. Alien Property Administrator, 107 Phil. 778 [1960];
Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v. Bonifacio,
105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna,
L-17631, October 19, 1966, 18 SCRA 390), such discretion must be
exercised soundly with a view to the circumstances surrounding each
particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April 28,
1962, 4 SCRA 1209). If facts obtain that serve as mitigating
circumstances for the delay, the same should be considered and
dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672;
Cervi v. Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]),
especially where the suit appears to be meritorious and the plaintiff
was not culpably negligent and no injury results to defendant (27
C.J.S. 235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First
Instance of Zamboanga City, Br. I, 70 SCRA 590, 595).
"It is true that the allowance or denial of petitions for postponement
and the setting aside of orders previously issued, rest principally
upon the sound discretion of the judge to whom they are addressed,
but always predicated on the consideration that more than the mere
convenience of the courts or of the parties of the case, the ends of
justice and fairness would be served thereby (Camara Vda. de Zubiri
v. Zubiri, et al., L-16745, December 17, 1966). When no substantial
 49

rights are affected and the intention to delay is not manifest, the
corresponding motion to transfer the hearing having been filed
accordingly, it is sound judicial discretion to allow them (Rexwell
Corp. v. Canlas, L-16746, December 30, 1961)." x x x.

This Court recalls that the complaint herein was filed on 15 June
1999. The summonses for Cynthia and Teresa were served on their
sister Melinda at the Borja Family Clinic in Tagbilaran City, but the
latter refused to receive the same. It was only on 1 June 2000 that
summons was served on Teresa at Room 304, Regency Crest
Condominium, Banilad, Cebu City, when she was in the Philippines
for a visit. However, the summons for Cynthia was never served
upon her.1âwphi1

Although Section 1, Rule 14 of the Rules, imposes upon the clerk of

court the duty to serve summons, this does not relieve the petitioner
of her own duty as the plaintiff in a civil case to prosecute the case
diligently. If the clerk had been negligent, it was petitioner’s duty to
call the court’s attention to that fact. It must be noted that it was not
even petitioner who called the court’s attention that summons had not
been served on Cynthia, but Teresa. This despite the fact that
petitioner was aware, as early as 15 June 1999, when she filed her
complaint, that the summonses could not be served on Teresa and
Cynthia, as she admitted therein that Teresa and Cynthia were
residing abroad. Petitioner as plaintiff should have asked that Cynthia
and Teresa be summoned by publication at the earliest possible time.
She cannot idly sit by and wait till this is done. She cannot afterwards
wash her hands and say that the delay was not her fault. She cannot
simply "fold [her] hands" and say that it is the duty of the clerk of
court to have the summonses served on Cynthia and Teresa for the
prompt disposition of her case. If there were no means of summoning
any of the defendants, petitioner should have so informed the court
within a reasonable period of time, so that the case could be disposed
of one way or another and the administration of justice would not
suffer delay. The non-performance of that duty by petitioner as
plaintiff is an express ground for dismissing an action. For, indeed,
this duty imposed upon her was precisely to spur on the slothful.

For failure to diligently pursue the complaint, petitioner trifled with

the right of the respondents to speedy trial. It also sorely tried the
patience of the court and wasted its precious time and attention. To
allow petitioner to wait until such time that summonses were served
on respondents would frustrate the protection against unreasonable
delay in the prosecution of cases and violate the constitutional
mandate of speedy dispensation of justice which would in time erode
the people’s confidence in the judiciary. We take a dim view of
petitioner’s complacent attitude. Ex nihilo nihil fit.35

Likewise, petitioner’s counsel inexplicably failed to diligently pursue

the service of summonses on respondents. These were acts of
negligence, laxity and truancy which the court could have very easily
avoided or timely remedied. Petitioner and her counsel could not
avail themselves of this Court’s sympathy, considering their apparent
complacency, if not delinquency, in the conduct of their litigation.

Considering the foregoing, we sustain the dismissal by the trial court

of the petitioner’s complaint for failure to prosecute for a period of
more than one year (from the time of filing thereof on 15 June 1997
until Teresa’s filing of a motion to dismiss).

WHEREFORE, premises considered, the instant petition is DENIED

for lack of merit and the assailed Decision dated 6 May 2005 of the
Court of Appeals in CA-G.R. CV No. 71028 is hereby AFFIRMED.
Costs against petitioner. SO ORDERED.

[G.R. No. 138104. April 11, 2002]
MR HOLDINGS, LTD., petitioner, vs. SHERIFF CARLOS P.
BAJAR, SHERIFF FERDINAND M. JANDUSAY,
SOLIDBANK CORPORATION, AND MARCOPPER MINING
CORPORATION, respondents.
SANDOVAL-GUTIERREZ, J.:
In the present Petition for Review on Certiorari, petitioner MR
Holdings, Ltd. assails the a) Decision[1] dated January 8, 1999 of the
Court of Appeals in CA-G.R. SP No. 49226finding no grave abuse of
discretion on the part of Judge Leonardo P. Ansaldo of the Regional
Trial Court (RTC), Branch 94, Boac, Marinduque, in denying
petitioners application for a writ of preliminary
injunction;[2] and b) Resolution[3] dated March 29, 1999 denying
petitioners motion for reconsideration.
The facts of the case are as follows:
Under a Principal Loan Agreement[4] and Complementary Loan
Agreement,[5] both dated November 4, 1992, Asian Development
Bank (ADB), a multilateral development finance institution, agreed
to extend to Marcopper Mining Corporation (Marcopper) a loan in
the aggregate amount of US$40,000,000.00 to finance the latters
mining project at Sta. Cruz, Marinduque. The principal loan of
US$ 15,000,000.00 was sourced from ADBs ordinary capital
resources, while the complementary loan of US$ 25,000,000.00 was
funded by the Bank of Nova Scotia, a participating finance
institution.
On even date, ADB and Placer Dome, Inc., (Placer Dome), a foreign
corporation which owns 40% of Marcopper, executed a Support and
Standby Credit Agreement whereby the latter agreed to provide
Marcopper with cash flow support for the payment of its obligations
to ADB.
To secure the loan, Marcopper executed in favor of ADB a Deed of
Real Estate and Chattel Mortgage[6] dated November 11, 1992,
covering substantially all of its (Marcoppers) properties and assets in
Marinduque. It was registered with the Register of Deeds on
November 12, 1992.
When Marcopper defaulted in the payment of its loan obligation,
Placer Dome, in fulfillment of its undertaking under the Support and
Standby Credit Agreement, and presumably to preserve its
international credit standing, agreed to have its subsidiary
corporation, petitioner MR Holding, Ltd., assumed Marcoppers
obligation to ADB in the amount of
US$ 18,453,450.02. Consequently, in an Assignment
Agreement[7] dated March 20, 1997, ADB assigned to petitioner all
its rights, interests and obligations under the principal and
complementary loan agreements, (Deed of Real Estate and Chattel
Mortgage, and Support and Standby Credit Agreement). On
December 8, 1997, Marcopper likewise executed a Deed of
Assignment[8] in favor of petitioner. Under its provisions,
Marcopper assigns, transfers, cedes and conveys to petitioner, its
assigns and/or successors-in-interest all of its (Marcoppers)
properties, mining equipment and facilities, to wit:
Land and Mining Rights
Building and Other Structures
Other Land Improvements
Machineries & Equipment, and Warehouse Inventory
Mine/Mobile Equipment
50
Transportation Equipment and Furniture & Fixtures
Meanwhile, it appeared that on May 7, 1997, Solidbank Corporation
(Solidbank) obtained a Partial Judgment[9] against Marcopper from
the RTC, Branch 26, Manila, in Civil Case No. 96-80083
entitled Solidbank Corporation vs. Marcopper Mining Corporation,
John E. Loney, Jose E. Reyes and Teodulo C. Gabor, Jr., the decretal
portion of which reads:
WHEREFORE, PREMISES CONSIDERED, partial judgment is
hereby rendered ordering defendant Marcopper Mining Corporation,
as follows:
1. To pay plaintiff Solidbank the sum of Fifty Two Million Nine
Hundred Seventy Thousand Pesos Seven Hundred Fifty Six and
89/100 only (PHP 52,970,756.89), plus interest and charges until
fully paid;
2. To pay an amount equivalent to Ten Percent (10%) of above-stated
amount as attorneys fees; and
3. To pay the costs of suit.
"SO ORDERED.
Upon Solidbanks motion, the RTC of Manila issued a writ of
execution pending appeal directing Carlos P. Bajar, respondent
sheriff, to require Marcopper to pay the sums of money to satisfy the
Partial Judgment.[10] Thereafter, respondent Bajar issued two
notices of levy on Marcoppers personal and real properties, and over
all its stocks of scrap iron and unserviceable mining
equipment.[11] Together with sheriff Ferdinand M. Jandusay (also a
respondent) of the RTC, Branch 94, Boac, Marinduque, respondent
Bajar issued two notices setting the public auction sale of the levied
properties on August 27, 1998 at the Marcopper mine site.[12]
Having learned of the scheduled auction sale, petitioner served an
Affidavit of Third-Party Claim[13] upon respondent sheriffs on
August 26, 1998, asserting its ownership over all Marcoppers mining
properties, equipment and facilities by virtue of the Deed of
Assignment.
Upon the denial of its Affidavit of ThirdParty Claim by the RTC of
Manila,[14] petitioner commenced with the RTC of Boac,
Marinduque, presided by Judge Leonardo P. Ansaldo, a complaint
for reivindication of properties, etc., with prayer for preliminary
injunction and temporary restraining order against respondents
Solidbank, Marcopper, and sheriffs Bajar and Jandusay.[15] The case
was docketed as Civil Case No. 98-13.
In an Order[16]dated October 6, 1998, Judge Ansaldo
denied petitioners application for a writ of preliminary injunction on
the ground that a) petitioner has no legal capacity to sue, it being a
foreign corporation doing business in the Philippines without
license; b) an injunction will amount to staying the execution of a
final judgment by a court of co-equal and concurrent jurisdiction;
and c) the validity of the Assignment Agreement and the Deed of
Assignment has been put into serious question by the timing of their
execution and registration.
Unsatisfied, petitioner elevated the matter to the Court of Appeals on
a Petition for Certiorari, Prohibition and Mandamus, docketed therein
as CA-G.R. SP No. 49226. On January 8, 1999, the Court of Appeals
rendered a Decision holding that Judge Ansaldo did not commit
grave abuse of discretion in denying petitioners prayer for a writ of
preliminary injunction, ratiocinating as follows:
Petitioner contends that it has the legal capacity to sue and seek
redress from Philippine courts as it is a non-resident foreign

corporation not doing business in the Philippines and suing on
isolated transactions.
xxxxxx
We agree with the finding of the respondent court that petitioner is
not suing on an isolated transaction as it claims to be, as it is very
obvious from the deed of assignment and its relationships with
Marcopper and Placer Dome, Inc. that its unmistakable intention is to
continue the operations of Marcopper and shield its properties/assets
from the reach of legitimate creditors, even those holding valid and
executory court judgments against it. There is no other way for
petitioner to recover its huge financial investments which it poured
into Marcoppers rehabilitation and the local situs where the Deeds of
Assignment were executed, without petitioner continuing to do
business in the country.
xxxxxx
While petitioner may just be an assignee to the Deeds of Assignment,
it may still fall within the meaning of doing business in light of the
Supreme Court ruling in the case of Far East International Import and
Export Corporation vs. Nankai Kogyo Co., 6 SCRA 725, that:
Where a single act or transaction however is not merely incidental or
casual but indicates the foreign corporations intention to do other
business in the Philippines, said single act or transaction constitutes
doing or engaging in or transacting business in the Philippines.
Furthermore, the court went further by declaring that even a single
act may constitute doing business if it is intended to be the beginning
of a series of transactions. (Far East International Import and Export
Corporation vs. Nankai Kogyo Co. supra).
On the issue of whether petitioner is the bona fide owner of all the
mining facilities and equipment of Marcopper, petitioner relies
heavily on the Assignment Agreement allegedly executed on March
20, 1997 wherein all the rights and interest of Asian Development
Bank (ADB) in a purported Loan Agreement were ceded and
transferred in favor of the petitioner as assignee, in addition to a
subsequent Deed of Assignment dated December 28, 1997 conveying
absolutely all the properties, mining equipment and facilities of
Marcopper in favor of petitioner.
The Deeds of Assignment executed in favor of petitioner cannot be
binding on the judgment creditor, private respondent Solidbank,
under the general legal principle that contracts can only bind the
parties who had entered into it, and it cannot favor or prejudice a
third person (Quano vs. Court of Appeals, 211 SCRA 40). Moreover,
by express stipulation, the said deeds shall be governed, interpreted
and construed in accordance with laws of New York.
The Deeds of Assignment executed by Marcopper, through its
President, Atty. Teodulo C. Gabor, Jr., were clearly made in bad faith
and in fraud of creditors, particularly private respondent Solidbank.
The first Assignment Agreement purportedly executed on March 20,
1997 was entered into after Solidbank had filed on September 19,
1996 a case against Marcopper for collection of sum of money before
Branch 26 of the Regional Trial Court docketed as Civil Case No.
96-80083. The second Deed of Assignment purportedly executed on
December 28, 1997 was entered into by President Gabor after
Solidbank had filed its Motion for Partial Summary Judgment, after
the rendition by Branch 26 of the Regional Trial Court of Manila of a
Partial Summary Judgment and after the said trial court had issued a
writ of execution, and which judgment was later affirmed by the
Court of Appeals. While the assignments (which were not registered
with the Registry of Property as required by Article 1625 of the new
Civil Code) may be valid between the parties thereof, it produces no
effect as against third parties. The purported execution of the Deeds
51
of Assignment in favor of petitioner was in violation of Article 1387
of the New Civil Code x x x. (Emphasis Supplied)
Hence, the present Petition for Review on Certiorari by MR Holdings,
Ltd. moored on the following grounds:
A. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN COMPLETELY DISREGARDING AS
A MATERIAL FACT OF THE CASE THE EXISTENCE OF THE
PRIOR, REGISTERED 1992 DEED OF REAL ESTATE AND
CHATTEL MORTGAGE CREATING A LIEN OVER THE
LEVIED PROPERTIES, SUBJECT OF THE ASSIGNMENT
AGREEMENT DATED MARCH 20, 1997, THUS, MATERIALLY
CONTRIBUTING TO THE SAID COURTS MISPERCEPTION
AND MISAPPRECIATION OF THE MERITS OF PETITIONERS
CASE.
B. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING
THAT THE SAID ASSIGNMENT AGREEMENT IS NOT
REGISTERED, THE SAME BEING CONTRARY TO THE FACTS
ON RECORD, THUS, MATERIALLY CONTRIBUTING TO THE
SAID COURTS MISPERCEPTION AND MISAPPRECIATION OF
THE MERITS OF PETITIONERS CASE.
C. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN MAKING A FACTUAL FINDING ON
THE EXISTENCE OF AN ATTACHMENT ON THE
PROPERTIES SUBJECT OF INSTANT CASE, THE SAME
BEING CONTRARY TO THE FACTS ON RECORD, THUS,
MATERIALLY CONTRIBUTING TO THE SAID COURTS
MISPERCEPTION AND MISAPPRECIATION OF THE MERITS
OF PETITIONERS CASE.
D. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT THE SAID
ASSIGNMENT AGREEMENT AND THE DEED OF
ASSIGNMENT ARE NOT BINDING ON RESPONDENT
SOLIDBANK WHO IS NOT A PARTY THERETO, THE SAME
BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE ON PRIOR REGISTERED MORTGAGE
LIENS AND ON PREFERENCE OF CREDITS.
E. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN FINDING THAT THE
AFOREMENTIONED ASSIGNMENT AGREEMENT AND DEED
OF ASSIGNMENT ARE SHAM, SIMULATED, OF DUBIOUS
CHARACTER, AND WERE MADE IN BAD FAITH AND IN
FRAUD OF CREDITORS, PARTICULARLY RESPONDENT
SOLIDBANK, THE SAME BEING IN COMPLETE DISREGARD
OF, VIZ: (1) THE LAW AND ESTABLISHED JURISPRUDENCE
ON PRIOR, REGISTERED MORTGAGE LIENS AND ON
PREFERENCE OF CREDITS, BY REASON OF WHICH THERE
EXISTS NO CAUSAL CONNECTION BETWEEN THE SAID
CONTRACTS AND THE PROCEEDINGS IN CIVIL CASE NO.
96-80083; (2) THAT THE ASIAN DEVELOPMENT BANK WILL
NOT OR COULD NOT HAVE AGREED TO A SHAM;
SIMULATED, DUBIOUS AND FRAUDULENT TRANSACTION;
AND (3) THAT RESPONDENT SOLIDBANKS BIGGEST
STOCKHOLDER, THE BANK OF NOVA SCOTIA, WAS A
MAJOR BENEFICIARY OF THE ASSIGNMENT AGREEMENT
IN QUESTION.
F. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT PETITIONER IS
WITHOUT LEGAL CAPACITY TO SUE AND SEEK REDRESS
FROM PHILIPPINE COURTS, IT BEING THE CASE THAT
SECTION 133 OF THE CORPORATION CODE IS WITHOUT
APPLICATION TO PETITIONER, AND IT BEING THE CASE

THAT THE SAID COURT MERELY RELIED ON SURMISES
AND CONJECTURES IN OPINING THAT PETITIONER
INTENDS TO DO BUSINESS IN THE PHILIPPINES.
G. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING THAT RESPONDENT
MARCOPPER, PLACER DOME, INC., AND PETITIONER ARE
ONE AND THE SAME ENTITY, THE SAME BEING WITHOUT
FACTUAL OR LEGAL BASIS.
H. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN HOLDING PETITIONER GUILTY OF
FORUM SHOPPING, IT BEING CLEAR THAT NEITHER LITIS
PENDENTIA NOR RES JUDICATA MAY BAR THE INSTANT
REIVINDICATORY ACTION, AND IT BEING CLEAR THAT AS
THIRD-PARTY CLAIMANT, THE LAW AFFORDS
PETITIONER THE RIGHT TO FILE SUCH REIVINDICATORY
ACTION.
I. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN RENDERING A DECISION WHICH IN
EFFECT SERVES AS JUDGMENT ON THE MERITS OF THE
CASE.
J. THE SHERIFFS LEVY AND SALE, THE SHERIFFS
CERTIFICATE OF SALE DATED OCTOBER 12, 1998, THE
RTC-MANILA ORDER DATED FEBRUARY 12, 1999, AND THE
RTC-BOAC ORDER DATED NOVEMBER 25, 1998 ARE NULL
AND VOID.
K. THE HONORABLE COURT OF APPEALS COMMITS A
REVERSIBLE ERROR IN AFFIRMING THE DENIAL BY THE
RTC-BOAC OF PETITIONERS APPLICATION FOR
PRELIMINARY INJUNCTION, THE SAME BEING IN TOTAL
DISREGARD OF PETITIONERS RIGHT AS ASSIGNEE OF A
PRIOR, REGISTERED MORTGAGE LIEN, AND IN
DISREGARD OF THE LAW AND JURISPRUDENCE ON
PREFERENCE OF CREDIT."
In its petition, petitioner alleges that it is not doing business in the
Philippines and characterizes its participation in the assignment
contracts (whereby Marcoppers assets where transferred to it) as
mere isolated acts that cannot foreclose its right to sue in local courts.
Petitioner likewise maintains that the two assignment contracts,
although executed during the pendency of Civil Case No. 96-80083
in the RTC of Manila, are not fraudulent conveyances as they were
supported by valuable considerations. Moreover, they were executed
in connection with prior transactions that took place as early as 1992
which involved ADB, a reputable financial institution. Petitioner
further claims that when it paid Marcoppers obligation to ADB, it
stepped into the latters shoes and acquired its (ADBS) rights, titles,
and interests under the Deed of Real Estate and Chattel
Mortgage. Lastly, petitioner asserts its existence as a corporation,
separate and distinct from Placer Dome and Marcopper.
In its comment, Solidbank avers that: a) petitioner is doing business
in the Philippines and this is evidenced by the huge investment it
poured into the assignment contracts; b) granting that petitioner is not
doing business in the Philippines, the nature of its transaction reveals
an intention to do business or to begin a series of transaction in the
country; c) petitioner, Marcopper and Placer Dome are one and the
same entity, petitioner being then a wholly-owned subsidiary of
Placer Dome, which, in turn, owns 40% of Marcopper; d) the timing
under which the assignments contracts were executed shows that
petitioners purpose was to defeat any judgment favorable to it
(Solidbank); and e) petitioner violated the rule on forum shopping
since the object of Civil Case No. 98-13 (at RTC, Boac, Marinduque)
is similar to the other cases filed by Marcopper in order to forestall
the sale of the levied properties.
52
Marcopper, in a separate comment, states that it is merely a nominal
party to the present case and that its principal concerns are being
ventilated in another case.
The petition is impressed with merit.
Crucial to the outcome of this case is our resolution of the following
issues: 1) Does petitioner have the legal capacity to sue? 2) Was the
Deed of Assignment between Marcopper and petitioner executed in
fraud of creditors? 3) Are petitioner MR Holdings, Ltd., Placer Dome,
and Marcopper one and the same entity? and 4) Is petitioner guilty of
forum shopping?
We shall resolve the issues in seriatim.
I
The Court of Appeals ruled that petitioner has no legal capacity to
sue in the Philippine courts because it is a foreign corporation doing
business here without license. A review of this ruling does not pose
much complexity as the principles governing a foreign
corporations right to sue in local courts have long been settled by our
Corporation Law.[17] These principles may be condensed in three
statements, to wit: a) if a foreign corporation does business in the
Philippines without a license, it cannot sue before the Philippine
courts;[18] b) if a foreign corporation is not doing business in the
Philippines, it needs no license to sue before Philippine courts on an
isolated transaction[19]or on a cause of action entirely independent
of any business transaction;[20] and c) if a foreign corporation does
business in the Philippines with the required license, it can sue before
Philippine courts on any transaction. Apparently, it is not the absence
of the prescribed license but the doing (of) business in the
Philippines without such license which debars the foreign
corporation from access to our courts.[21]
The task at hand requires us to weigh the facts vis--vis the
established principles. The question whether or not a foreign
corporation is doing business is dependent principally upon the facts
and circumstances of each particular case, considered in the light of
the purposes and language of the pertinent statute or statutes involved
and of the general principles governing the jurisdictional authority of
the state over such corporations.[22]
Batas Pambansa Blg. 68, otherwise known as The Corporation Code
of the Philippines, is silent as to what constitutes doing or transacting
business in the Philippines. Fortunately, jurisprudence has supplied
the deficiency and has held that the term implies a continuity of
commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
the purpose and object for which the corporation was
organized.[23] In Mentholatum Co. Inc., vs. Mangaliman,[24] this
Court laid down the test to determine whether a foreign company
is doing business, thus:
x x x The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or
enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another. (Traction Cos. vs.
Collectors of Int. Revenue [C.C.A., Ohio], 223 F. 984,987.) x x x.
The traditional case law definition has metamorphosed into a
statutory definition, having been adopted with some qualifications in
various pieces of legislation in our jurisdiction. For instance,
Republic Act No. 7042, otherwise known as the Foreign Investment
Act of 1991, defines doing business as follows:
d) The phrase doing business shall include soliciting orders, service
contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the

Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eight(y) (180) days or more;
participating in the management, supervision or control of any
domestic business, firm, entity, or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of
acts or works; or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization; Provided,
however, That the phrase doing business shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor, nor having a nominee director or
officer to represent its interests in such corporation, nor appointing a
representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account.
(Emphasis supplied)[25]
Likewise, Section 1 of Republic Act No. 5455,[26] provides that:
SECTION. 1. Definition and scope of this Act. - (1) x x x the phrase
doing business shall include soliciting orders, purchases, service
contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a
period or periods totaling one hundred eighty days or more;
participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines;
and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
There are other statutes[27] defining the term doing business in the
same tenor as those above-quoted, and as may be observed, one
common denominator among them all is the concept of continuity.
In the case at bar, the Court of Appeals categorized as doing
business petitioners participation under the Assignment Agreement
and the Deed of Assignment. This is simply untenable.The
expression doing business should not be given such a strict and literal
construction as to make it apply to any corporate
dealing whatever.[28] At this early stage and with petitioners acts or
transactions limited to the assignment contracts, it cannot be said that
it had performed acts intended to continue the business for which it
was organized. It may not be amiss to point out
that the purpose or business for which petitioner was organized is not
discernible in the records. No effort was exerted by the Court of
Appeals to establish the nexus between petitioners business and the
acts supposed to constitute doing business. Thus, whether the
assignment contracts were incidental to petitioners business or were
continuation thereof is beyond determination. We cannot apply the
case cited by the Court of Appeals, Far East Intl Import and Export
Corp. vs. Nankai Kogyo Co., Ltd.,[29] which held that a single act
may still constitute doing business if it is not merely incidental or
casual, but is of such character as distinctly to indicate a purpose on
the part of the foreign corporation to do other business in the state. In
said case, there was an express admission from an official of the
foreign corporation that he was sent to the Philippines to look into
the operation of mines, thereby revealing the foreign corporations
desire to continue engaging in business here. But in the case at bar,
there is no evidence of similar desire or intent. Unarguably, petitioner
may, as the Court of Appeals suggested, decide to operate
Marcoppers mining business, but, of course, at this stage, that is a
mere speculation. Or it may decide to sell the credit secured by the
mining properties to an offshore investor, in which case the acts will
53
still be isolated transactions. To see through the present facts an
intention on the part of petitioner to start a series of business
transaction is to rest on assumptions or probabilities falling short of
actual proof. Courts should never base its judgments on a state of
facts so inadequately developed that it cannot be determined where
inference ends and conjecture begins.
Indeed, the Court of Appeals holding that petitioner was determined
to be doing business in the Philippines is based mainly on
conjectures and speculation. In concluding that the unmistakable
intention of petitioner is to continue Marcoppers business, the Court
of Appeals hangs on the wobbly premise that there is no other way
for petitioner to recover its huge financial investments which it
poured into Marcoppers rehabilitation without it (petitioner)
continuing Marcoppers business in the country.[30] This is a mere
presumption. Absent overt acts of petitioner from which we may
directly infer its intention to continue Marcoppers business, we
cannot give our concurrence. Significantly, a view subscribed upon
by many authorities is that the mere ownership by a foreign
corporation of a property in a certain state, unaccompanied by its
active use in furtherance of the business for which it was formed, is
insufficient in itself to constitute doing business.[31] In Chittim vs.
Belle Fourche Bentonite Products Co.,[32] it was held that even if a
foreign corporation purchased and took conveyances of amining
claim, did some assessment work thereon, and endeavored to sell it,
its acts will not constitute the doing of business so as to subject the
corporation to the statutory requirements for the transacting of
business. On the same vein, petitioner, a foreign corporation, which
becomes the assignee of mining properties, facilities and equipment
cannot be automatically considered as doing business, nor presumed
to have the intention of engaging in mining business.
One important point. Long before petitioner assumed Marcoppers
debt to ADB and became their assignee under the two assignment
contracts, there already existed a Support and Standby Credit
Agreement between ADB and Placer Dome whereby the latter bound
itself to provide cash flow support for Marcoppers payment of its
obligations to ADB. Plainly, petitioners payment of US$ 18,453,
450.12 to ADB was more of a fulfillment of an obligation under the
Support and Standby Credit Agreement rather than an
investment. That petitioner had to step into the shoes of ADB as
Marcoppers creditor was just a necessary legal consequence of the
transactions that transpired. Also, we must hasten to add that the
Support and Standby Credit Agreement was executed four (4) years
prior to Marcoppers insovency, hence, the alleged intention of
petitioner to continue Marcoppers business could have no basis for at
that time, Marcoppers fate cannot yet be determined.
In the final analysis, we are convinced that petitioner was engaged
only in isolated acts or transactions. Single or isolated acts, contracts,
or transactions of foreign corporations are not regarded as a doing or
carrying on of business. Typical examples of these are the making of
a single contract, sale, sale with the taking of a note and mortgage in
the state to secure payment therefor, purchase, or note, or the mere
commission of a tort.[33] In these instances, there is no purpose to do
any other business within the country.
II
Solidbank contends that from the chronology and timing of events, it
is evident that there existed a pre-set pattern of response on the part
of Marcopper to defeat whatever court ruling that may be rendered in
favor of Solidbank.
We are not convinced.
While it may appear, at initial glance, that the assignment contracts
are in the nature of fraudulent conveyances, however, a closer look at
the events that transpired prior to the execution of those contracts

gives rise to a different conclusion. The obvious flaw in the Court of
Appeals Decision lies in its constricted view of the facts obtaining in
the case. In its factual narration, the Court of Appeals definitely left
out some events. We shall see later the significance of those events.
Article 1387 of the Civil Code of the Philippines provides:
Art. 1387. All contracts by virtue of which the debtor alienates
property by gratuitous title are presumed to have been entered into in
fraud of creditors, when the donor did not reserve sufficient property
to pay all debts contracted before the donation.
Alienations by onerous title are also presumed fraudulent when made
by persons against whom some judgment has been rendered in any
instance or some writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, and need not
have been obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors
may be proved in any other manner recognized by law and of
evidence.
This article presumes the existence of fraud made by a debtor. Thus,
in the absence of satisfactory evidence to the contrary, an alienation
of a property will be held fraudulent if it is made after a judgment has
been rendered against the debtor making the alienation.[34] This
presumption of fraud is not conclusive and may be rebutted by
satisfactory and convincing evidence. All that is necessary is to
establish affirmatively that the conveyance is made in good faith and
for a sufficient and valuable consideration.[35]
The Assignment Agreement and the Deed of Assignment were
executed for valuable considerations. Patent from the Assignment
Agreement is the fact that petitioner assumed the payment of
US$ 18,453,450.12 to ADB in satisfaction of Marcoppers remaining
debt as of March 20, 1997.[36] Solidbank cannot deny this fact
considering that a substantial portion of the said payment, in the sum
of US$ 13,886,791.06, was remitted in favor of the Bank of Nova
Scotia, its major stockholder.[37]
The facts of the case so far show that the assignment contracts were
executed in good faith. The execution of the Assignment Agreement
on Macrh 20, 1997 and the Deed of Assignment on December 8,1997
is not the alpha of this case. While the execution of these assignment
contracts almost coincided with the rendition on May 7, 1997 of the
Partial Judgment in Civil Case No. 96-80083 by the Manila RTC,
however, there was no intention on the part of petitioner to defeat
Solidbanks claim. It bears reiterating that as early as November 4,
1992, Placer Dome had already bound itself under a Support and
Standby Credit Agreement to provide Marcopper with cash flow
support for the payment to ADB of its obligations.When Marcopper
ceased operations on account of disastrous mine tailings spill into the
Boac River and ADB pressed for payment of the loan, Placer Dome
agreed to have its subsidiary, herein petitioner, paid ADB the amount
of US $18,453,450.12. Thereupon, ADB and Marcopper executed,
respectively, in favor of petitioner an Assignment Agreement and a
Deed of Assignment. Obviously, the assignment contracts were
connected with transactions that happened long before the rendition
in 1997 of the Partial Judgment in Civil Case No. 96-80083 by the
Manila RTC. Those contracts cannot be viewed in isolation. If we
may add, it is highly inconceivable that ADB, a reputable
international financial organization, will connive with Marcopper to
feign or simulate a contract in 1992 just to defraud Solidbank for its
claim four years thereafter. And it is equally incredible for petitioner
to be paying the huge sum of US $ 18, 453, 450.12 to ADB only for
the purpose of defrauding Solidbank of the sum of P52,970.756.89.
It is said that the test as to whether or not a conveyance is fraudulent
is -- does it prejudice the rights of creditors?[38] We cannot see how
54
Solidbanks right was prejudiced by the assignment contracts
considering that substantially all of Marcoppers properties were
already covered by the registered Deed of Real Estate and Chattel
Mortgage executed by Marcopper in favor of ADB as early as
November 11, 1992. As such, Solidbank cannot assert a better right
than ADB, the latter being a preferred creditor. It is basic that
mortgaged properties answer primarily for the mortgaged credit, not
for the judgment credit of the mortgagors unsecured creditor.
Considering that petitioner assumed Marcoppers debt to ADB, it
follows that Solidbanks right as judgment creditor over the subject
properties must give way to that of the former.
III
The record is lacking in circumstances that would suggest that
petitioner corporation, Placer Dome and Marcopper are one and the
same entity. While admittedly, petitioner is a wholly-owned
subsidiary of Placer Dome, which in turn, which, in turn, was then a
minority stockholder of Marcopper, however, the mere fact that a
corporation owns all of the stocks of another corporation, taken alone
is not sufficient to justify their being treated as one entity. If used to
perform legitimate functions, a subsidiarys separate existence shall
be respected, and the liability of the parent corporation as well as the
subsidiary will be confined to those arising in their respective
business.[39]
The recent case of Philippine National Bank vs. Ritratto Group
Inc.,[40] outlines the circumstances which are useful in the
determination of whether a subsidiary is but a mere instrumentality
of the parent-corporation, to wit:
(a) The parent corporation owns all or most of the capital stock of the
subsidiary.
(b) The parent and subsidiary corporations have common directors or
officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of the
subsidiary or otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses or
losses of the subsidiary.
(g) The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by the
parent corporation.
(h) In the papers of the parent corporation or in the statements of its
officers, the subsidiary is described as a department or division of the
parent corporation, or its business or financial responsibility is
referred to as the parent corporations own.
(i) The parent corporation uses the property of the subsidiary as its
own.
(j) The directors or executives of the subsidiary do not act
independently in the interest of the subsidiary, but take their orders
from the parent corporation.
(k) The formal legal requirements of the subsidiary are not observed.
In this catena of circumstances, what is only extant in the records is
the matter of stock ownership. There are no other factors
indicative that petitioner is a mere instrumentality of Marcopper or
Placer Dome. The mere fact that Placer Dome agreed, under the
terms of the Support and Standby Credit Agreement to provide
Marcopper with cash flow support in paying its obligations to ADB,
 55

does not mean that its personality has merged with that of
Marcopper. This singular undertaking, performed by Placer Dome
with its own stockholders in Canada and elsewhere, is not a sufficient
ground to merge its corporate personality with Marcopper which has
its own set of shareholders, dominated mostly by Filipino citizens.
The same view applies to petitioners payment of Marcoppers
remaining debt to ADB.
With the foregoing considerations and the absence of fraud in the
transaction of the three foreign corporations, we find it improper to
pierce the veil of corporate fiction that equitable doctrine developed
to address situations where the corporate personality of a corporation
is abused or used for wrongful purposes.
IV
On the issue of forum shopping, there could have been a violation of
the rules thereon if petitioner and Marcopper were indeed one and
the same entity. But since petitioner has a separate personality, it has
the right to pursue its third-party claim by filing the independent
reivindicatory action with the RTC of Boac, Marinduque, pursuant to
Rule 39, Section 16 of the 1997 Rules of Civil Procedures. This
remedy has been recognized in a long line of cases decided by this
Court.[41] In Rodriguez vs. Court of Appeals,[42] we held:
. . . It has long been settled in this jurisdiction that the claim of
ownership of a third party over properties levied for execution of a
judgment presents no issue for determination by the court issuing the
writ of execution.
. . .Thus, when a property levied upon by the sheriff pursuant to a
writ of execution is claimed by third person in a sworn statement of
ownership thereof, as prescribed by the rules, an entirely different
matter calling for a new adjudication arises. And dealing as it does
with the all important question of title, it is reasonable to require the
filing of proper pleadings and the holding of a trial on the matter in
view of the requirements of due process.
. . . In other words, construing Section 17 of Rule 39 of the Revised
Rules of Court (now Section 16 of the 1997 Rules of Civil
Procedure), the rights of third-party claimants over certain properties
levied upon by the sheriff to satisfy the judgment may not be taken
up in the case where such claims are presented but in a separate and
independent action instituted by the claimants. (Emphasis supplied)
This reivindicatory action has for its object the recovery of
ownership or possession of the property seized by the sheriff, despite
the third party claim, as well as damages resulting therefrom, and it
may be brought against the sheriff and such other parties as may be
alleged to have connived with him in the supposedly wrongful
execution proceedings, such as the judgment creditor himself. Such
action is an entirely separate and distinct action from that in which
execution has been issued. Thus, there being no identity of parties
and cause of action between Civil Case No. 98-13 (RTC, Boac) and
those cases filed by Marcopper, including Civil Case No. 96-80083
(RTC, Manila) as to give rise to res judicata or litis pendentia,
Solidbanks allegation of forum-shopping cannot prosper.[43]
(b) That the commission, continuance or non-performance of the acts
or acts complained of during the litigation would probably work
injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done, some act or
acts probably in violation of the rights of the applicant respecting the
subject of the action or proceeding, and tending to render the
judgment ineffectual.
Petitioners right to stop the further execution of the properties
covered by the assignment contracts is clear under the facts so far
established. An execution can be issued only against a party and not
against one who did not have his day in court.[44] The duty of the
sheriff is to levy the property of the judgment debtor not that of a
third person. For, as the saying goes, one mans goods shall not be
sold for another man's debts.[45] To allow the execution of
petitioners properties would surely work injustice to it and render the
judgment on the reivindicatory action, should it be favorable,
ineffectual. In Arabay, Inc., vs. Salvador,[46] this Court held that an
injunction is a proper remedy to prevent a sheriff from selling the
property of one person for the purpose of paying the debts of another;
and that while the general rule is that no court has authority to
interfere by injunction with the judgments or decrees of another court
of equal or concurrent or coordinate jurisdiction, however, it is not so
when a third-party claimant is involved. We quote the instructive
words of Justice Querube C. Makalintal in Abiera vs. Court of
Appeals,[47] thus:
The rationale of the decision in the Herald Publishing Company
case[48] is peculiarly applicable to the one before Us, and removes it
from the general doctrine enunciated in the decisions cited by the
respondents and quoted earlier herein.
1. Under Section 17 of Rule 39 a third person who claims property
levied upon on execution may vindicate such claim by
action. Obviously a judgment rendered in his favor, that is, declaring
him to be the owner of the property, would not constitute interference
with the powers or processes of the court which rendered the
judgment to enforce which the execution was levied. If that be so and
it is so because the property, being that of a stranger, is not subject to
levy then an interlocutory order such as injunction, upon a claim and
prima facie showing of ownership by the claimant, cannot be
considered as such interference either.
WHEREFORE, the petition is GRANTED. The assailed Decision
dated January 8, 1999 and the Resolution dated March 29, 1999 of
the Court of Appeals in CA G.R. No. 49226 are set aside. Upon
filing of a bond of P1,000,000.00, respondent sheriffs are restrained
from further implementing the writ of execution issued in
Civil Case No. 96-80083 by the RTC, Branch 26, Manila, until
further orders from this Court. The RTC, Branch 94, Boac,
Marinduque, is directed to dispose of Civil Case No. 98-13 with
dispatch. SO ORDERED.

All considered, we find petitioner to be entitled to the issuance of a

writ of preliminary injunction. Section 3, Rule 58 of the 1997 Rules
of Civil Procedure provides:

SEC. 3 Grounds for issuance of preliminary injunction. A

preliminary injunction may be granted when it is established:

(a) That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or
perpetually;

[G.R. No. 113074. January 22, 1997]
ALFRED HAHN, petitioner, vs. COURT OF APPEALS and
BAYERISCHE MOTOREN WERKE
AKTIENGESELLSCHAFT (BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision[1] of the Court of
Appeals dismissing a complaint for specific performance which
petitioner had filed against private respondent on the ground that the
Regional Trial Court of Quezon City did not acquire jurisdiction over
private respondent, a nonresident foreign corporation, and of the
appellate court's order denying petitioner's motion for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the
name and style "Hahn-Manila." On the other hand, private
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is
a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at Munich,
Germany.
On March 7, 1967, petitioner executed in favor of private respondent
a "Deed of Assignment with Special Power of Attorney," which
reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the
BMW trademark and device in the Philippines which ASSIGNOR
uses and has been using on the products manufactured by
ASSIGNEE, and for which ASSIGNOR is the authorized exclusive
Dealer of the ASSIGNEE in the Philippines, the same being
evidenced by certificate of registration issued by the Director of
Patents on 12 December 1963 and is referred to as Trademark No.
10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently
record said transfer of the said BMW trademark and device in favor
of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration
of the stipulations hereunder stated, the ASSIGNOR hereby affirms
the said assignment and transfer in favor of the ASSIGNEE under the
following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other
than ASSIGNOR or infringer of the BMW trademark in the
Philippines, for such purpose, the ASSIGNOR shall inform the
ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information
the ASSIGNOR shall automatically act as Attorney-In-Fact of the
ASSIGNEE for such case, with full power, authority and
responsibility to prosecute unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and for purposes hereof the
ASSIGNOR is hereby named and constituted as ASSIGNEE's
Attorney-In-Fact, but any such suit without ASSIGNEE's consent
will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business
relations as has been usual in the past without a formal contract, and
for that purpose, the dealership of ASSIGNOR shall cover the
ASSIGNEE's complete production program with the only limitation
that, for the present, in view of ASSIGNEE's limited production, the
latter shall not be able to supply automobiles to ASSIGNOR.
56
Per the agreement, the parties "continue[d] business relations as has
been usual in the past without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and the president of
Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership
of BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner received
confirmation of the information from BMW which, in a letter,
expressed dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and
petitioner's alleged failure to comply with the standards for an
exclusive BMW dealer.[2]Nonetheless, BMW expressed willingness
to continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive
dealership would be a breach of the Deed of Assignment.[3] Hahn
insisted that as long as the assignment of its trademark and device
subsisted, he remained BMW's exclusive dealer in the Philippines
because the assignment was made in consideration of the exclusive
dealership. In the same letter petitioner explained that the decline in
sales was due to lower prices offered for BMW cars in the United
States and the fact that few customers returned for repairs and
servicing because of the durability of BMW parts and the efficiency
of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW
withdrew on March 26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer relationship effective
June 30, 1993.[4] At a conference of BMW Regional Importers held
on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez
among those invited from the Asian region. On April 29, 1993,
BMW proposed that Hahn and CMC jointly import and distribute
BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a
complaint for specific performance and damages against BMW to
compel it to continue the exclusive dealership. Later he filed an
amended complaint to include an application for temporary
restraining order and for writs of preliminary, mandatory and
prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the
Philippines with principal offices at Munich, Germany. It may be
served with summons and other court processes through the
Secretary of the Department of Trade and Industry of the
Philippines. . . .
....
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW
a Deed of Assignment with Special Power of Attorney covering the
trademark and in consideration thereof, under its first whereas clause,
Plaintiff was duly acknowledged as the "exclusive Dealer of the
Assignee in the Philippines" . . . .
....
8. From the time the trademark "BMW & DEVICE" was first used
by the Plaintiff in the Philippines up to the present, Plaintiff, through
its firm name "HAHN MANILA" and without any monetary
contribution from defendant BMW, established BMW's goodwill and
market presence in the Philippines. Pursuant thereto, Plaintiff has
invested a lot of money and resources in order to single-handedly
compete against other motorcycle and car companies .... Moreover,

Plaintiff has built buildings and other infrastructures such as service
centers and showrooms to maintain and promote the car and products
of defendant BMW.
....
10. In a letter dated February 24, 1993, defendant BMW advised
Plaintiff that it was willing to maintain with Plaintiff a relationship
but only "on the basis of a standard BMW importer contract as
adjusted to reflect the particular situation in the Philippines" subject
to certain conditions, otherwise, defendant BMW would terminate
Plaintiff's exclusive dealership and any relationship for cause
effective June 30, 1993. . . .
....
15. The actuations of defendant BMW are in breach of the
assignment agreement between itself and plaintiff since the
consideration for the assignment of the BMW trademark is the
continuance of the exclusive dealership agreement. It thus, follows
that the exclusive dealership should continue for so long as defendant
BMW enjoys the use and ownership of the trademark assigned to it
by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to
Branch 104 of the Quezon City Regional Trial Court, which on June
14, 1993 issued a temporary restraining order. Summons and copies
of the complaint and amended complaint were thereafter served on
the private respondent through the Department of Trade and Industry,
pursuant to Rule 14, 14 of the Rules of Court. The order, summons
and copies of the complaint and amended complaint were later sent
by the DTI to BMW via registered mail on June 15, 1993[5] and
received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on
the application for the writ of preliminary injunction proceeded ex
parte, with petitioner Hahn testifying. On June 30, 1993, the trial
court issued an order granting the writ of preliminary injunction upon
the filing of a bond of P100,000.00. On July 13, 1993, following the
posting of the required bond, a writ of preliminary injunction was
issued.
On July 1, 1993, BMW moved to dismiss the case, contending that
the trial court did not acquire jurisdiction over it through the service
of summons on the Department of Trade and Industry, because it
(BMW) was a foreign corporation and it was not doing business in
the Philippines. It contended that the execution of the Deed of
Assignment was an isolated transaction; that Hahn was not its agent
because the latter undertook to assemble and sell BMW cars and
products without the participation of BMW and sold other products;
and that Hahn was an indentor or middleman transacting business in
his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW
was doing business in the Philippines through him as its agent, as
shown by the fact that BMW invoices and order forms were used to
document his transactions; that he gave warranties as exclusive
BMW dealer; that BMW officials periodically inspected standards of
service rendered by him; and that he was described in service
booklets and international publications of BMW as a "BMW
Importer" or "BMW Trading Company" in the Philippines.
The trial court[6] deferred resolution of the Motion to dismiss until
after trial on the merits for the reason that the grounds advanced by
BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW
filed a petition for certiorari with the Court of Appeals alleging that:
57
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE
OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS
LEADING TOWARD THE ISSUANCE OF THE WRIT OF
PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE
TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN
DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON
THE GROUND OF LACK OF JURISDICTION, AND THEREBY
FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining
order and, after hearing, for a writ of preliminary injunction, to
enjoin the trial court from proceeding further in Civil Case No.
Q-93-15933. Private respondent pointed out that, unless the trial
court's order was set aside, it would be forced to submit to the
jurisdiction of the court by filing its answer or to accept judgment in
default, when the very question was whether the court had
jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing
petitioner's complaint. On December 20, 1993, it rendered judgment
finding the trial court guilty of grave abuse of discretion in deferring
resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before
it came out with its questioned order of July 26, 1993, we rule and so
hold that petitioner's (BMW) motion to dismiss could be resolved
then and there, and that the respondent judge's deferment of his
action thereon until after trial on the merit constitutes, to our mind,
grave abuse of discretion.
....
. . . [T]here is not much appreciable disagreement as regards the
factual matters relating, to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal
conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the
Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make
on the motion to dismiss would anyway be elevated to it on appeal,
the Court of Appeals itself resolved the motion. It ruled that BMW
was not doing business in the country and, therefore, jurisdiction
over it could not be acquired through service of summons on the DTI
pursuant to Rule 14, Section 14. The court upheld private
respondent's contention that Hahn acted in his own name and for his
own account and independently of BMW, based on Alfred Hahn's
allegations that he had invested his own money and resources in
establishing BMW's goodwill in the Philippines and on BMW's claim
that Hahn sold products other than those of BMW. It held that
petitioner was a mere indentor or broker and not an agent through
whom private respondent BMW transacted business in the
Philippines. Consequently, the Court of Appeals dismissed
petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals
erred (1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that
private respondent BMW is not doing business in the Philippines and,
for this reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon foreign corporations. If the defendant is a foreign
corporation, or a nonresident joint stock company or
association, doing business in the Philippines, service may be made
on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official

designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis added)
What acts are considered "doing business in the Philippines" are
enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows:[7]
d) the phrase "doing business" shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or
branches, appointing representatives or distributors domiciled in the
Philippines or who in any calendar year stay in the country for a
period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and
any other act or acts that imply a continuity of commercial dealings
or arrangements and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in
domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having, a nominee director or
officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own
account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors
in the Philippines" but not when the representative or distributor
"transacts business in its name and for its own account." In addition,
Section 1(f)(1) of the Rules and Regulations implementing (IRR) the
Omnibus Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts,
enumerated in Article 44 of the Code. In particular, "doing business"
includes:
(1).... A foreign firm which does business through middlemen acting
in their own names, such as indentors, commercial brokers or
commission merchants, shall not be deemed doing business in the
Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the
Philippines.
The question is whether petitioner Alfred Hahn is the agent or
distributor in the Philippines of private respondent BMW. If he is,
BMW may be considered doing business in the Philippines and the
trial court acquired jurisdiction over it (BMW) by virtue of the
service of summons on the Department of Trade and Industry.
Otherwise, if Hahn is not the agent of BMW but an independent
dealer, albeit of BMW cars and products, BMW, a foreign
corporation, is not considered doing business in the Philippines
within the meaning of the Foreign Investments Act of 1991 and the
IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his
own name and for his own account and not as agent or distributor in
the Philippines of BMW on the ground that "he alone had contacts
with individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he
is to be considered, under governing statutes, as doing business." (p.
13) In support of this conclusion, the appellate court cited the
following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used
by the Plaintiff in the Philippines up to the present, Plaintiff, through
its firm name "HAHN MANILA" and without any monetary
contributions from defendant BMW; established BMW's goodwill
58
and market presence in the Philippines. Pursuant thereto, Plaintiff
invested a lot of money and resources in order to single-handedly
compete against other motorcycle and car companies.... Moreover,
Plaintiff has built buildings and other infrastructures such as service
centers and showrooms to maintain and promote the car and products
of defendant BMW.
As the above quoted allegations of the amended complaint show,
however, there is nothing to support the appellate court's finding that
Hahn solicited orders alone and for his own account and without
"interference from, let alone direction of, BMW." (p. 13) To the
contrary, Hahn claimed he took orders for BMW cars and transmitted
them to BMW. Upon receipt of the orders, BMW fixed the down
payment and pricing charges, notified Hahn of the scheduled
production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment was
made by the buyer directly to BMW. Title to cars purchased passed
directly to the buyer and Hahn never paid for the purchase price of
BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of
a vehicle order by BMW. Upon confirmation in writing that the
vehicles had been registered in the Philippines and serviced by him,
Hahn received an additional 3% of the full purchase price. Hahn
performed after-sale services, including, warranty services, for which
he received reimbursement from BMW. All orders were on invoices
and forms of BMW.[8]
These allegations were substantially admitted by BMW which, in its
petition for certiorari before the Court of Appeals, stated:[9]
9.4. As soon as the vehicles are fully manufactured and full payment
of the purchase prices are made, the vehicles are shipped to the
Philippines. (The payments may be made by the purchasers or
third-persons or even by Hahn.) The bills of lading are made up in
the name of the purchasers, but Hahn-Manila is therein indicated as
the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports,
for purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited
with a commission of fourteen percent (14%) of the full purchase
price thereof, and as soon as he confirms in writing, that the vehicles
have been registered in the Philippines and have been serviced by
him, he will receive an additional three percent (3%) of the full
purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows
an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay
merely by bringing the buyer and the seller together, even if no sale
is eventually made.
As to the service centers and showrooms which he said he had put up
at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected the service centers
to see to it that BMW standards were maintained. Indeed, it would
seem from BMW's letter to Hahn that it was for Hahn's alleged
failure to maintain BMW standards that BMW was terminating
Hahn's dealership.
The fact that Hahn invested his own money to put up these service
centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record
which suggest that BMW exercised control over Hahn's activities as
a dealer and made regular inspections of Hahn's premises to enforce
 59

compliance with BMW standards and specifications.[10] For
example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions
and letters that we have to tackle the Philippine market more
professionally and that we are through your present activities not
adequately prepared to cope with the forthcoming challenges.[11]
In effect, BMW was holding Hahn accountable to it under the 1967
Agreement.
This case fits into the mould of Communications Materials, Inc. v.
Court of Appeals,[12] in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a
domestic corporation, by virtue of which the latter was appointed
"exclusive representative" in the Philippines for a stipulated
commission. Pursuant to these contracts, the domestic corporation
sold products exported by the foreign corporation and put up a
service center for the products sold locally. This Court held that these
acts constituted doing business in the Philippines. The arrangement
showed that the foreign corporation's purpose was to penetrate the
Philippine market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive
distributor in the Philippines, even as it announced in the Asian
region that Hahn was the "official BMW agent" in the
Philippines.[13]
the foreign corporation through service of summons pursuant to Rule
14, 14. Such determination does not foreclose a contrary finding
should evidence later show that it is not transacting business in the
country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the
jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only
involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not
its agent, then it cannot really be said to be doing business in the
Philippines. It is a defense, however, that requires the contravention
of the allegations of the complaint, as well as a full ventilation, in
effect, of the main merits of the case, which should not thus be
within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has
done business in the country, but which has ceased to do business at
the time of the filing, of a complaint, can still be made to answer for
a cause of action which accrued while it was doing, business, is
another matter that would yet have to await the reception and
admission of evidence. Since these points have seasonably been
raised by the petitioner, there should be no real cause for what may
understandably be its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent an invocation of separate
or independent reliefs of its own, be considered to have voluntarily
submitted itself to the court's jurisdiction.[19]

The Court of Appeals also found that petitioner Alfred Hahn dealt in
other products, and not exclusively in BMW products, and, on this
basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding
is based entirely on allegations of BMW in its motion to dismiss filed
in the trial court and in its petition for certiorari before the Court of
Appeals.[14] But this allegation was denied by Hahn[15] and
therefore the Court of Appeals should not have cited it as if it were
the fact.
Indeed this is not the only factual issue raised, which should have
indicated to the Court of Appeals the necessity of affirming the trial
court's order deferring resolution of BMW's motion to dismiss.
Petitioner alleged that whether or not he is considered an agent of
BMW, the fact is that BMW did business in the Philippines because
it sold cars directly to Philippine buyers. [16] This was denied by
BMW, which claimed that Hahn was not its agent and that, while it
was true that it had sold cars to Philippine buyers, this was done
without solicitation on its part.[17]
Far from committing an abuse of discretion, the trial court properly
deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis, with
the same result if it had denied the motion and conditionally assumed
jurisdiction. It is the Court of Appeals which, by ruling that BMW is
not doing business on the basis merely of uncertain allegations in the
pleadings, disposed of the whole case with finality and thereby
deprived petitioner of his right to be heard on his cause of action. Nor
was there justification for nullifying the writ of preliminary
injunction issued by the trial court. Although the injunction was
issued ex parte, the fact is that BMW was subsequently heard on its
defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED
and the case is REMANDED to the trial court for further proceedings.
SO ORDERED.

It is not true then that the question whether BMW is doing business
could have been resolved simply by considering the parties'
pleadings. There are genuine issues of facts which can only be
determined on the basis of evidence duly presented. BMW cannot
short circuit the process on the plea that to compel it to go to trial
would be to deny its right not to submit to the jurisdiction of the trial
court which precisely it denies. Rule 16, 3 authorizes courts to defer
the resolution of a motion to dismiss until after the trial if the ground
on which the motion is based does not appear to be indubitable. Here
the record of the case bristles with factual issues and it is not at all
clear whether some allegations correspond to the proof.

Anyway, private respondent need not apprehend that by responding

to the summons it would be waiving its objection to the trial court's
jurisdiction. It is now settled that. for purposes of having summons
served on a foreign corporation in accordance with Rule 14, 14, it is
sufficient that it be alleged in the complaint that the foreign
corporation is doing business in the Philippines. The court need not
go beyond the allegations of the complaint in order to determine
whether it has jurisdiction.[18] A determination that the foreign
corporation is doing business is only tentative and is made only for
the purpose of enabling the local court to acquire jurisdiction over

[G.R. No. 159586. July 26, 2004]
EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and
DELFIN J. WENCESLAO, petitioners, vs. INGENIEUBURO
BIRKHAHN + NOLTE, Ingeniurgesellschaft mbh and HEERS
& BROCKSTEDT GMBH & CO., respondents.
YNARES-SANTIAGO, J.:
Assailed in this Petition for Review under Rule 45 of the Rules of
Court is the Decision[1] of the Court of Appeals dated May 15, 2003,
which sustained the Order of the Regional Trial Court of Angeles
City, Branch 61, dated June 28, 2001, and its subsequent Resolution
dated August 3, 2003 denying petitioners motion for reconsideration.
European Resources and Technologies Inc. (hereinafter ERTI), a
corporation organized and existing under the laws of the Republic of
the Philippines, is joined by Delfin J. Wenceslao as petitioner in this
case. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and
Heers & Brockstedt Gmbh & Co. are German corporations who are
respondents in this case and shall be collectively referred to as the
German Consortium.
The German Consortium tendered and submitted its bid to the Clark
Development Corporation (CDC) to construct, operate and manage
the Integrated WasteManagement Center at the Clark Special
Economic Zone (CSEZ). CDC accepted the German Consortiums bid
and awarded the contract to it. On October 6, 1999, CDC and the
German Consortium executed the Contract for Services[2] which
embodies the terms and conditions of their agreement.
The Contract for Services provides that the German Consortium shall
be empowered to enter into a contract or agreement for the use of the
integrated waste management center by corporations, local
government units, entities, and persons not only within the CSEZ but
also outside. For waste collected within the CSEZ, the German
Consortium may impose a tipping fee per ton of waste collected from
locators and residents of the CSEZ, which fees shall be subject to the
schedule agreed upon by the parties and specified in the Contract for
Services. For its operations outside of the CSEZ, the German
Consortium shall pay CDC US$1.50 per ton of non-hazardous solid
waste collected.[3] The CDC shall guarantee that nineteen thousand
eighteen hundred (19,800) tons per year of solid waste volume shall
be collected from inside and outside the CSEZ.[4] The contract has a
term of twenty-five (25) years,[5] during which time the German
Consortium shall operate the waste management center on a
day-to-day basis.[6]
Article VIII, Section 7 of the Contract for Services provides that the
German Consortium shall undertake to organize a local corporation
as its representative for this project. On April 18, 2000, the German
Consortium entered into a Joint Venture with D.M. Wenceslao and
Associates, Inc. (DMWAI) and Ma. Elena B. Villarama (doing
business as LBV and Associates), embodied in a Memorandum of
Understanding[7] (MOU) signed by the parties. Under the MOU, the
parties agreed to jointly form a local corporation to which the
German Consortium shall assign its rights under the Contract for
Services. Pursuant to this agreement, petitioner European Resources
and Technologies, Inc. was incorporated. The parties likewise agreed
to prepare and finalize a Shareholders Agreement within one (1)
month from the execution of the MOU, which shall provide that the
German Consortium shall own fifteen percent (15%) of the equity in
the joint venture corporation, DMWAI shall own seventy percent
(70%) and LBV&A shall own fifteen percent (15%). In the event that
the parties fail to execute the Shareholders Agreement, the MOU
shall be considered null and void.[8]
60
On August 1, 2000, without the Shareholders Agreement having
been executed, the German Consortium and petitioner ERTI entered
into a Memorandum of Agreement (MOA)[9] whereby the German
Consortium ceded its rights and obligations under the Contract for
Services in favor of ERTI and assigned unto ERTI, among others, its
license from CDC to engage in the business of providing
environmental services needed in the CSEZ in connection with the
waste management within the CSEZ and other areas.[10] Likewise,
the parties agreed that should there be a disagreement between or
among them relative to the interpretation or implementation of the
MOA and the collateral documents including but not limited to the
Contract for Services between the German Consortium and CDC, the
dispute shall be referred to a panel of arbitrators.[11]
On December 11, 2000, ERTI received a letter from BN Consultants
Philippines, Inc., signed by Mr. Holger Holst for and on behalf of the
German Consortium,[12]stating that the German Consortiums
contract with DMWAI, LBV&A and ERTI has been terminated or
extinguished on the following grounds: (a) the CDC did not give its
approval to the Consortiums request for the approval of the
assignment or transfer by the German Consortium in favor of ERTI
of its rights and interests under the Contract for Services; (b) the
parties failed to prepare and finalize the Shareholders Agreement
pursuant to the provision of the MOU; (c) there is no more factual or
legal basis for the joint venture to continue; and (d) with the
termination of the MOU, the MOA is also deemed terminated or
extinguished.
Attached to the letter was a copy of the letter of the CDC,[13] stating
that the German Consortiums assignment of an eighty-five percent
(85%) majority interest to another party violated its representation to
undertake both the financial and technical aspects of the project. The
dilution of the Consortiums interest in ERTI is a substantial
modification of the Consortiums representations which were used as
bases for the award of the project to it.
On February 20, 2001, petitioner ERTI, through counsel, sent a letter
to CDC requesting for the reconsideration of its disapproval of the
agreement between ERTI and the German Consortium.
Before CDC could act upon petitioner ERTIs letter, the German
Consortium filed a complaint for injunction against herein petitioners
before the Regional Trial Court ofAngeles City, Branch 61, docketed
as Civil Case No. 10049. The German Consortium claimed that
petitioner ERTIs continued misrepresentation as to their right to
accept solid wastes from third parties for processing at the waste
management center will cause irreparable damage to the Consortium
and its exclusive right to operate the waste management center at the
CSEZ. Moreover, petitioner ERTIs acts destroy the Consortiums
credibility and undermine customer confidence in it. Hence, the
German Consortium prayed that a writ of temporary restraining order
be issued against petitioner ERTI and, after hearing, a writ of
preliminary injunction be likewise issued ordering petitioner ERTI to
cease and desist from misrepresenting to third parties or the public
that it has any right or interest in the waste management center at
CSEZ.[14]
Petitioners filed their Opposition to the application for preliminary
injunction on February 7, 2001. The following day, February 8, 2001,
petitioners sent respondents, through Mr. Holger Holst, a letter
demanding that the parties proceed to arbitration in accordance with
Section 17 of the MOA. At the hearings on the application for
injunction, petitioners objected to the presentation of evidence on the
ground that the trial court had no jurisdiction over the case since the
German Consortium was composed of foreign corporations doing
business in the country without a license. Moreover, the MOA
between the parties provides that the dispute should be referred to
arbitration.

The trial court overruled the objection and proceeded with the
hearing. On June 28, 2001, the trial court issued an Order granting
the writ of preliminary injunction.[15]Petitioners filed a motion for
reconsideration, which was denied in a Resolution dated November
21, 2001.
On January 17, 2002, petitioners filed a petition for certiorari and
prohibition under Rule 65 of the Rules of Court before the Court of
Appeals, assailing the trial courts Orders dated June 28,
2001 and November 21, 2001.
Meanwhile, on February 11, 2002, the temporary restraining order
issued was lifted in view of respondents failure to file sufficient
bond.[16] On September 6, 2002, all proceedings in Civil Case No.
10049 were suspended until the petition for certiorari pending before
the Court of Appeals shall have been resolved.[17]
On May 15, 2003, the Court of Appeals dismissed the petition for
certiorari. Petitioners Motion for Reconsideration was denied in a
Resolution dated August 25, 2003.
Hence, this petition arguing that the Court of Appeals committed
reversible error in:
(a) Ruling that petitioners are estopped from assailing the capacity of
the respondents to institute the suit for injunction
(b) Ruling that respondents are entitled to an injunctive writ.
(c) Not holding that the dispute is covered by the arbitration clause in
the memorandum of agreement.
(d) Issuing the writ of preliminary injunction that is tantamount to a
decision of the case on the merits.[18]
The petition is partly meritorious.
There is no general rule or governing principle laid down as to what
constitutes doing or engaging in or transacting business in
the Philippines. 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.[19] We have held that the act
of participating in a bidding process constitutes doing business
because it shows the foreign corporations intention to engage in
business in the Philippines. 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.[20]
Consequently, the German Consortium is doing business in
the Philippines without the appropriate license as required by our
laws. By participating in the bidding conducted by the CDC for the
operation of the waste management center, the German Consortium
exhibited its intent to transact business in the Philippines. Although
the Contract for Services provided for the establishment of a local
corporation to serve as respondents representative, it is clear from the
other provisions of the Contract for Services as well as the letter by
the CDC containing the disapproval that it will be the German
Consortium which shall manage and conduct the operations of the
waste management center for at least twenty-five years. Moreover,
the German Consortium was allowed to transact with other entities
outside the CSEZ for solid waste collection. Thus, it is clear that the
local corporation to be established will merely act as a conduit or
extension of the German Consortium.
As a general rule, unlicensed foreign non-resident corporations
cannot file suits in the Philippines. Section 133 of the Corporation
Code specifically provides:
61
SECTION 133. No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in
any court or administrative agency of the Philippines, but such
corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
A corporation has legal status only within the state or territory in
which it was organized. For this reason, a corporation organized in
another country has no personality to file suits in the Philippines. In
order to subject a foreign corporation doing business in the country
to the jurisdiction of our courts, it must acquire a license from the
Securities and Exchange Commission (SEC) and appoint an agent for
service of process. Without such license, it cannot institute a suit in
the Philippines.[21]
However, there are exceptions to this rule. In a number of
cases,[22] we have declared a party estopped from challenging or
questioning the capacity of an unlicensed foreign corporation from
initiating a suit in our courts. In the case of Communication Materials
and Design, Inc. v. Court of Appeals,[23] a foreign corporation
instituted an action before our courts seeking to enjoin a local
corporation, with whom it had a Representative Agreement, from
using its corporate name, letter heads, envelopes, sign boards and
business dealings as well as the foreign corporations trademark. The
case arose when the foreign corporation discovered that the local
corporation has violated certain contractual commitments as
stipulated in their agreement. In said case, we held that a foreign
corporation doing business in the Philippines without license may
sue in Philippine Courts a Philippine citizen or entity that had
contracted with and benefited from it.
Hence, the party is estopped from questioning the capacity of a
foreign corporation to institute an action in our courts where it had
obtained benefits from its dealings with such foreign corporation and
thereafter committed a breach of or sought to renege on its
obligations. The rule relating to estoppel is deeply rooted in the
axiom of commodum ex injuria sua non habere debetno person ought
to derive any advantage from his own wrong.
In the case at bar, petitioners have clearly not received any benefit
from its transactions with the German Consortium. In fact, there is no
question that petitioners were the ones who have expended a
considerable amount of money and effort preparatory to the
implementation of the MOA. Neither do petitioners seek to back out
from their obligations under both the MOU and the MOA by
challenging respondents capacity to sue. The reverse could not be
any more accurate. Petitioners are insisting on the full validity and
implementation of their agreements with the German Consortium.
To rule that the German Consortium has the capacity to institute an
action against petitioners even when the latter have not committed
any breach of its obligation would be tantamount to an unlicensed
foreign corporation gaining access to our courts for protection and
redress. We cannot allow this without violating the very rationale for
the law prohibiting a foreign corporation not licensed to do business
in the Philippines from suing or maintaining an action in Philippine
courts. The object of requiring a license is not to prevent the foreign
corporation from performing single acts, but to prevent it from
acquiring domicile for the purpose of business without taking the
steps necessary to render it amenable to suits in the local
courts.[24] In other words, the foreign corporation is merely
prevented from being in a position where it takes the good without
accepting the bad.
On the issue of whether the respondents were entitled to the
injunctive writ, the petitioners claim that respondents right is not

in esse but is rather a future right which is contingent upon a judicial
declaration that the MOA has been validly rescinded. The Court of
Appeals, in its decision, held that the MOA should be deemed
subject to a suspensive condition, that is, that CDCs prior written
consent must be obtained for the validity of the assignment.
This issue must be resolved in a separate proceeding. It must be
noted that the hearing conducted in the trial court was merely a
preliminary hearing relating to the issuance of the injunctive writ. In
order to fully appreciate the facts of this case and the surrounding
circumstances relating to the agreements and contract involved,
further proof should be presented for consideration of the
court. Likewise, corollary matters, such as whether either of the
parties is liable for damages and to what extent, cannot be resolved
with absolute certainty, thus rendering any decision we might make
incomplete as to fully dispose of this case.
More importantly, it is evident that CDC must be made a proper
party in any case which seeks to resolve the effectivity or
ineffectivity of its disapproval of the assignment made between
petitioners and respondent German Consortium. Where, as in the
instant case, CDC is not impleaded as a party, any decision of the
court which will inevitably affect or involve CDC cannot be deemed
binding on it.
For the same reason, petitioners assertion that the instant case should
be referred to arbitration pursuant to the provision of the MOA is
untenable.
We have ruled in several cases that arbitration agreements are valid,
binding, enforceable and not contrary to public policy such that when
there obtains a written provision for arbitration which is not complied
with, the trial court should suspend the proceedings and order the
parties to proceed to arbitration in accordance with the terms of their
agreement.[25] In the case at bar, the MOA between petitioner ERTI
and respondent German Consortium provided:
17. Should there be a disagreement between or among the Parties
relative to the interpretation or implementation of this Agreement
and the collateral documents including but not limited to the Contract
for Services between GERMAN CONSORTIUM and CDC and the
Parties cannot resolve the same by themselves, the same shall be
endorsed to a panel of arbitrators which shall be convened in
accordance with the process ordained under the Arbitration Law of
the Republic of the Philippines.[26]
Indeed, to brush aside a contractual agreement calling for arbitration
in case of disagreement between parties would be a step
backward.[27] But there are exceptions to this rule. Even if there is
an arbitration clause, there are instances when referral to arbitration
does not appear to be the most prudent action. The object of
arbitration is to allow the expeditious determination of a
dispute. Clearly, the issue before us could not be speedily and
efficiently resolved in its entirety if we allow simultaneous
arbitration proceedings and trial, or suspension of trial pending
arbitration.[28]
As discussed earlier, the dispute between respondent German
Consortium and petitioners involves the disapproval by the CDC of
the assignment by the German Consortium of its rights under the
Contract for Services to petitioner ERTI. Admittedly, the arbitration
clause is contained in the MOA to which only the German
Consortium and petitioner ERTI were parties. Even if the case is
brought before an arbitration panel, the decision will not be binding
upon CDC who is a non-party to the arbitration agreement. What is
more, the arbitration panel will not be able to completely dispose of
all the issues of this case without including CDC in its
proceedings. Accordingly, the interest of justice would only be
62
served if the trial court hears and adjudicates the case in a single and
complete proceeding.
Lastly, petitioners question the propriety of the issuance of writ of
preliminary injunction claiming that such is already tantamount to
granting the main prayer of respondents complaint without the
benefit of a trial. Petitioners point out that the purpose of a
preliminary injunction is to prevent threatened or continuous
irremediable injury to some of the parties before their claims can be
thoroughly studied and decided. It cannot be used to railroad the
main case and seek a judgment without a full-blown trial as in the
instant case.
The Court of Appeals ruled that since petitioners did not raise this
issue during the hearing on the application for preliminary injunction
before the trial court, the same cannot be raised for the first time on
appeal and even in special civil actions for certiorari as in this case.
At the outset, it must be noted that with the finding that the German
Consortium is without any personality to file the petition with the
trial court, the propriety of the injunction writ issued is already moot
and academic. Even assuming for the sake of argument that
respondents have the capacity to file the petition, we find merit in the
issue raised by petitioners against the injunction writ issued.
Before an injunctive writ can be issued, it is essential that the
following requisites are present: (1) there must be a right in esse or
the existence of a right to be protected; and (2) the act against which
injunction to be directed is a violation of such right.[29] The onus
probandi is on movant to show that there exists a right to be
protected, which is directly threatened by the act sought to be
enjoined. Further, there must be a showing that the invasion of the
right is material and substantial and that there is an urgent and
paramount necessity for the writ to prevent a serious damage.[30]
Thus, it is clear that for the issuance of the writ of preliminary
injunction to be proper, it must be shown that the invasion of the
right sought to be protected is material and substantial, that the right
of complainant is clear and unmistakable and that there is an urgent
and paramount necessity for the writ to prevent serious
damage.[31] At the time of its application for an injunctive writ,
respondents right to operate and manage the waste management
center, to the exclusion of or without any participation by petitioner
ERTI, cannot be said to be clear and unmistakable. The MOA
executed between respondents and petitioner ERTI has not yet been
judicially declared as rescinded when the complaint was lodged in
court.[32] Hence, a cloud of doubt exists over respondent German
Consortiums exclusive right relating to the waste management
center.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP
No. 68923 dated May 15, 2003 is REVERSED and SET ASIDE. The
Orders of the trial court dated June 28, 2001 and November 21,
2001 are ANNULLED and SET ASIDE and Civil Case No. 10049 is
DISMISSED for lack of legal capacity of respondents to institute the
action. Costs against respondents. SO ORDERED.

[G.R. No. 154618. April 14, 2004]
AGILENT TECHNOLOGIES SINGAPORE (PTE)
LTD., petitioner, vs. INTEGRATED SILICON TECHNOLOGY
PHILIPPINES CORPORATION, TEOH KIANG HONG,
TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M.
DELA CRUZ, JEAN KAY M. DELA CRUZ and ROLANDO T.
NACILLA, respondents.
YNARES-SANTIAGO, J.:
This petition for review assails the Decision dated August 12,
2002 of the Court of Appeals in CA-G.R. SP No. 66574, which
dismissed Civil Case No. 3123-2001-C and annulled and set aside
the Order dated September 4, 2001 issued by the Regional Trial
Court of Calamba, Laguna, Branch 92.
Petitioner Agilent Technologies Singapore (Pte.), Ltd. (Agilent) is a
foreign corporation, which, by its own admission, is not licensed to
do business in the Philippines.[1]Respondent Integrated Silicon
Technology Philippines Corporation (Integrated Silicon) is a private
domestic corporation, 100% foreign owned, which is engaged in the
business of manufacturing and assembling electronics
components.[2] Respondents Teoh Kiang
Hong, Teoh Kiang Seng and Anthony Choo, Malaysian nationals, are
current members of Integrated Silicons board of directors, while
Joanne Kate M. dela Cruz, Jean Kay M. dela Cruz, and Rolando
T. Nacilla are its former members.[3]
The juridical relation among the various parties in this case can be
traced to a 5-year Value Added Assembly Services Agreement
(VAASA), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.)
Ltd., Singapore Components Operation (HP-Singapore).[4] Under
the terms of the VAASA, Integrated Silicon was to locally
manufacture and assemble fiber optics for export to
HP-Singapore. HP-Singapore, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of
Integrated Silicon; and pay Integrated Silicon the purchase price of
the finished products.[5] The VAASA had a five-year term,
beginning on April 2, 1996, with a provision for annual renewal by
mutual written consent.[6] On September 19, 1999, with the consent
of Integrated Silicon,[7] HP-Singapore assigned all its rights and
obligations in the VAASA to Agilent.[8]
On May 25, 2001, Integrated Silicon filed a complaint for Specific
Performance and Damages against Agilent and its officers
Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor,
docketed as Civil Case No. 3110-01-C. It alleged
that Agilent breached the parties oral agreement to extend
the VAASA. Integrated Silicon thus prayed that defendant be ordered
to execute a written extension of the VAASA for a period of five
years as earlier assured and promised; to comply with the
extended VAASA; and to pay actual, moral, exemplary damages and
attorneys fees.[9]
On June 1, 2001, summons and a copy of the complaint were served
on Atty. Ramon Quisumbing, who returned these processes on the
claim that he was not the registered agent of Agilent. Later, he
entered a special appearance to assail the courts jurisdiction over the
person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against Integrated
Silicon, Teoh Kang Seng, Teoh Kiang Gong, Anthony Choo, Joanne
Kate M. dela Cruz, Jean Kay M. dela Cruz and Rolando
T. Nacilla,[10] for Specific Performance, Recovery of Possession,
and Sum of Money with Replevin, Preliminary Mandatory Injunction,
63
and Damages, before the Regional Trial Court, Calamba, Laguna,
Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed
that a writ of replevin or, in the alternative, a writ of preliminary
mandatory injunction, be issued ordering defendants to immediately
return and deliver to plaintiff its equipment, machineries and the
materials to be used for fiber-optic components which were left in
the plant of Integrated Silicon. It further prayed that defendants be
ordered to pay actual and exemplary damages and attorneys fees.[11]
Respondents filed a Motion to Dismiss in Civil Case No.
3123-2001-C,[12] on the grounds of lack of Agilents legal capacity
to sue;[13] litis pendentia;[14] forum shopping;[15] and failure to
state a cause of action.[16]
On September 4, 2001, the trial court denied the Motion to Dismiss
and granted petitioner Agilents application for a writ of replevin.[17]
Without filing a motion for reconsideration, respondents filed a
petition for certiorari with the Court of Appeals.[18]
In the meantime, upon motion filed by respondents, Judge Antonio
S. Pozas of Branch 92 voluntarily inhibited himself in Civil Case No.
3123-2001-C. The case was re-raffled and assigned to Branch 35, the
same branch where Civil Case No. 3110-2001-C is pending.
On August 12, 2002, the Court of Appeals granted respondents
petition for certiorari, set aside the assailed Order of the trial court
dated September 4, 2001, and ordered the dismissal of Civil Case No.
3123-2001-C.
Hence, the instant petition raising the following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN NOT DISMISSING RESPONDENTS PETITION FOR
CERTIORARI FOR RESPONDENTS FAILURE TO FILE A
MOTION FOR RECONSIDERATION BEFORE RESORTING TO
THE REMEDY OF CERTIORARI.
II.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF LITIS PENDENTIA, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ANNULLING AND SETTING ASIDE THE TRIAL
COURTS ORDER DATED 4 SEPTEMBER 2001 AND
ORDERING THE DISMISSAL OF CIVIL CASE NO. 3123-2001-C
BELOW ON THE GROUND OF FORUM SHOPPING, ON
ACCOUNT OF THE PENDENCY OF CIVIL CASE NO.
3110-2001-C.
IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR IN ORDERING THE DISMISSAL OF CIVIL CASE NO.
323-2001-C BELOW INSTEAD OF ORDERING IT
CONSOLIDATED WITH CIVIL CASE NO. 3110-2001-C.[19]
The two primary issues raised in this petition: (1) whether or not the
Court of Appeals committed reversible error in giving due course to
respondents petition, notwithstanding the failure to file a Motion for
Reconsideration of the September 4, 2001 Order; and (2) whether or

not the Court of Appeals committed reversible error in dismissing
Civil Case No. 3123-2001-C.
We find merit in the petition.
The Court of Appeals, citing the case
of Malayang Manggagawa sa ESSO v. ESSO Standard Eastern,
Inc.,[20] held that the lower court had no jurisdiction over Civil Case
No. 3123-2001-C because of the pendency of Civil Case No.
3110-2001-C and, therefore, a motion for reconsideration was not
necessary before resort to a petition for certiorari. This was error.
Jurisdiction is fixed by law. Batas Pambansa Blg. 129 vests
jurisdiction over the subject matter of Civil Case No. 3123-2001-C in
the RTC.[21]
The Court of Appeals ruling that the assailed Order issued by the
RTC of Calamba, Branch 92, was a nullity for lack of jurisdiction
due to litis pendentia and forum shopping, has no legal
basis. The pendency of another action does not strip a court of the
jurisdiction granted by law.
The Court of Appeals further ruled that a Motion for Reconsideration
was not necessary in view of the urgent necessity in this case. We are
not convinced. In the case of Bache and Co. (Phils.), Inc. v.
Ruiz,[22] relied on by the Court of Appeals, it was held that time is
of the essence in view of the tax assessments sought to be enforced
by respondent officers of the Bureau of Internal Revenue against
petitioner corporation, on account of which immediate and more
direct action becomes necessary. Tax assessments in that case were
based on documents seized by virtue of an illegal search, and the
deprivation of the right to due process tainted the entire proceedings
with illegality. Hence, the urgent necessity of preventing the
enforcement of the tax assessments was patent. Respondents, on the
other hand, cite the case of Geronimo v. Commission on
Elections,[23] where the urgent necessity of resolving a
disqualification case for a position in local government warranted the
expeditious resort to certiorari.In the case at bar, there is no
analogously urgent circumstance which would necessitate the
relaxation of the rule on a Motion for Reconsideration.
Indeed, none of the exceptions for dispensing with a Motion for
Reconsideration is present here. None of the following cases cited by
respondents serves as adequate basis for their procedural lapse.
In Vigan Electric Light Co., Inc. v. Public Service
Commission,[24] the questioned order was null and void for failure
of respondent tribunal to comply with due process requirements;
in Matanguihan v. Tengco,[25] the questioned order was a patent
nullity for failure to acquire jurisdiction over the defendants, which
fact the records plainly disclosed; and in National Electrification
Administration v. Court of Appeals,[26] the questioned orders were
void for vagueness. No such patent nullity is evident in the Order
issued by the trial court in this case. Finally, while urgency may be a
ground for dispensing with a Motion for Reconsideration, in the case
of Vivo v. Cloribel,[27] cited by respondents, the slow progress of
the case would have rendered the issues moot had a motion for
reconsideration been availed of. We find no such urgent
circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they
immediately raised the matter to the Court of Appeals on certiorari;
and the appellate court committed reversible error when it took
cognizance of respondents petition instead of dismissing the same
outright.
We come now to the substantive issues of the petition.
Litis pendentia is a Latin term which literally means a pending suit. It
is variously referred to in some decisions
64
as lis pendens and auter action pendant. While it is normally
connected with the control which the court has on a property
involved in a suit during the continuance proceedings, it is more
interposed as a ground for the dismissal of a civil action pending in
court.
Litis pendentia as a ground for the dismissal of a civil action refers to
that situation wherein another action is pending between the same
parties for the same cause of action, such that the second action
becomes unnecessary and vexatious. For litis pendentia to be invoked,
the concurrence of the following requisites is necessary:
(a) identity of parties or at least such as represent the same interest in
both actions;
(b) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and
(c) the identity in the two cases should be such that the judgment that
may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.[28]
The Court of Appeals correctly appreciated the identity of parties in
Civil Cases No. 3123-2001-C and 3110-2001-C. Well-settled is the
rule that lis pendens requires only substantial, and not absolute,
identity of parties.[29] There is substantial identity of parties when
there is a community of interest between a party in the first case and
a party in the second case, even if the latter was not impleaded in the
first case.[30] The parties in these cases are vying over the interests
of the two opposing corporations; the individuals are only
incidentally impleaded, being the natural persons purportedly
accused of violating these corporations rights.
Likewise, the fact that the positions of the parties are reversed, i.e.,
the plaintiffs in the first case are the defendants in the second case or
vice versa, does not negate the identity of parties for purposes of
determining whether the case is dismissible on the ground
of litis pendentia.[31]
The identity of parties notwithstanding, litis pendentia does not
obtain in this case because of the absence of the second and third
requisites. The rights asserted in each of the cases involved are
separate and distinct; there are two subjects of controversy presented
for adjudication; and two causes of action are clearly involved. The
fact that respondents instituted a prior action for Specific
Performance and Damages is not a ground for defeating the
petitioners action for Specific Performance, Recovery of Possession,
and Sum of Money with Replevin, Preliminary Mandatory Injunction,
and Damages.
In Civil Case No. 3110-2001-C filed by respondents, the issue is
whether or not there was a breach of an oral promise to renew of
the VAASA. The issue in Civil Case No. 3123-2001-C, filed by
petitioner, is whether petitioner has the right to take possession of the
subject properties. Petitioners right of possession is founded on the
ownership of the subject goods, which ownership is not disputed and
is not contingent on the extension or non-extension of
the VAASA. Hence, the replevin suit can validly be tried even while
the prior suit is being litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No.
3110-2001-C. The reliefs sought by respondent Integrated Silicon
therein are as follows: (1) execution of a written extension or renewal
of the VAASA; (2) compliance with the extended VAASA; and (3)
payment of overdue accounts, damages, and attorneys
fees.The reliefs sought by petitioner Agilent in Civil Case No.
3123-2001-C, on the other hand, are as follows: (1) issuance of a
Writ of Replevin or Writ of Preliminary Mandatory Injunction; (2)

recovery of possession of the subject properties; (3) damages and
attorneys fees.
Concededly, some items or pieces of evidence may be admissible in
both actions. It cannot be said, however, that exactly the same
evidence will support the decisions in both, since the legally
significant and controlling facts in each case are entirely different.
Although the VAASA figures prominently in both suits, Civil Case
No. 3110-2001-C is premised on a purported breach of an oral
obligation to extend the VAASA, and damages arising out
of Agilents alleged failure to comply with such purported
extension. Civil Case No. 3123-2001-C, on the other hand, is
premised on a breach of the VAASA itself, and damages arising
to Agilent out of that purported breach.
It necessarily follows that the third requisite for litis pendentia is also
absent. The following are the elements of res judicata:
(a) The former judgment must be final;
(b) The court which rendered judgment must have jurisdiction over
the parties and the subject matter;
(c) It must be a judgment on the merits; and
(d) There must be between the first and second actions identity of
parties, subject matter, and cause of action.[32]
In this case, any judgment rendered in one of the actions will not
amount to res judicata in the other action. There being different
causes of action, the decision in one case will not
constitute res judicata as to the other.
Of course, a decision in one case may, to a certain extent, affect the
other case. This, however, is not the test to determine the identity of
the causes of action.Whatever difficulties or inconvenience may be
entailed if both causes of action are pursued on separate remedies,
the proper solution is not the dismissal order of the Court of Appeals.
The possible consolidation of said cases, as well as stipulations and
appropriate modes of discovery, may well be considered by the court
below to subserve not only procedural expedience but, more
important, the ends of justice.[33]
We now proceed to the issue of forum shopping.
The test for determining whether a party violated the rule against
forum-shopping was laid down in the case of Buan v.
Lopez.[34] Forum shopping exists where the elements
of litis pendentia are present, or where a final judgment in one case
will amount to res judicata in the final other. There being
no litis pendentia in this case, a judgment in the said case will not
amount to res judicata in Civil Case No. 3110-2001-C, and
respondents contention on forum shopping must likewise fail.
We are not unmindful of the afflictive consequences that may be
suffered by both petitioner and respondents if replevin is granted by
the trial court in Civil Case No. 3123-2001-C. If respondent
Integrated Silicon eventually wins Civil Case No. 3110-2001-C, and
the VAASAs terms are extended, petitioner corporation will have to
comply with its obligations thereunder, which would include the
consignment of properties similar to those it may recover by way
of replevin in Civil Case No. 3123-2001-C.However, petitioner will
also suffer an injustice if denied the remedy of replevin, resort to
which is not only allowed but encouraged by law.
Respondents argue that since Agilent is an unlicensed foreign
corporation doing business in the Philippines, it lacks the legal
capacity to file suit.[35] The assailed acts of petitioner Agilent,
purportedly in the nature of doing business in the Philippines, are the
following: (1) mere entering into the VAASA, which is a service
65
contract;[36] (2) appointment of a full-time representative in
Integrated Silicon, to oversee and supervise the production
of Agilents products;[37] (3) the appointment by Agilent of six
full-time staff members, who were permanently stationed at
Integrated Silicons facilities in order to inspect the finished goods
for Agilent;[38] and (4) Agilents participation in the management,
supervision and control of Integrated Silicon,[39] including
instructing Integrated Silicon to hire more employees to
meet Agilents increasing production needs,[40] regularly performing
quality audit, evaluation and supervision of Integrated Silicons
employees,[41] regularly performing inventory audit of raw materials
to be used by Integrated Silicon, which was also required to provide
weekly inventory updates to Agilent,[42] and providing and dictating
Integrated Silicon on the daily production schedule, volume and
models of the products to manufacture and ship for Agilent.[43]
A foreign corporation without a license is not ipso facto incapacitated
from bringing an action in Philippine courts. A license is necessary
only if a foreign corporation is transacting or doing business in the
country. The Corporation Code provides:
Sec. 133. Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in
any action, suit or proceeding in any court or administrative agency
of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.
The aforementioned provision prevents an unlicensed foreign
corporation doing business in the Philippines from accessing our
courts.
In a number of cases, however, we have held that an unlicensed
foreign corporation doing business in the Philippines may bring suit
in Philippine courts against a Philippine citizen or entity who had
contracted with and benefited from said corporation.[44] Such a suit
is premised on the doctrine of estoppel. A party is estopped from
challenging the personality of a corporation after having
acknowledged the same by entering into a contract with it. This
doctrine of estoppel to deny corporate existence and capacity applies
to foreign as well as domestic corporations.[45] The application of
this principle prevents a person contracting with a foreign
corporation from later taking advantage of its noncompliance with
the statutes chiefly in cases where such person has received the
benefits of the contract.[46]
The principles regarding the right of a foreign corporation to bring
suit in Philippine courts may thus be condensed in four statements: (1)
if a foreign corporation does business in the Philippines without a
license, it cannot sue before the Philippine courts;[47] (2) if a foreign
corporation is not doing business in the Philippines, it needs no
license to sue before Philippine courts on an isolated transaction or
on a cause of action entirely independent of any business
transaction[48]; (3) if a foreign corporation does business in the
Philippines without a license, a Philippine citizen or entity which has
contracted with said corporation may be estopped from challenging
the foreign corporations corporate personality in a suit brought
before Philippine courts;[49] and (4) if a foreign corporation does
business in the Philippines with the required license, it can sue before
Philippine courts on any transaction.
The challenge to Agilents legal capacity to file suit hinges on
whether or not it is doing business in the Philippines. However, there
is no definitive rule on what constitutes doing, engaging in, or
transacting business in the Philippines, as this Court observed in the
case of Mentholatum v. Mangaliman.[50] The Corporation Code

itself is silent as to what acts constitute doing or transacting business
in the Philippines.
Jurisprudence has it, however, that the term implies a continuity of
commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of some of
the functions normally incident to or in progressive prosecution of
the purpose and subject of its organization.[51]
In Mentholatum,[52] this Court discoursed on the two general tests to
determine whether or not a foreign corporation can be considered as
doing business in the Philippines. The first of these is
the substance test, thus:[53]
The true test [for doing business], however, seems to be whether the
foreign corporation is continuing the body of the business or
enterprise for which it was organized or whether it has substantially
retired from it and turned it over to another.
The second test is the continuity test, expressed thus:[54]
The term [doing business] implies a continuity of commercial
dealings and arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of the functions
normally incident to, and in the progressive prosecution of, the
purpose and object of its organization.
Although each case must be judged in light of its attendant
circumstances, jurisprudence has evolved several guiding principles
for the application of these tests. For instance, considering that it
transacted with its Philippine counterpart for seven years, engaging
in futures contracts, this Court concluded that the foreign corporation
in Merrill Lynch Futures, Inc. v. Court of Appeals and Spouses
Lara,[55] was doing business in the Philippines. In Commissioner of
Internal Revenue v. Japan Airlines (JAL),[56]the Court held that JAL
was doing business in the Philippines, i.e., its commercial dealings in
the country were continuous despite the fact that no JAL aircraft
landed in the country as it sold tickets in the Philippines through a
general sales agent, and opened a promotions office here as well.
In General Corp. of the Phils. v. Union Insurance Society of Canton
and Firemans Fund Insurance,[57] a foreign insurance corporation
was held to be doing business in the Philippines, as it appointed a
settling agent here, and issued 12 marine insurance policies. We held
that these transactions were not isolated or casual, but manifested the
continuity of the foreign corporations conduct and its intent to
establish a continuous business in the country. In Eriks PTE Ltd. v.
Court of Appeals and Enriquez,[58] the foreign corporation sold its
products to a Filipino buyer who ordered the goods 16 times within
an eight-month period. Accordingly, this Court ruled that the
corporation was doing business in the Philippines, as there was a
clear intention on its part to continue the body of its business here,
despite the relatively short span of time involved.Communication
Materials and Design, Inc., et al. v. Court of Appeals, ITEC, et
al.[59] and Top-Weld Manufacturing v. ECED, IRTI, et al.[60] both
involved the License and Technical Agreement and Distributor
Agreement of foreign corporations with their respective local
counterparts that were the primary bases for the Courts ruling that the
foreign corporations were doing business in the Philippines.[61] In
particular, the Court cited the highly restrictive nature of certain
provisions in the agreements involved, such that, as stated
in Communication Materials, the Philippine entity is reduced to a
mere extension or instrument of the foreign corporation. For example,
in Communication Materials, the Court deemed the No Competing
Product provision of the Representative Agreement therein
restrictive.[62]
The case law definition has evolved into a statutory definition,
having been adopted with some qualifications in various pieces of
66
legislation. The Foreign Investments Act of 1991 (the FIA; Republic
Act No. 7042, as amended), defines doing business as follows:
Sec. 3, par. (d). The phrase doing business shall include soliciting
orders, service contracts, opening offices, whether called liaison
offices or branches; appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling one hundred eighty (180)
days or more; participating in the management, supervision or
control of any domestic business, firm, entity, or corporation in the
Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent
the performance of acts or works, or the exercise of some of the
functions normally incident to, and in the progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
An analysis of the relevant case law, in conjunction with Section 1 of
the Implementing Rules and Regulations of the FIA (as amended by
Republic Act No. 8179), would demonstrate that the acts enumerated
in the VAASA do not constitute doing business in the Philippines.
Section 1 of the Implementing Rules and Regulations of the FIA (as
amended by Republic Act No. 8179) provides that the following
shall not be deemed doing business:
(1) Mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of
rights as such investor;
(2) Having a nominee director or officer to represent its interest in
such corporation;
(3) Appointing a representative or distributor domiciled in
the Philippines which transacts business in the representatives or
distributors own name and account;
(4) The publication of a general advertisement through any print or
broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the
purpose of having the same processed by another entity in
the Philippines;
(6) Consignment by a foreign entity of equipment with a local
company to be used in the processing of products for export;
(7) Collecting information in the Philippines; and
(8) Performing services auxiliary to an existing isolated contract of
sale which are not on a continuing basis, such as installing in the
Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate
it, and similar incidental services.
By and large, to constitute doing business, the activity to be
undertaken in the Philippines is one that is for profit-making.[63]
By the clear terms of the VAASA, Agilents activities in the
Philippines were confined to (1) maintaining a stock of goods in the
Philippines solely for the purpose of having the same processed by
Integrated Silicon; and (2) consignment of equipment with Integrated
Silicon to be used in the processing of products for export. As such,
we hold that, based on the evidence presented thus
far, Agilent cannot be deemed to be doing business in
the Philippines. Respondents contention that Agilent lacks the legal
capacity to file suit is therefore devoid of merit. As a foreign
corporation not doing business in the Philippines, it needed no
license before it can sue before our courts.
 67

Finally, as to Agilents purported failure to state a cause of action

against the individual respondents, we likewise rule in favor of
petitioner. A Motion to Dismiss hypothetically admits all the
allegations in the Complaint, which plainly alleges that these
individual respondents had committed or permitted the commission
of acts prejudicial to Agilent. Whether or not these individuals had
divested themselves of their interests in Integrated Silicon, or are no
longer members of Integrated Silicons Board of Directors, is a matter
of defense best threshed out during trial.

WHEREFORE, PREMISES CONSIDERED, the petition is

GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 66574 dated August 12, 2002, which dismissed Civil Case No.
3123-2001-C, is REVERSED and SET ASIDE. The Order
dated September 4, 2001 issued by the Regional Trial Court
of Calamba, Laguna, Branch 92, in Civil Case No. 3123-2001-C, is
REINSTATED. Agilents application for a Writ of Replevin is
GRANTED.

No pronouncement as to costs. SO ORDERED.


FIRST DIVISION EXPRESS PADALA (ITALIA) S.P.A., now
BDO REMITTANCE (ITALIA) S.P.A., G.R. No. 202505 Present:
Petitioner, -versus-HELEN M. OCAMPO, Respondent.
SERENO, CJ., Chairperson,* LEONARDO-DE CASTRO,**
DEL CASTILLO, JARDELEZA, and TIJAM, JJ.
Jr-JARDELEZA, J.:
This is a petition for review on certiorari1 challenging the Decision2
dated January 5, 2012 and Resolution3 dated June 27, 2012 of the
Court of Appeals (CA) in CA-G.R. SP No. 113475. The CA granted
the petition for certiorari filed by respondent Helen M. Ocampo
(Ocampo) and set aside the Decision4 dated September 14, 2009 of
the Regional Trial Court (RTC) in Civil Case No. MC08-3775 which
granted BOO Remittance (Italia) S.P.A. 's (BDO Remittance)
petition for recognition of foreign judgment. The core issue being
raised is whether service of summons was validly effected upon
respondent, who lives in Italy, through substituted service. On
official leave. .. Designated as Acting Chairperson of the First
Division per Special Order No. 2480 dated August 31, 2017. Rollo,
pp. 8-25. Id. at 27-44, penned It Associate Justice Danton Q. Bueser
and Associate Justices Rosmari D. Carandang and Ricardo
Ji( Rosario, concurring. 3 Id. at 46-47. 4 Id. at 123-129.
Decision 2 G.R. No. 202505 BDO Remittance, a corporation with
principal office in Italy, hired respondent Ocampo as a remittance
processor in September 2002. She was dismissed in February 2004
for misappropriating the sum of €24,035.60 by falsifying invoices of
money payments relating to customers' money transfer orders from
February to December 2003. 5 Accordingly, BDO Remittance filed a
criminal complaint against Ocampo for the same acts before the
Court of Turin, Italy. Ocampo pleaded guilty to the offense charged.
On April 13, 2005, the Honorable Court of Turin convicted and
sentenced her to suffer imprisonment of six months and a penalty of
€300.00, but granted her the benefit of suspension of the enforcement
of sentence on account of her guilty plea (the Court of Turin
D. . ) 6 ec1s1on . On September 22, 2008, BDO Remittance
filed a petition for recognition of foreign judgment7 with the RTC of
Mandaluyong City. BDO Remittance prayed for the recognition of
the Court of Turin Decision and the cancellation or restriction of
Ocampo' s Philippine passport by the Department of Foreign Affairs
(DF A). 8 On November 21, 2008, the sheriff attempted to personally
serve the summons on Ocampo in her local address alleged in the
petition located in San Bernardo Village, Darasa, Tanauan, Batangas.
However, since the address was incomplete, the sheriff sought the
help of barangay officials, who pointed him to the house belonging to
Ocampo's father, Nicasio Ocampo, Victor P. Macahia (Macahia),
uncle of Ocampo and present occupant, informed the sheriff that
Ocampo and her family were already in Italy, and that he was only a
caretaker of the house. The sheriff then proceeded to serve the
summons upon Macahia.9 After Ocampo failed to file an answer,
BDO Remittance filed a motion to declare Ocampo in default. The R
TC granted the motion and allowed BDO Remittance to present .d 10
ev1 ence ex parte. On September 14, 2009, the RTC rendered a
Decision11 in favor of BDO Remittance (RTC Decision). It
recognized as valid and binding in the Philippines the Court of Turin
Decision and ordered the DF A to cancel or restrict Ocampo's
Philippine passport and not to allow its renewal until she has served
her sentence.12 6 9 Id. at 123-124. Id. at 29. Id. at 115-121. Id. at 119.
Id. at 30-31. 10 td. at 31. ( 11 Supra note 4. 12 Rollo, p. 128·
Decision 3 G.R. No. 202505 On February 11, 2010, Ocampo's
mother, Laureana Macahia, received a copy of the RTC Decision and
forwarded it to Ocampo.13 Not having been represented by counsel a
quo, the period of appeal lapsed. Ocampo was later able to engage
68
the services of counsel who filed a petition for certiorari under Rule
65 with the CA on April 12, 2010.14 Ocampo principally argued that
the RTC acted in grave abuse of discretion in recognizing and
ordering the enforcement of the Court of Turin Decision. 15 In its
now assailed Decision, 16 the CA set aside the RTC Decision and
revoked the order to cancel or restrict Ocampo's Philippine passport
(CA Decision). The CA first settled the issue of procedural due
process, particularly whether Ocampo was properly served with
summons. It held that since Ocampo's whereabouts were unknown,
summons should have been served in accordance with Section 14,
Rule 14 of the Rules of Civil Procedure. The sheriff however,
erroneously effected the substituted service. of summons under
Section 7 of Rule 14. Thus, the CA concluded that the RTC did not
acquire jurisdiction over Ocampo, and the RTC Decision against her
is null and void. It also found that the R TC acted in grave abuse of
discretion when it recognized a foreign judgment of a criminal case
and ordered the DFA to restrict or cancel Ocampo's passport.17 After
the CA denied its motion for reconsideration, BDO Remittance filed
the present petition for review under Rule 45 arguing that: ( 1)
Ocampo availed of the wrong remedy; and (2) the RTC did not
gravely abuse its discretion in granting the petition for recognition of
foreign judgment and ordering the DFA to restrict or cancel
Ocampo's passport.18 In her comment, 19 Ocampo explained that
BDO Remittance's insistence on the enforcement of Court of Turin
Decision is misleading because, by availing of the benefit of
suspension of the enforcement, the penalty of confinement will not
be enforced upon her. She also presented a decree20 from the High
Court of Turin dated June 29, 2010 which stated that her criminal
liability has been extinguished. We deny the petition. The general
rule in this jurisdiction is that summons must be served personally on
the defendant. Section 6, Rule 14 of the Rules of Court provides: 13
Id. at 95. 14 Id. at l 76. 15 Id. at 33. 16 Supra note 2. 17 Rollo, pp.
33-3,. 18 Id. at 15-22. 19 Id.at94-114. 20 Id. at 155-156.
Decision 4 G.R. No. 202505 Sec. 6. Service in person on defendant.
-Whenever practicable, the summons shall be served by handing a
copy thereof to the defendant in person, or, if he refuses to receive
and sign for it, by tendering it to him. For justifiable reasons,
however, other modes of serving summons may be resorted to. When
the defendant cannot be served personally within a reasonable time
after efforts to locate him have failed, the rules allow summons to be
served by substituted service. Substituted service is effected by
leaving copies of the summons at the defendant's residence with
some person of suitable age and discretion then residing therein, or
by leaving the copies at defendant's office or regular place of
business with some competent person in charge thereof.21 When the
defendant's whereabouts are unknown, the rules allow service of
summons by publication.22 As an exception to the preferred mode of
service, service of summons by publication may only be resorted to
when the whereabouts of the defendant are not only unknown, but
cannot be ascertained by diligent inquiry. The diligence requirement
means that there must be prior resort to personal service under
Section 7 and substituted service under Section 8, and proof that
these modes were ineffective before summons by publication may be
allowed. 23 This mode also requires the plaintiff to file a written
motion for leave of court to effect service of summons by publication,
supported by affidavit of the plaintiff or some person on his behalf,
setting forth the grounds for the application.24 In the present case,
the sheriff resorted to substituted service upon Ocampo through her
uncle, who was the caretaker of Ocampo's old family residence in
Tanauan, Batangas. The CA held that substituted service was
improperly resorted to. It found that since Ocampo' s "whereabouts
are unknown and cannot be ascertained by diligent inquiry x x x
service may be effected only by publication in a newspaper of
general circulation."25 We agree with the CA that substituted service
is improper under the facts of this case. Substituted service
presupposes that the place where the summons is being served is the
 69

defendant's current residence or office/regular place of business. petition. These issues can be resolved by the trial court upon
Thus, where the defendant neither resides nor holds office in the acquiring jurisdiction over Ocampo and giving her an opportunity to
address stated in the summons, substituted service cannot be resorted be heard. It is in a better position to receive and assess the evidence
to. As we explained in Keister v. Navarro:26 Under the Rules, that may be presented by Ocampo, including the decree dated June
substituted service may be effect[ ed] (a) by leaving copies of the 29, 2010 issued by the High Court of Turin, to the effect that her
summons at the defendant's dwelling house or residence with some liability has been extinguished. While such claim would tend to
person of suitable 21 RULES OF courn, Rule 14, Sec. 7. 22 RULES render the case moot, we refuse to consider the argument at the first
OF COURT, Rule 14, Sec. 14. 23 See Pua v. Deyto, G.R. No. instance on two grounds: first, we are not a trier of facts; and second,
173336, November 26, 2012, 686 SCRA 365, 372-373, citing Santos, the document submitted has not been authenticated in accordance
Jr. v. PNOC Exploration Corporation, G.R. No. 170943, September with the rules on evidence. WHEREFORE, the petition is DENIED.
23, 2008, 566 SCRA 272. 2'1 RULES OF COURT, Rule 14, Sec. 17. The Decision dated January 5, 2012 and Resolution dated June 27,
25 Rollo, p. 35. 26 G.R. No. L-29067, May 31, 1977, 77 SCRA 209 2012 of the Court of Appeals in CA-G.R. SP No. 113475 are
AFFIRMED insofar as there was no valid service of summons. The
Decision 5 G.R. No. 202505 age and discretion then residing therein, Decision dated September 14, 2009 of the Regional Trial Court,
or (b) by leaving the copies at defendant's office or regular place of Branch 212, Mandaluyong City in Civil Case No. MCOS-3775 is
business with some competent person in charge thereof The terms declared VOID. SO ORDERED.
"dwelling house" or "residence" are generally held to refer to the
time of service, hence it is not sufficient "to leave the copy at
defendant's former dwelling house, residence, or place of abode, as
the case may be, after his removal therefrom." They refer to the place
where the person named in the summons is living at the time when
the service is made, even though he may be temporarily out of the
country at the time. Similarly, the terms "office" or "regular place of
business" refer to the office or place of business of defendant at the
time of service. Note that the rule designates the persons to whom
copies of the process may be left. The rule presupposes that such a
relation of confidence exists between the person with whom the copy
is left and the defendant and, therefore, assumes that such person will
deliver the process to defendant or in some way give him notice
thereof.27 (Italics in the original, citations omitted.) Based on the
sheriffs report, it is clear that Ocampo no longer resides in San
Bernardo Village, Darasa, Tanauan, Batangas. The report
categorically stated that "defendant Helen M. Ocampo and her family
were already in Italy,"28 without, however, identifying any specific
address. Even BDO Remittance itself admitted in its petition for
recognition that Ocampo' s "whereabouts in Italy are no longer
certain."29 This, we note, is the reason why in alleging the two
addresses of Ocampo, one in Italy and one in the Philippines, BDO
Remittance used the phrase "last known [address ]"30 instead of the
usual "resident of." Not being a resident of the address where the
summons was served, the substituted service of summons is
ineffective. Accordingly, the RTC did not acquire jurisdiction over
the person of Ocampo. BDO Remittance's reliance on Palma v.
Galvez31 is misplaced for the simple reason that the case involved
service of summons to a person who is temporarily out of the country.
In this case, however, Ocampo's sojourn in Italy cannot be classified
as temporary considering that she already resides there, albeit her
precise address was not known. Modes of service of summons must
be strictly followed in order that the court may acquire jurisdiction
over the person of the defendant. The purpose of this is to afford the
defendant an opportunity to be heard on the claim against him. 32
BDO Remittance is not totally without recourse, as the rules allow
summons by publication and extraterritorial service. 33 Unlike
substituted service, however, these are extraordinary modes which
require leave of court. 27 Id. at215-216. 28 Rollo, p. 30. 29 Id. at 118.
30 /d.atl15. 31 G.R. No. 165273, March IO, 2010, 615 SCRA 86. 32
Pacana-Gonzales v. Court qf y.No. 150908, January 21, 2005, 449
SCRA 196, 204. 33 RULES OF COURT, Rule 14, Sec. 15r

Decision 6 G.R. No. 202505 The service of summons is a vital and

indispensable ingredient of a defendant's constitutional right to due
process. As a rule, if a defendant has not been validly summoned, the
court acquires no jurisdiction over his person, and a judgment
rendered against him is void.34 Since the RTC never acquired
jurisdiction over the person of Ocampo, the judgment rendered by
the court could not be considered binding upon her. Consequently, it
is no longer necessary to delve into the other issues raised in the

G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.
LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER
CEFERINA J. DIOSANA AND MARCELO G.
SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari1 to annul the
following orders of the National Labor Relations Commission
(hereinafter referred to as "NLRC") for having been issued without
or with excess jurisdiction and with grave abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting aside its earlier
resolution of August 28, 1992.4 The questioned order declared that
the NLRC, not the Philippine Overseas Employment Administration
(hereinafter referred to as "POEA"), had jurisdiction over private
respondent's complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to jointly
and severally pay private respondent twelve thousand and six
hundred dollars (US$ 12,600.00) representing salaries for the
unexpired portion of his contract; three thousand six hundred dollars
(US$3,600.00) as extra four months salary for the two (2) year period
of his contract, three thousand six hundred dollars (US$3,600.00) as
"14th month pay" or a total of nineteen thousand and eight hundred
dollars (US$19,800.00) or its peso equivalent and attorney's fees
amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995.6 Denying the motion for
reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as "Santos") was an overseas worker employed as a
printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace
Hotel, Beijing, People's Republic of China and later terminated due
to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to
as "MHC") and the Manila Hotel International Company, Limited
(hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a
government-owned and controlled corporation duly organized and
existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws
of Hong Kong.7 MHC is an "incorporator" of MHICL, owning 50%
of its capital stock.8
By virtue of a "management agreement"9 with
the Palace Hotel
(Wang Fu Company Limited), MHICL10 trained the personnel and
staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Santos received a letter dated May 2,
1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel,
Beijing, China. Mr. Schmidt informed respondent Santos that he was
recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer,
but with a higher monthly salary and increased benefits. The position
was slated to open on October 1, 1988.11
70
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and
signified his acceptance of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk
mailed a ready to sign employment contract to respondent Santos. Mr.
Henk advised respondent Santos that if the contract was acceptable,
to return the same to Mr. Henk in Manila, together with his passport
and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon
Printing Press, effective June 30, 1988, under the pretext that he was
needed at home to help with the family's piggery and poultry
business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and
acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4)
signed copies of the employment contract (dated June 4, 1988) and
notified them that he was going to arrive in Manila during the first
week of July 1988.
The employment contract of June 4, 1988 stated that his employment
would commence September 1, 1988 for a period of two years. 12 It
provided for a monthly salary of nine hundred dollars (US$900.00)
net of taxes, payable fourteen (14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned from the
Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He
started to work at the Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment
agreement" with the Palace Hotel, effective November 5, 1988. In
the contract, Mr. Shmidt represented the Palace Hotel. The Vice
President (Operations and Development) of petitioner MHICL
Miguel D. Cergueda signed the employment agreement under the
word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July
17, 1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna
suggested in a handwritten note that respondent Santos be given one
(1) month notice of his release from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by
letter signed by Mr. Shmidt that his employment at the Palace Hotel
print shop would be terminated due to business reverses brought
about by the political upheaval in China.15 We quote the letter:16
"After the unfortunate happenings in China and especially Beijing
(referring to Tiannamen Square incidents), our business has been
severely affected. To reduce expenses, we will not open/operate
printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest
assured this does in no way reflect your past performance which we
found up to our expectations."
"Should a turnaround in the business happen, we will contact you
directly and give you priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the employment
of respondent Santos and paid all benefits due him, including his
plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the
Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty.
Ednave wrote Mr. Shmidt, demanding full compensation pursuant to
the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause and Mr.
Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still not
operational and with a low business outlook, retrenchment in various
departments of the hotel is going on which is a normal management
practice to control costs.
"When going through the latest performance ratings, please also be
advised that his performance was below average and a Chinese
National who is doing his job now shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly
showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure."
On February 20, 1990, respondent Santos filed a complaint for illegal
dismissal with the Arbitration Branch, National Capital Region,
National Labor Relations Commission (NLRC). He prayed for an
award of nineteen thousand nine hundred and twenty three dollars
(US$19,923.00) as actual damages, forty thousand pesos (P40,000.00)
as exemplary damages and attorney's fees equivalent to 20% of the
damages prayed for. The complaint named MHC, MHICL, the
Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and
neither participated in the proceedings before the Labor Arbiter. 18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the
case against petitioners, thus:19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and
severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as
unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that the
POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: 20
"WHEREFORE, let the appealed Decision be, as it is hereby,
declared null and void for want of jurisdiction. Complainant is
hereby enjoined to file his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that the
case was not cognizable by the POEA as he was not an "overseas
contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself.
The NLRC directed Labor Arbiter Emerson Tumanon to hear the
71
case on the question of whether private respondent was retrenched or
dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the
proceedings based on the testimonial and documentary evidence
presented to and heard by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial
Arbiter of the National Capital Region, Arbitration Branch, and the
case was transferred to Labor Arbiter Jose G. de Vera.24
On November 25, 1994, Labor Arbiter de Vera submitted his
report.25 He found that respondent Santos was illegally dismissed
from employment and recommended that he be paid actual damages
equivalent to his salaries for the unexpired portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private
respondent, to wit:27
"WHEREFORE, finding that the report and recommendations of
Arbiter de Vera are supported by substantial evidence, judgment is
hereby rendered, directing the respondents to jointly and severally
pay complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the unexpired portion of the parties'
contract; (2) US$3,600.00 as extra four (4) months salary for the two
(2) years period (sic) of the parties' contract; (3) US$3,600.00 as
"14th month pay" for the aforesaid two (2) years contract stipulated
by the parties or a total of US$19,800.00 or its peso equivalent, plus
(4) attorney's fees of 10% of complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration
arguing that Labor Arbiter de Vera's recommendation had no basis in
law and in fact.28
On March 30, 1995, the NLRC denied the motion for
reconsideration.29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order and/or writ
of preliminary injunction and a motion for the annulment of the entry
of judgment of the NLRC dated July 31, 1995. 31
On November 20, 1995, the Court denied petitioner's urgent motion.
The Court required respondents to file their respective comments,
without giving due course to the petition.32
On March 8, 1996, the Solicitor General filed a manifestation stating
that after going over the petition and its annexes, they can not defend
and sustain the position taken by the NLRC in its assailed decision
and orders. The Solicitor General prayed that he be excused from
filing a comment on behalf of the NLRC33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the
Solicitor General and required the NLRC to file its own comment to
the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign
jurisdictions and the case involves purely foreign elements. The only

link that the Philippines has with the case is that respondent Santos is
a Filipino citizen. The Palace Hotel and MHICL are foreign
corporations. Not all cases involving our citizens can be tried here.
The employment contract. — Respondent Santos was hired directly
by the Palace Hotel, a foreign employer, through correspondence
sent to the Sultanate of Oman, where respondent Santos was then
employed. He was hired without the intervention of the POEA or any
authorized recruitment agency of the government.36
Under the rule of forum non conveniens, a Philippine court or agency
may assume jurisdiction over the case if it chooses to do so provided:
(1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to
make an intelligent decision as to the law and the facts; and (3) that
the Philippine court has or is likely to have power to enforce its
decision.37 The conditions are unavailing in the case at bar.
Not Convenient. — We fail to see how the NLRC is a convenient
forum given that all the incidents of the case — from the time of
recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the
proper defendants, the Palace Hotel and MHICL are not nationals of
the Philippines. Neither .are they "doing business in the Philippines."
Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are
non-residents of the Philippines.
No power to determine applicable law. — Neither can an intelligent
decision be made as to the law governing the employment contract as
such was perfected in foreign soil. This calls to fore the application
of the principle of lex loci contractus (the law of the place where the
contract was made).38
The employment contract was not perfected in the Philippines.
Respondent Santos signified his acceptance by writing a letter while
he was in the Republic of Oman. This letter was sent to the Palace
Hotel in the People's Republic of China.
No power to determine the facts. — Neither can the NLRC determine
the facts surrounding the alleged illegal dismissal as all acts
complained of took place in Beijing, People's Republic of China. The
NLRC was not in a position to determine whether the Tiannamen
Square incident truly adversely affected operations of the Palace
Hotel as to justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision. — Even
assuming that a proper decision could be reached by the NLRC, such
would not have any binding effect against the employer, the Palace
Hotel. The Palace Hotel is a corporation incorporated under the laws
of China and was not even served with summons. Jurisdiction over
its person was not acquired.
This is not to say that Philippine courts and agencies have no power
to solve controversies involving foreign employers. Neither are we
saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an "overseas contract
worker", a Philippine forum, specifically the POEA, not the NLRC,
would protect him.39 He is not an "overseas contract worker" a fact
which he admits with conviction.40
Even assuming that the NLRC was the proper forum, even on the
merits, the NLRC's decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction
over the case, and (2) that MHICL was liable for Santos'
retrenchment, still MHC, as a separate and distinct juridical entity
cannot be held liable.
72
True, MHC is an incorporator of MHICL and owns fifty percent
(50%) of its capital stock. However, this is not enough to pierce the
veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is
resorted to when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend a crime. 41 It is
done only when a corporation is a mere alter ego or business conduit
of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere
ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself a
sufficient reason for disregarding the fiction of separate corporate
personalities."
The tests in determining whether the corporate veil may be pierced
are: First, the defendant must have control or complete domination
of the other corporation's finances, policy and business practices with
regard to the transaction attacked. There must be proof that the other
corporation had no separate mind, will or existence with respect the
act complained of. Second, control must be used by the defendant to
commit fraud or wrong. Third, the aforesaid control or breach of duty
must be the proximate cause of the injury or loss complained of. The
absence of any of the elements prevents the piercing of the corporate
veil.43
It is basic that a corporation has a personality separate and distinct
from those composing it as well as from that of any other legal entity
to which it may be related.44 Clear and convincing evidence is needed
to pierce the veil of corporate fiction.45 In this case, we find no
evidence to show that MHICL and MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that
MHICL "signed" his employment contract with the Palace Hotel.
This fact fails to persuade us.
First, we note that the Vice President (Operations and Development)
of MHICL, Miguel D. Cergueda signed the employment contract as a
mere witness. He merely signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or
approval, as a party would.46 In Sichangco v. Board of
Commissioners of Immigration,47 the Court recognized that the term
"noted" means that the person so noting has merely taken cognizance
of the existence of an act or declaration, without exercising a
judicious deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document.
The "witnessing part" of the document is that which, "in a deed or
other formal instrument is that part which comes after the recitals, or
where there are no recitals, after the parties (emphasis ours)."48 As
opposed to a party to a contract, a witness is simply one who, "being
present, personally sees or perceives a thing; a beholder, a spectator,
or eyewitness."49 One who "notes" something just makes a "brief
written statement"50 a memorandum or observation.
Second, and more importantly, there was no existing
employer-employee relationship between Santos and MHICL. In
determining the existence of an employer-employee relationship, the
following elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
 73

MHICL did not have and did not exercise any of the aforementioned
powers. It did not select respondent Santos as an employee for the
Palace Hotel. He was referred to the Palace Hotel by his friend,
Nestor Buenio. MHICL did not engage respondent Santos to work.
The terms of employment were negotiated and finalized through
correspondence between respondent Santos, Mr. Schmidt and Mr.
Henk, who were officers and representatives of the Palace Hotel and
not MHICL. Neither did respondent Santos adduce any proof that
MHICL had the power to control his conduct. Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that terminated
respondent Santos' services.
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari
and ANNULS the orders and resolutions of the National Labor
Relations Commission dated May 31, 1993, December 15, 1994 and
March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR
Case No. 00-02-01058-90).
No costs.
SO ORDERED.

Neither is there evidence to suggest that MHICL was a "labor-only

contractor."52 There is no proof that MHICL "supplied" respondent
Santos or even referred him for employment to the Palace Hotel.

Likewise, there is no evidence to show that the Palace Hotel and

MHICL are one and the same entity. The fact that the Palace Hotel is
a member of the "Manila Hotel Group" is not enough to pierce the
corporate veil between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and

considering further that no employer-employee relationship existed
between MHICL, MHC and respondent Santos, Labor Arbiter
Ceferina J. Diosana clearly had no jurisdiction over respondent's
claim in NLRC NCR Case No. 00-02-01058-90.

Labor Arbiters have exclusive and original jurisdiction only over the
following:53

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that

workers may file involving wages, rates of pay, hours of work and
other terms and conditions of employment;

"4. Claims for actual, moral, exemplary and other forms of damages
arising from employer-employee relations;

"5. Cases arising from any violation of Article 264 of this Code,
including questions involving legality of strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relations, including those of persons in domestic
or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement."

In all these cases, an employer-employee relationship is an

indispensable jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of
the Labor Code is limited to disputes arising from an
employer-employee relationship which can be resolved by reference
to the Labor Code, or other labor statutes, or their collective
bargaining agreements.54

"To determine which body has jurisdiction over the present

controversy, we rely on the sound judicial principle that jurisdiction
over the subject matter is conferred by law and is determined by the
allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein."55

The lack of jurisdiction of the Labor Arbiter was obvious from the
allegations of the complaint. His failure to dismiss the case amounts
to grave abuse of discretion.56

G.R. No. 141536. February 26, 2001
GIL MIGUEL T. PUYAT, petitioner,
vs.
RON ZABARTE, respondent.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine
issue as to any material fact, other than the amount of damages. If
this verity is evident from the pleadings and the supporting affidavits,
depositions and admissions on file with the court, the moving party is
entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court, challenging the August 31, 1999 Decision 1 of the
Court of Appeals (CA), which affirmed the Regional Trial Court
(RTC) of Pasig City, Branch 67 in Civil Case No. 64107; and the
January 20, 2000 CA Resolution 2 which denied reconsideration.
The assailed CA Decision disposed as follows:
“WHEREFORE, finding no error in the judgment appealed from, the
same is AFFIRMED." 3
The Facts
The facts of this case, as narrated by the Court of Appeals, are as
follows: 4
“It appears that on 24 January 1994, [Respondent] Ron Zabarte
commenced [an action] to enforce the money judgment rendered by
the Superior Court for the State of California, County of Contra
Costa, U.S.A. On 18 March 1994, [petitioner] filed his Answer with
the following special and affirmative defenses:
xxx xxx xxx
‘8) The Superior Court for the State of California, County of Contra
Costa[,] did not properly acquire jurisdiction over the subject matter
of and over the persons involved in [C]ase #C21-00265.
‘9) The Judgment on Stipulations for Entry in Judgment in Case
#C21-00265 dated December 12, 1991 was obtained without the
assistance of counsel for [petitioner] and without sufficient notice to
him and therefore, was rendered in clear violation of [petitioner’s]
constitutional rights to substantial and procedural due process.
‘10) The Judgment on Stipulation for Entry in Judgment in Case
#C21-00265 dated December 12, 1991 was procured by means of
fraud or collusion or undue influence and/or based on a clear mistake
of fact and law.
‘11) The Judgment on Stipulation for Entry in Judgment in Case
#C21-00265 dated December 12, 1991 is contrary to the laws, public
policy and canons of morality obtaining in the Philippines and the
enforcement of such judgment in the Philippines would result in the
unjust enrichment of [respondent] at the expense of [petitioner] in
this case.
‘12) The Judgment on Stipulation for Entry in Judgment in Case
#C21-00265 dated December 12, 1991 is null and void and
unenforceable in the Philippines.
‘13) In the transaction, which is the subject matter in Case
#C21-00265, [petitioner] is not in any way liable, in fact and in law,
to [respondent] in this case, as contained in [petitioner’s] ‘Answer to
74
Complaint’ in Case #C21-00265 dated April 1, 1991, Annex ‘B’ of
[respondent’s] ‘Complaint’ dated December 6, 1993.
’14) [Respondent] is guilty of misrepresentation or falsification in the
filing of his ‘Complaint’ in this case dated December 6, 1993. Worse,
[respondent] has no capacity to sue in the Philippines.
’15) Venue has been improperly laid in this case.’
(Record, pp. 42-44)
“On 1 August 1994, [respondent] filed a [M]otion for [S]ummary
[J]udgment under Rule 34 of the Rules of Court alleging that the
[A]nswer filed by [petitioner] failed to tender any genuine issue as to
the material facts. In his [O]pposition to [respondent’s] motion,
[petitioner] demurred as follows:
‘2) [Petitioner] begs to disagree[;] in support hereof, [he] wishes to
mention that in his ‘Answer with Special and Affirmative Defenses’
dated March 16, 1994 [petitioner] has interposed that the ‘Judgment
on Stipulations for Entry in Judgment’ is null and void, fraudulent,
illegal and unenforceable, the same having been obtained by means
of fraud, collusion, undue influence and/or clear mistake of fact and
law. In addition, [he] has maintained that said ‘Judgment on
Stipulations for Entry in Judgment’ was obtained without the
assistance of counsel for [petitioner] and without sufficient notice to
him and therefore, was rendered in violation of his constitutional
rights to substantial and procedural due process.’
“The [M]otion for [S]ummary [J]udgment was set for hearing on 12
August 1994 during which [respondent] marked and submitted in
evidence the following:
Exhibit ‘A’ - x x x Judgment on Stipulation For Entry In Judgment of
the Supreme Court of the State of California[,] County of Contra
Costa[,] signed by Hon. Ellen James, Judge of the Superior Court.
Exhibit ‘B’ - x x x Certificate of Authentication of the [O]rder signed
by the Hon. Ellen James, issued by the Consulate General of the
Republic of the Philippines.
Exhibit ‘C’ - [R]eturn of the [W]rit of [E]xecution (writ unsatisfied)
issued by the sheriff/marshall, County of Santa Clara, State of
California.
Exhibit ‘D’ - [W]rit of [E]xecution
Exhibit 'E' [P]roof of [S]ervice of copies of [W]rit of [E]xecution,
[N]otice of [L]evy, [M]emorandum of [G]arnishee, [E]xemptions
from [E]nforcement of [J]udgment.
Exhibit ‘F’ - Certification issued by the Secretary of State, State of
California that Stephen Weir is the duly elected, qualified and acting
[c]ounty [c]lerk of the County of Contra Costa of the State of
California.
Exhibit ‘G’ - Certificate of [A]uthentication of the [W]rit of
[E]xecution.
“On 6 April 1995, the court a quo issued an [O]rder granting
[respondent’s] [M]otion for [S]ummary [J]udgment [and] likewise
granting [petitioner] ten (10) days to submit opposing affidavits, after
which the case would be deemed submitted for resolution (Record,
pp. 152-153). [Petitioner] filed a [M]otion for [R]econsideration of
the aforesaid [O]rder and [respondent] filed [C]omment. On 30 June
1995, [petitioner] filed a [M]otion to [D]ismiss on the ground of lack
of jurisdiction over the subject matter of the case and
forum-non-conveniens (Record, pp. 166-170). In his [O]pposition to
the [M]otion (Record, pp. 181-182) [respondent] contended that
[petitioner could] no longer question the jurisdiction of the lower
court on the ground that [the latter’s] Answer had failed to raise the

issue of jurisdiction. [Petitioner] countered by asserting in his Reply
that jurisdiction [could] not be fixed by agreement of the parties. The
lower court dismissed [his] [M]otion for [R]econsideration and
[M]otion [to] [D]ismiss (Record, pp. 196-198), x x x.”
The RTC 5 eventually rendered its February 21, 1997
Decision, 6 which disposed as follows:
“WHEREFORE, judgment is hereby rendered, ordering [petitioner]
to pay [respondent] the following amounts:
“1. The amount of U.S. dollars $241,991.33, with the interest of legal
rate from October 18, 1991, or its peso equivalent, pursuant to the
[J]udgment of [S]tipulation for [E]ntry in [J]udgment dated
December 19, 1991;
“2. The amount of P30,000.00 as attorney’s fees;
“3. To pay the costs of suit.
“The claim for moral damages, not having been substantiated, it is
hereby denied.” 7
Ruling of the Court of Appeals
Affirming the trial court, the Court of Appeals held that petitioner
was estopped from assailing the judgment that had become final and
had, in fact, been partially executed. The CA also ruled that summary
judgment was proper, because petitioner had failed to tender any
genuine issue of fact and was merely maneuvering to delay the full
effects of the judgment.
Citing Ingenohl v. Olsen, 8 the CA also rejected petitioner’s argument
that the RTC should have dismissed the action for the enforcement of
a foreign judgment, on the ground of forum non conveniens. It
reasoned out that the recognition of the foreign judgment was based
on comity, reciprocity and res judicata.
Hence, this Petition. 9
Issue
In his Memorandum, petitioner submits this lone but all-embracing
issue:
“Whether or not the Court of Appeals acted in a manner x x x
contrary to law when it affirmed the Order of the trial court granting
respondent’s Motion for Summary Judgment and rendering judgment
against the petitioner.” 10
In his discussion, petitioner contends that the CA erred in ruling in
this wise:
1. That his Answer failed to tender a genuine issue of fact regarding
the following:
(a) the jurisdiction of a foreign court over the subject matter
(b) the validity of the foreign judgment
(c) the judgment’s conformity to Philippine laws, public policy,
canons of morality, and norms against unjust enrichment
2. That the principle of forum non conveniens was inapplicable to the
instant case.
This Court’s Ruling
The Petition has no merit.
First Question: Summary Judgment
75
Petitioner vehemently insists that summary judgment is inappropriate
to resolve the case at bar, arguing that his Answer allegedly raised
genuine and material factual matters which he should have been
allowed to prove during trial.
On the other hand, respondent argues that the alleged “genuine issues
of fact” raised by petitioner are mere conclusions of law, or
“propositions arrived at not by any process of natural reasoning from
a fact or a combination of facts stated but by the application of the
artificial rules of law to the facts pleaded.” 11
The RTC granted respondent’s Motion for Summary Judgment
because petitioner, in his Answer, admitted the existence of the
Judgment on Stipulation for Entry in Judgment. Besides, he had
already paid $5,000 to respondent, as provided in the foreign
judgment sought to be enforced. 12 Hence, the trial court ruled that,
there being no genuine issue as to any material fact, the case should
properly be resolved through summary judgment. The CA affirmed
this ruling.
We concur with the lower courts. Summary judgment is a procedural
device for the prompt disposition of actions in which the pleadings
raise only a legal issue, and not a genuine issue as to any material
fact. By genuine issue is meant a question of fact that calls for the
presentation of evidence. It should be distinguished from an issue
that is sham, contrived, set in bad faith and patently unsubstantial. 13
Summary judgment is resorted to in order to avoid long drawn out
litigations and useless delays. When affidavits, depositions and
admissions on file show that there are no genuine issues of fact to be
tried, the Rules allow a party to pierce the allegations in the
pleadings and to obtain immediate relief by way of summary
judgment. In short, since the facts are not in dispute, the court is
allowed to decide the case summarily by applying the law to the
material facts.
Petitioner contends that by allowing summary judgment, the two
courts a quo prevented him from presenting evidence to substantiate
his claims. We do not agree. Summary judgment is based on facts
directly proven by affidavits, depositions or admissions. 14 In this
case, the CA and the RTC both merely ruled that trial was not
necessary to resolve the case. Additionally and correctly, the RTC
specifically ordered petitioner to submit opposing affidavits to
support his contentions that (1) the Judgment on Stipulation for Entry
in Judgment was procured on the basis of fraud, collusion, undue
influence, or a clear mistake of law or fact; and (2) that it was
contrary to public policy or the canons of morality. 15
Again, in its Order 16 dated November 29, 1995, the trial court
clarified that the opposing affidavits were “for [petitioner] to spell
out the facts or circumstances [that] would constitute lack of
jurisdiction over the subject matter of and over the persons involved
in Case No. C21-00265,” and that would render the judgment therein
null and void. In this light, petitioner’s contention that he was not
allowed to present evidence to substantiate his claims is clearly
untenable.
For summary judgment to be valid, Rule 34, Section 3 of the Rules
of Court, requires (a) that there must be no genuine issue as to any
material fact, except for the amount of damages; and (b) that the
party presenting the motion for summary judgment must be entitled
to a judgment as a matter of law. 17 As mentioned earlier, petitioner
admitted that a foreign judgment had been rendered against him and
in favor of respondent, and that he had paid $5,000 to the latter in
partial compliance therewith. Hence, respondent, as the party
presenting the Motion for Summary Judgment, was shown to be
entitled to the judgment.

The CA made short shrift of the first requirement. To show that
petitioner had raised no genuine issue, it relied instead on the finality
of the foreign judgment which was, in fact, partially executed. Hence,
we shall show in the following discussion how the defenses
presented by petitioner failed to tender any genuine issue of fact, and
why a full-blown trial was not necessary for the resolution of the
issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which
involved partnership interest, was vested in the Securities and
Exchange Commission, not in the Superior Court of California,
County of Contra Costa.
We disagree. In the absence of proof of California law on the
jurisdiction of courts, we presume that such law, if any, is similar to
Philippine law. We base this conclusion on the presumption of
identity or similarity, also known as processual presumption. 18 The
Complaint, 19 which respondent filed with the trial court, was for the
enforcement of a foreign judgment. He alleged therein that the action
of the foreign court was for the collection of a sum of money, breach
of promissory notes, and damages. 20
In our jurisdiction, such a case falls under the jurisdiction of civil
courts, not of the Securities and Exchange Commission (SEC). The
jurisdiction of the latter is exclusively over matters enumerated in
Section 5, PD 902-A, 21prior to its latest amendment. If the foreign
court did not really have jurisdiction over the case, as petitioner
claims, it would have been very easy for him to show this. Since
jurisdiction is determined by the allegations in a complaint, he only
had to submit a copy of the complaint filed with the foreign court.
Clearly, this issue did not warrant trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form
of a Compromise Agreement, cannot be executed without the parties
being assisted by their chosen lawyers. The reason for this, he points
out, is to eliminate collusion, undue influence and/or improper
exertion of ascendancy by one party over the other. He alleges that
he discharged his counsel during the proceedings, because he felt that
the latter was not properly attending to the case. The judge, however,
did not allow him to secure the services of another counsel. Insisting
that petitioner settle the case with respondent, the judge practically
imposed the settlement agreement on him. In his Opposing Affidavit,
petitioner states:
“It is true that I was initially represented by a counsel in the
proceedings in #C21-00625. I discharged him because I then felt that
he was not properly attending to my case or was not competent
enough to represent my interest. I asked the Judge for time to secure
another counsel but I was practically discouraged from engaging one
as the Judge was insistent that I settle the case at once with the
[respondent]. Being a foreigner and not a lawyer at that I did not
know what to do. I felt helpless and the Judge and [respondent’s]
lawyer were the ones telling me what to do. Under ordinary
circumstances, their directives should have been taken with a grain of
salt especially so [since respondent’s] counsel, who was telling me
what to do, had an interest adverse to mine. But [because] time
constraints and undue influence exerted by the Judge and
[respondent’s] counsel on me disturbed and seriously affected my
freedom to act according to my best judgment and belief. In point of
fact, the terms of the settlement were practically imposed on me by
the Judge seconded all the time by [respondent’s] counsel. I was then
helpless as I had no counsel to assist me and the collusion between
the Judge and [respondent’s] counsel was becoming more evident by
the way I was treated in the Superior Court of [t]he State of
California. I signed the ‘Judgment on Stipulation for Entry in
76
Judgment’ without any lawyer assisting me at the time and without
being fully aware of its terms and stipulations.” 22
The manifestation of petitioner that the judge and the counsel for the
opposing party had pressured him would gain credibility only if he
had not been given sufficient time to engage the services of a new
lawyer. Respondent’s Affidavit 23 dated May 23, 1994, clarified,
however, that petitioner had sufficient time, but he failed to retain a
counsel. Having dismissed his lawyer as early as June 19, 1991,
petitioner directly handled his own defense and negotiated a
settlement with respondent and his counsel in December 1991.
Respondent also stated that petitioner, ignoring the judge’s reminder
of the importance of having a lawyer, argued that “he would be the
one to settle the case and pay” anyway. Eventually, the Compromise
Agreement was presented in court and signed before Judge Ellen
James on January 3, 1992. Hence, petitioner’s rights to counsel and
to due process were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the norm
against unjust enrichment because the judge made him shoulder all
the liabilities in the case, even if there were two other defendants,
G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign
judgment, even if there are other defendants who are not being held
liable together with him. First, the foreign judgment itself does not
mention these other defendants, their participation or their liability to
respondent. Second, petitioner’s undated Opposing Affidavit states:
“[A]lthough myself and these entities were initially represented by
Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan &
Severson, x x x I discharged x x x said lawyer. Subsequently, I
assumed the representation for myself and these firms and this was
allowed by the Superior Court of the State of California without any
authorization from G.G.P. & Sons, Inc. and the Genesis
Group.” 24 Clearly, it was petitioner who chose to represent the other
defendants; hence, he cannot now be allowed to impugn a decision
based on this ground.
In any event, contrary to petitioner’s contention, unjust enrichment or
solutio indebiti does not apply to this case. This doctrine
contemplates payment when there is no duty to pay, and the person
who receives the payment has no right to receive it. 25 In this case,
petitioner merely argues that the other two defendants whom he
represented were liable together with him. This is not a case of unjust
enrichment.
We do not see, either, how the foreign judgment could be contrary to
law, morals, public policy or the canons of morality obtaining in the
country. Petitioner owed money, and the judgment required him to
pay it. That is the long and the short of this case.
In addition, the maneuverings of petitioner before the trial court
reinforce our belief that his claims are unfounded. Instead of filing
opposing affidavits to support his affirmative defenses, he filed a
Motion for Reconsideration of the Order allowing summary
judgment, as well as a Motion to Dismiss the action on the ground
of forum non conveniens. His opposing affidavits were filed only
after the Order of November 29, 1995 had denied both
Motions.26 Such actuation was considered by the trial court as a
dilatory ploy which justified the resolution of the action by summary
judgment. According to the CA, petitioner’s allegations sought to
delay the full effects of the judgment; hence, summary judgment was
proper. On this point, we concur with both courts.
Second Question: Forum Non Conveniens
 77

Petitioner argues that the RTC should have refused to entertain the WHEREFORE, the Petition is hereby DENIED and the assailed
Complaint for enforcement of the foreign judgment on the principle Decision and Resolution AFFIRMED. Double costs against
of forum non conveniens. He claims that the trial court had no petitioner.
jurisdiction, because the case involved partnership interest, and there
was difficulty in ascertaining the applicable law in California. All the SO ORDERED.
aspects of the transaction took place in a foreign country, and
respondent is not even Filipino.

We disagree. Under the principle of forum non conveniens, even if

the exercise of jurisdiction is authorized by law, courts may
nonetheless refuse to entertain a case for any of the following
practical reasons:

“1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence
there;

2) The belief that the non-resident plaintiff sought the forum[,] a

practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;

3) The unwillingness to extend local judicial facilities to

non-residents or aliens when the docket may already be
overcrowded;

4) The inadequacy of the local judicial machinery for effectuating the

right sought to be maintained; and

The difficulty of ascertaining foreign law.” 27

None of the aforementioned reasons barred the RTC from exercising

its jurisdiction. In the present action, there was no more need for
material witnesses, no forum shopping or harassment of petitioner,
no inadequacy in the local machinery to enforce the foreign judgment,
and no question raised as to the application of any foreign law.

Authorities agree that the issue of whether a suit should be

entertained or dismissed on the basis of the above-mentioned
principle depends largely upon the facts of each case and on the
sound discretion of the trial court. 28Since the present action lodged
in the RTC was for the enforcement of a foreign judgment, there was
no need to ascertain the rights and the obligations of the parties based
on foreign laws or contracts. The parties needed only to perform their
obligations under the Compromise Agreement they had entered
into. 1âwphi1.nêt

Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a

judgment in an action in personam rendered by a foreign tribunal
clothed with jurisdiction is presumptive evidence of a right as
between the parties and their successors-in-interest by a subsequent
title. 29

Also, under Section 5(n) of Rule 131, a court -- whether in the

Philippines or elsewhere -- enjoys the presumption that it is acting in
the lawful exercise of its jurisdiction, and that it is regularly
performing its official duty. 30 Its judgment may, however, be
assailed if there is evidence of want of jurisdiction, want of notice to
the party, collusion, fraud or clear mistake of law or fact. But
precisely, this possibility signals the need for a local trial court to
exercise jurisdiction. Clearly, the application of forum non coveniens
is not called for.

The grounds relied upon by petitioner are contradictory. On the one

hand, he insists that the RTC take jurisdiction over the enforcement
case in order to invalidate the foreign judgment; yet, he avers that the
trial court should not exercise jurisdiction over the same case on the
basis of forum non conveniens. Not only do these defenses weaken
each other, but they bolster the finding of the lower courts that he
was merely maneuvering to avoid or delay payment of his obligation.

G.R. No. 156848 October 11, 2007
PIONEER INTERNATIONAL, LTD., petitioner,
vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding
Judge of Regional Trial Court, Branch 147, Makati City, and
ANTONIO D. TODARO, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 of the Decision2 dated 27
September 2001 and of the Resolution3 dated 14 January 2003 of the
Court of Appeals (appellate court) in CA-G.R. SP No. 54062. The
Decision affirmed the Orders4 dated 4 January 19995 and 3 June
19996 of Branch 147 of the Regional Trial Court of Makati City (trial
court) in Civil Case No. 98-124. The trial court denied the motion to
dismiss filed by Pioneer International, Ltd. (PIL)7in its special
appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint
for sum of money and damages with preliminary attachment against
PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer Philippines
Holdings, Inc. (PPHI), John G. McDonald (McDonald), and Philip J.
Klepzig (Klepzig). PIL and its co-defendants were served copies of
the summons and of the complaint at PPHI and PCPI’s office in
Alabang, Muntinlupa, through Cecille L. De Leon (De Leon), who
was Klepzig’s Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under
Australian laws, while PCPI and PPHI are corporations duly
organized under Philippine laws. PIL is engaged in the ready-mix
and concrete aggregates business and has established a presence
worldwide. PIL established PPHI as the holding company of the
stocks of its operating company in the Philippines, PCPI. McDonald
is the Chief Executive Officer of PIL’s Hong Kong office while
Klepzig is the President and Managing Director of PPHI and PCPI.
For his part, Todaro further alleged that he was the managing director
of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to his
resignation in February 1996.
Before Todaro filed his complaint, there were several meetings and
exchanges of letters between Todaro and the officers of Pioneer
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK, PPHI,
and PIL. According to Todaro, PIL contacted him in May 1996 and
asked if he could join it in establishing a pre-mixed concrete plant
and in overseeing its operations in the Philippines. Todaro confirmed
his availability and expressed interest in joining PIL. Todaro met
with several of PIL’s representatives and even gave PIL the names of
three of his subordinates in Betonval whom he would like to join him
in PIL.
Todaro attached nine letters, marked as Annexes "A" to "I," to his
complaint. Annex "A"8 shows that on 15 July 1996, Todaro, under
the letterhead of Ital Tech Distributors, Inc., sent a letter to Max
Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited.
Todaro wrote that "[m]y aim is to run again a ready-mix concrete
company in the Philippines and not to be a part-time consultant.
Otherwise, I could have charged your company with a much higher
fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the
letterhead of Pioneer Concrete (Hong Kong) Limited, responded by
fax to Todaro’s faxed letter to McDonald and proposed that Todaro
"join Pioneer on a retainer basis for 2 to 3 months on the
78
understanding that [Todaro] would become a permanent employee if
as we expect, our entry proceeds." The faxed letter to McDonald
referred to by Lindsay is not found in the rollo and was not attached
to Todaro’s complaint.
Annex "C"10 shows that on the same date as that of Annex "B,"
Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed
another letter to Lindsay of Pioneer Concrete (Hong Kong) Limited.
Todaro asked for a formal letter addressed to him about the proposed
retainer. Todaro requested that the letter contain a statement on his
remuneration package and on his permanent employment "with
PIONEER once it has established itself on a permanent basis in the
Philippines."
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro
confirmed the following to McDonald:
1. That I am accepting the proposal of PIONEER INT’L. as a
consultant for three (3) months, starting October 1, 1996, with a
retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by
PIONEER INT’L., on a permanent basis, as its Managing Director or
CEO in the Philippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3. That Gino Martinel and the Sales Manager – Jun Ong, will be
hired as well, on a permanent basis, by PIONEER as soon as the
company is established. Salary, likewise, will be accepted by both
PIONEER and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald,
under the letterhead of Pioneer Concrete Group HK, to Todaro of Ital
Tech Distributors, Inc. The first three paragraphs of McDonald’s
letter read:
Further to our recent meeting in Hong Kong, I am now able to
confirm my offer to engage you as a consultant to Pioneer
International Ltd. Should Pioneer proceed with an investment in the
Philippines, then Pioneer would offer you a position to manage the
premixed concrete operations.
Pioneer will probably be in a position to make a decision on
proceeding with an investment by mid January ‘97.
The basis for your consultancy would be:
 Monthly fee USD 15,000 per month billed on monthly
basis and payable 15 days from billing date.
 Additional pre-approved expenses to be reimbursed.
 Driver and secretarial support-basis for reimbursement of
this to be agreed.
 Arrangement to commence from 1st November ‘96,
reflecting your contributions so far and to continue until
Pioneer makes a decision.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead of Ital
Tech Distributors, Inc., to McDonald of Pioneer Concrete Group HK
dated 19 November 1996. Todaro confirmed McDonald’s package
concerning the consultancy and reiterated his desire to be the
manager of Pioneer’s Philippine business venture.
Annex "G"14 shows Todaro’s faxed reply, under the letterhead of Ital
Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997.
Todaro informed McDonald that he was willing to extend assistance

to the Pioneer representative from Queensland. The tenor of the letter
revealed that Todaro had not yet occupied his expected position.
Annex "H"15 shows Klepzig’s letter, under the letterhead of PPHI, to
Todaro dated 18 September 1997. Klepzig’s message reads:
It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of
offer of permanent employment, leave me no alternative but to
withdraw these offers of employment with this company.
As you provided services under your previous agreement with our
Pioneer Hong Kong office during the month of August, I will see that
they pay you at the previous rates until the end of August. They have
authorized me on behalf of Pioneer International Ltd. to formally
advise you that the agreement will cease from August 31 stas per our
previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell
(Folwell), PIL’s Executive General Manager of Australia and Asia,
to Todaro. Folwell confirmed the contents of Klepzig’s 18 September
1997 letter. Folwell’s message reads:
Thank you for your letter to Dr. Schubert dated 29th September 1997
regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your
association with Pioneer over the period from mid 1996 through to
September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in
regard to your request and expectation to be given permanent
employment with Pioneer Philippines Holdings, Inc. I am
informed that negotiations to reach agreement on appropriate terms
and conditions have not been successful.
The employment conditions you specified in your letter to John
McDonald dated 11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association
with you any further. Mr. Klepzig was authorized to terminate this
association and the letter he sent to you dated 18th September has my
support.
Thank you for your involvement with Pioneer. I wish you all the best
for the future. (Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaro’s
complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a
separate motion to dismiss.17 PIL asserted that the trial court has no
jurisdiction over PIL because PIL is a foreign corporation not doing
business in the Philippines. PIL also questioned the service of
summons on it. Assuming arguendo that Klepzig is PIL’s agent in
the Philippines, it was not Klepzig but De Leon who received the
summons for PIL. PIL further stated that the National Labor
Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that
assuming that the trial court has jurisdiction over the subject matter
of the action, the complaint should be dismissed on the ground
of forum non-conveniens. Finally, PIL maintained that the complaint
does not state a cause of action because there was no perfected
contract, and no personal judgment could be rendered by the trial
court against PIL because PIL is a foreign corporation not doing
business in the Philippines and there was improper service of
summons on PIL.
79
Todaro filed a Consolidated Opposition dated 26 August 1998 to
refute PIL’s assertions. PIL filed, still by special appearance, a Reply
on 2 October 1998.
The Ruling of the Trial Court
On 4 January 1999, the trial court issued an order18 which ruled in
favor of Todaro. The trial court denied the motions to dismiss filed
by PIL, PCPI, PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a
complaint for lack of cause of action are tested on the strength of the
allegation of facts in the complaint. The trial court found that the
allegations in the complaint sufficiently establish a cause of action.
The trial court declared that Todaro’s cause of action is based on an
alleged breach of a contractual obligation and an alleged violation of
Articles 19 and 21 of the Civil Code. Therefore, the cause of action
does not lie within the jurisdiction of the NLRC but with the trial
court.
The trial court also asserted its jurisdiction over PIL, holding that PIL
did business in the Philippines when it entered into a contract with
Todaro. Although PIL questions the service of summons on Klepzig,
whom PIL claims is not its agent, the trial court ruled that PIL failed
to adduce evidence to prove its contention. Finally, on the issue
of forum non-conveniens, the trial court found that it is more
convenient to hear and decide the case in the Philippines because
Todaro resides in the Philippines and the contract allegedly breached
involves employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the
trial court’s 4 January 1999 order and for the deferment of filing its
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus
motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
PPHI, and Klepzig filed a joint reply. The trial court issued an
order19on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and
Klepzig. The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days
within which to file their respective answers.
PIL did not file an answer before the trial court and instead filed a
petition for certiorari before the appellate court.
The Ruling of the Appellate Court
The appellate court denied PIL’s petition and affirmed the trial
court’s ruling in toto. The dispositive portion of the appellate court’s
decision reads:
WHEREFORE, premises considered, the present petition for
certiorari is hereby DENIED DUE COURSE and accordingly
DISMISSED. The assailed Orders dated January 4, 1999 and June 3,
1999 of the Regional Trial Court of Makati City, Branch 147, in
Civil Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed21 PIL’s motion for
reconsideration for lack of merit. The appellate court stated that
PIL’s motion raised no new substantial or weighty arguments that
could impel the appellate court from departing or overturning its
previous decision. PIL then filed a petition for review on certiorari
before this Court.
The Issues
PIL raised the following issues before this Court:
A. [The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:

A.1. [PIL] is a foreign corporation "not doing business" in the
Philippines.
A.2. Moreover, the complaint does not contain appropriate
allegations of ultimate facts showing that [PIL] is doing or
transacting business in the Philippines.
A.3. Assuming arguendo that jurisdiction may be acquired over the
person of [PIL], [the trial court] still failed to acquire jurisdiction
since summons was improperly served on [PIL].
B. [Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the
case, including annexes, motions and all evidence on record.
C. [The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained
therein indubitably show that [Todaro] bases his claims on an alleged
breach of an employment contract. Thus, exclusive jurisdiction is
vested with the [NLRC].
D. Pursuant to the principle of forum non-conveniens, [the trial court]
committed grave abuse of discretion when it took cognizance of the
case.22
The Ruling of the Court
The petition has partial merit. We affirm with modification the
rulings of the trial and appellate courts. Apart from the issue on
service of summons, the rulings of the trial and appellate courts on
the issues raised by PIL are correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a
cause of action is the act or omission by which a party violates a right
of another.
The general rule is that the allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of
damages.23
In the present case, the summary of Todaro’s allegations states that
PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in
PIL’s Philippine office. Todaro’s allegations are thus sufficient to
establish a cause of action. We quote with approval the trial court’s
ruling on this matter:
On the issue of lack of cause of action – It is well-settled that the
merits of a motion to dismiss a complaint for lack of cause of action
is tested on the strength of the allegations of fact contained in the
complaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil.
366 [1954]). This Court finds that the allegations of the complaint,
specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging as
follows:
"30. All of the acts set forth in the foregoing have been done with the
knowledge, consent and/or approval of the defendants who acted in
concert and/or in conspiracy with one another.
80
31. Under the circumstances, there is a valid contract entered into
between [Todaro] and the Pioneer Group, whereby, among others,
the Pioneer Group would employ [Todaro], on a permanent basis, to
manage and operate the ready-mix concrete operations, if the Pioneer
Group decides to invest in the Philippines.
32. The Pioneer Group has decided to invest in the Philippines. The
refusal of the defendants to comply with the Pioneer Group’s
undertaking to employ [Todaro] to manage their Philippine
ready-mix operations, on a permanent basis, is a direct breach of an
obligation under a valid and perfected contract.
33. Alternatively, assuming without conceding, that there was no
contractual obligation on the part of the Pioneer Group to employ
[Todaro] on a permanent basis, in their Philippine operations, the
Pioneer Group and the other defendants did not act with justice, give
[Todaro] his due and observe honesty and good faith and/or they
have willfully caused injury to [Todaro] in a manner that is contrary
to morals, good customs, and public policy, as mandated under Arts.
19 and 21 of the New Civil Code."
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or
not these allegations are true is immaterial for the court cannot
inquire into the truth thereof, the test being whether, given the
allegations of fact in the complaint, a valid judgment could be
rendered in accordance with the prayer in the complaint. 24
It should be emphasized that the presence of a cause of action rests
on the sufficiency, and not on the veracity, of the allegations in the
complaint. The veracity of the allegations will have to be examined
during the trial on the merits. In resolving a motion to dismiss based
on lack of cause of action, the trial court is limited to the four corners
of the complaint and its annexes. It is not yet necessary for the trial
court to examine the truthfulness of the allegations in the complaint.
Such examination is proper during the trial on the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the
truthfulness of the allegations in the complaint. Section 1, Rule 16 of
the 1997 Rules of Civil Procedure does not
mention forum non-conveniens as a ground for filing a motion to
dismiss. The propriety of dismissing a case based on forum
non-conveniens requires a factual determination; hence, it is more
properly considered a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction on
this ground, the trial court should do so only after vital facts are
established to determine whether special circumstances require the
court’s desistance.25
Jurisdiction over PIL
PIL questions the trial court’s exercise of jurisdiction over it on two
levels. First, that PIL is a foreign corporation not doing business in
the Philippines and because of this, the service of summons on PIL
did not follow the mandated procedure. Second, that Todaro’s claims
are based on an alleged breach of an employment contract so Todaro
should have filed his complaint before the NLRC and not before the
trial court.
Transacting Business in the Philippines and
Service of Summons
The first level has two sub-issues: PIL’s transaction of business in
the Philippines and the service of summons on PIL. Section 12, Rule
14 of the 1997 Rules of Civil Procedure provides the manner by
which summons may be served upon a foreign juridical entity which
has transacted business in the Philippines. Thus:

Service upon foreign private juridical entity. — When the defendant
is a foreign juridical entity which has transacted business in the
Philippines, service may be made on its resident agent designated in
accordance with law for that purpose, or, if there be no such agent,
on the government official designated by law to that effect, or any of
its officers or agents within the Philippines.
As to the first sub-issue, PIL insists that its sole act of "transacting"
or "doing business" in the Philippines consisted of its investment in
PPHI. Under Philippine law, PIL’s mere investment in PPHI does not
constitute "doing business." However, we affirm the lower courts’
ruling and declare that, based on the allegations in Todaro’s
complaint, PIL was doing business in the Philippines when it
negotiated Todaro’s employment with PPHI. Section 3(d) of
Republic Act No. 7042, Foreign Investments Act of 1991, states:
The phrase "doing business" shall include
soliciting orders, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year
stay in the country for a period or periods totaling one hundred eighty
[180] days or more; participating in the management, supervision or
control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some
of the functions normally incident to, and in progressive
prosecution of commercial gain or of the purpose and object of
the business organization: Provided, however, That the phrase
"doing business" shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in
its own name and for its own account; (Emphases added)
PIL’s alleged acts in actively negotiating to employ Todaro to run its
pre-mixed concrete operations in the Philippines, which acts are
hypothetically admitted in PIL’s motion to dismiss, are not mere acts
of a passive investor in a domestic corporation. Such are managerial
and operational acts in directing and establishing commercial
operations in the Philippines. The annexes that Todaro attached to his
complaint give us an idea on the extent of PIL’s involvement in the
negotiations regarding Todaro’s employment. In Annex "E,"
McDonald of Pioneer Concrete Group HK confirmed his offer to
engage Todaro as a consultant of PIL. In Annex "F," Todaro
accepted the consultancy. In Annex "H," Klepzig of PPHI stated that
PIL authorized him to tell Todaro about the cessation of his
consultancy. Finally, in Annex "I," Folwell of PIL wrote to Todaro to
confirm that "Pioneer" no longer wishes to be associated with Todaro
and that Klepzig is authorized to terminate this association. Folwell
further referred to a Dr. Schubert and to Pioneer Hong Kong. These
confirmations and references tell us that, in this instance, the various
officers and companies under the Pioneer brand name do not work
independently of each other. It cannot be denied that PIL had
knowledge of and even authorized the non-implementation of
Todaro’s alleged permanent employment. In fact, in the letters to
Todaro, the word "Pioneer" was used to refer not just to PIL alone
but also to all corporations negotiating with Todaro under the Pioneer
name.
As further proof of the interconnection of the various Pioneer
corporations with regard to their negotiations with Todaro,
McDonald of Pioneer Concrete Group HK confirmed Todaro’s
engagement as consultant of PIL (Annex "E") while Folwell of PIL
stated that Todaro rendered consultancy services to Pioneer HK
(Annex "I"). In this sense, the various Pioneer corporations were not
81
acting as separate corporations. The behavior of the various Pioneer
corporations shoots down their defense that the corporations have
separate and distinct personalities, managements, and operations. The
various Pioneer corporations were all working in concert to negotiate
an employment contract between Todaro and PPHI, a domestic
corporation.
Finally, the phrase "doing business in the Philippines" in the former
version of Section 12, Rule 14 now reads "has transacted business in
the Philippines." The scope is thus broader in that it is enough for the
application of the Rule that the foreign private juridical entity "has
transacted business in the Philippines."26
As to the second sub-issue, the purpose of summons is not only to
acquire jurisdiction over the person of the defendant, but also to give
notice to the defendant that an action has been commenced against it
and to afford it an opportunity to be heard on the claim made against
it. The requirements of the rule on summons must be strictly
followed; otherwise, the trial court will not acquire jurisdiction over
the defendant.
When summons is to be served on a natural person, service of
summons should be made in person on the defendant. 27 Substituted
service is resorted to only upon the concurrence of two requisites: (1)
when the defendant cannot be served personally within a reasonable
time and (2) when there is impossibility of prompt service as shown
by the statement in the proof of service in the efforts made to find the
defendant personally and that such efforts failed.28
The statutory requirements of substituted service must be followed
strictly, faithfully, and fully, and any substituted service other than
by the statute is considered ineffective. Substituted service is in
derogation of the usual method of service. It is a method
extraordinary in character and may be used only as prescribed and in
the circumstances authorized by the statute.29 The need for strict
compliance with the requirements of the rule on summons is also
exemplified in the exclusive enumeration of the agents of a domestic
private juridical entity who are authorized to receive summons.
At present, Section 11 of Rule 14 provides that when the defendant is
a domestic private juridical entity, service may be made on the
"president, managing partner, general manager, corporate secretary,
treasurer, or in-house counsel." The previous version of Section 11
allowed for the service of summons on the "president, manager,
secretary, cashier, agent, or any of its directors." The present Section
11 qualified "manager" to "general manager" and "secretary" to
"corporate secretary." The present Section 11 also removed "cashier,
agent, or any of its directors" from the exclusive enumeration.
When summons is served on a foreign juridical entity, there are three
prescribed ways: (1) service on its resident agent designated in
accordance with law for that purpose, (2) service on the government
official designated by law to receive summons if the corporation does
not have a resident agent, and (3) service on any of the corporation’s
officers or agents within the Philippines.30
In the present case, service of summons on PIL failed to follow any
of the prescribed processes. PIL had no resident agent in the
Philippines. Summons was not served on the Securities and
Exchange Commission (SEC), the designated government
agency,31 since PIL is not registered with the SEC. Summons for PIL
was served on De Leon, Klepzig’s Executive Assistant. Klepzig is
PIL’s "agent within the Philippines" because PIL authorized Klepzig
to notify Todaro of the cessation of his consultancy (Annexes "H"
and "I").32 The authority given by PIL to Klepzig to notify Todaro
implies that Klepzig was likewise authorized to receive Todaro’s
response to PIL’s notice. Todaro responded to PIL’s notice by filing
a complaint before the trial court.
 82

However, summons was not served personally on Klepzig as agent of

PIL. Instead, summons was served on De Leon, Klepzig’s Executive
Assistant. In this instance, De Leon was not PIL’s agent but a mere
employee of Klepzig. In effect, the sheriff33 resorted to substituted
service. For symmetry, we apply the rule on substituted service of
summons on a natural person and we find that no reason was given to
justify the service of PIL’s summons on De Leon.

Thus, we rule that PIL transacted business in the Philippines and

Klepzig was its agent within the Philippines. However, there was
improper service of summons on PIL since summons was not served
personally on Klepzig.

NLRC Jurisdiction

As to the second level, Todaro prays for payment of damages due

him because of PIL’s non-implementation of Todaro’s alleged
employment agreement with PPHI. The appellate court stated its
ruling on this matter, thus:

It could not be denied that there was no existing contract yet to speak
of between PIONEER INTL. and [Todaro]. Since there was an
absence of an employment contract between the two parties, this
Court is of the opinion and so holds that no employer-employee
relationship actually exists. Record reveals that all that was agreed
upon by [Todaro] and the Pioneer Concrete, acting in behalf of
PIONEER INTL., was the confirmation of the offer to engage the
services of the former as consultant of PIONEER INTL. (Rollo, p.
132). The failure on the part of PIONEER INTL. to abide by the said
agreement, which was duly confirmed by PIONEER INTL., brought
about a breach of an obligation on a valid and perfected agreement.
There being no employer-employee relationship established between
[PIL] and [Todaro], it could be said that the instant case falls within
the jurisdiction of the regular courts of justice as the money claim of
[Todaro] did not arise out of or in connection with [an]
employer-employee relationship.34

Todaro’s employment in the Philippines would not be with PIL but

with PPHI as stated in the 20 October 1997 letter of Folwell.
Assuming the existence of the employment agreement, the
employer-employee relationship would be between PPHI and Todaro,
not between PIL and Todaro. PIL’s liability for the
non-implementation of the alleged employment agreement is a civil
dispute properly belonging to the regular courts. Todaro’s causes of
action as stated in his complaint are, in addition to breach of contract,
based on "violation of Articles 19 and 21 of the New Civil Code" for
the "clear and evident bad faith and malice"35 on the part of
defendants. The NLRC’s jurisdiction is limited to those enumerated
under Article 217 of the Labor Code.36

WHEREFORE, the petition is PARTIALLY GRANTED. The

Decision dated 27 September 2001 and the Resolution dated 14
January 2003 of the appellate court are AFFIRMED with
the MODIFICATION that there was improper service of summons
on Pioneer International, Ltd. The case is remanded to the trial court
for proper service of summons and trial. No costs.

SO ORDERED.

G.R. No. 162894 February 26, 2008
RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.
DECISION
TINGA, J.:
Before this Court is a petition for review on certiorari under Rule 45
of the 1997 Rules of Civil Procedure which seeks the reversal of the
Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP
No. 67001 and the dismissal of the civil case filed by respondent
against petitioner with the trial court.
As culled from the records of the case, the following antecedents
appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a
corporation duly organized and existing under the laws of the State
of Connecticut, United States of America, and respondent Stockton
W. Rouzie, Jr., an American citizen, entered into a contract whereby
BMSI hired respondent as its representative to negotiate the sale of
services in several government projects in the Philippines for an
agreed remuneration of 10% of the gross receipts. On 11 March 1992,
respondent secured a service contract with the Republic of the
Philippines on behalf of BMSI for the dredging of rivers affected by
the Mt. Pinatubo eruption and mudflows.3
On 16 July 1994, respondent filed before the Arbitration Branch of
the National Labor Relations Commission (NLRC) a suit against
BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and
Walter G. Browning for alleged nonpayment of commissions, illegal
termination and breach of employment contract.4 On 28 September
1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment
ordering BMSI and RUST to pay respondent’s money claims. 5 Upon
appeal by BMSI, the NLRC reversed the decision of the Labor
Arbiter and dismissed respondent’s complaint on the ground of lack
of jurisdiction.6 Respondent elevated the case to this Court but was
dismissed in a Resolution dated 26 November 1997. The Resolution
became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union,
instituted an action for damages before the Regional Trial Court
(RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case
No. 1192-BG, named as defendants herein petitioner Raytheon
International, Inc. as well as BMSI and RUST, the two corporations
impleaded in the earlier labor case. The complaint essentially
reiterated the allegations in the labor case that BMSI verbally
employed respondent to negotiate the sale of services in government
projects and that respondent was not paid the commissions due him
from the Pinatubo dredging project which he secured on behalf of
BMSI. The complaint also averred that BMSI and RUST as well as
petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent’s claim,
it was a foreign corporation duly licensed to do business in the
Philippines and denied entering into any arrangement with
respondent or paying the latter any sum of money. Petitioner also
denied combining with BMSI and RUST for the purpose of assuming
the alleged obligation of the said companies.9 Petitioner also referred
to the NLRC decision which disclosed that per the written agreement
between respondent and BMSI and RUST, denominated as "Special
Sales Representative Agreement," the rights and obligations of the
parties shall be governed by the laws of the State of
Connecticut.10 Petitioner sought the dismissal of the complaint on
grounds of failure to state a cause of action and forum non
83
conveniens and prayed for damages by way of compulsory
counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for
Preliminary Hearing Based on Affirmative Defenses and for
Summary Judgment12 seeking the dismissal of the complaint on
grounds of forum non conveniens and failure to state a cause of
action. Respondent opposed the same. Pending the resolution of the
omnibus motion, the deposition of Walter Browning was taken
before the Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s
omnibus motion. The trial court held that the factual allegations in
the complaint, assuming the same to be admitted, were sufficient for
the trial court to render a valid judgment thereon. It also ruled that
the principle of forum non conveniens was inapplicable because the
trial court could enforce judgment on petitioner, it being a foreign
corporation licensed to do business in the Philippines.15
Petitioner filed a Motion for Reconsideration16 of the order, which
motion was opposed by respondent.17 In an Order dated 31 July
2001,18 the trial court denied petitioner’s motion. Thus, it filed a Rule
65 Petition19 with the Court of Appeals praying for the issuance of a
writ of certiorari and a writ of injunction to set aside the twin orders
of the trial court dated 13 September 2000 and 31 July 2001 and to
enjoin the trial court from conducting further proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed
Decision21 denying the petition for certiorari for lack of merit. It also
denied petitioner’s motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have
confined itself to the allegations in the complaint and should have
also considered evidence aliunde in resolving petitioner’s omnibus
motion, it found the evidence presented by petitioner, that is, the
deposition of Walter Browning, insufficient for purposes of
determining whether the complaint failed to state a cause of action.
The appellate court also stated that it could not rule one way or the
other on the issue of whether the corporations, including petitioner,
named as defendants in the case had indeed merged together based
solely on the evidence presented by respondent. Thus, it held that the
issue should be threshed out during trial.23 Moreover, the appellate
court deferred to the discretion of the trial court when the latter
decided not to desist from assuming jurisdiction on the ground of the
inapplicability of the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO
STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN
REFUSING TO DISMISS THE COMPLAINT ON THE GROUND
OF FORUM NON CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated
notices. The Ceferino Padua Law Office, counsel on record for
respondent, manifested that the lawyer handling the case, Atty.
Rogelio Karagdag, had severed relations with the law firm even
before the filing of the instant petition and that it could no longer find
the whereabouts of Atty. Karagdag or of respondent despite diligent
efforts. In a Resolution25 dated 20 November 2006, the Court
resolved to dispense with the filing of a comment.
The instant petition lacks merit.
 84

Petitioner mainly asserts that the written contract between respondent
and BMSI included a valid choice of law clause, that is, that the
contract shall be governed by the laws of the State of Connecticut. It
also mentions the presence of foreign elements in the dispute –
namely, the parties and witnesses involved are American
corporations and citizens and the evidence to be presented is located
outside the Philippines – that renders our local courts inconvenient
forums. Petitioner theorizes that the foreign elements of the dispute
necessitate the immediate application of the doctrine of forum non
conveniens.
the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court’s
desistance.35
Finding no grave abuse of discretion on the trial court, the Court of
Appeals respected its conclusion that it can assume jurisdiction over
the dispute notwithstanding its foreign elements. In the same manner,
the Court defers to the sound discretion of the lower courts because
their findings are binding on this Court.

Recently in Hasegawa v. Kitamura,26 the Court outlined three Petitioner also contends that the complaint in Civil Case No.
consecutive phases involved in judicial resolution of 1192-BG failed to state a cause of action against petitioner. Failure to
conflicts-of-laws problems, namely: jurisdiction, choice of law, and state a cause of action refers to the insufficiency of allegation in the
recognition and enforcement of judgments. Thus, in the pleading.36 As a general rule, the elementary test for failure to state a
instances27 where the Court held that the local judicial machinery cause of action is whether the complaint alleges facts which if true
was adequate to resolve controversies with a foreign element, the would justify the relief demanded.37
following requisites had to be proved: (1) that the Philippine Court is
The complaint alleged that petitioner had combined with BMSI and
one to which the parties may conveniently resort; (2) that the
RUST to function as one company. Petitioner contends that the
Philippine Court is in a position to make an intelligent decision as to
deposition of Walter Browning rebutted this allegation. On this score,
the law and the facts; and (3) that the Philippine Court has or is likely
the resolution of the Court of Appeals is instructive, thus:
to have the power to enforce its decision.28
x x x Our examination of the deposition of Mr. Walter Browning as
On the matter of jurisdiction over a conflicts-of-laws problem where
well as other documents produced in the hearing shows that these
the case is filed in a Philippine court and where the court has
evidence aliunde are not quite sufficient for us to mete a ruling that
jurisdiction over the subject matter, the parties and the res, it may or
the complaint fails to state a cause of action.
can proceed to try the case even if the rules of conflict-of-laws or the
convenience of the parties point to a foreign forum. This is an Annexes "A" to "E" by themselves are not substantial, convincing
exercise of sovereign prerogative of the country where the case is and conclusive proofs that Raytheon Engineers and Constructors, Inc.
filed.29 (REC) assumed the warranty obligations of defendant Rust
International in the Makar Port Project in General Santos City, after
Jurisdiction over the nature and subject matter of an action is
Rust International ceased to exist after being absorbed by REC.
conferred by the Constitution and the law30 and by the material
Other documents already submitted in evidence are likewise meager
allegations in the complaint, irrespective of whether or not the
to preponderantly conclude that Raytheon International, Inc., Rust
plaintiff is entitled to recover all or some of the claims or reliefs
International[,] Inc. and Brand Marine Service, Inc. have combined
sought therein.31 Civil Case No. 1192-BG is an action for damages
into one company, so much so that Raytheon International, Inc., the
arising from an alleged breach of contract. Undoubtedly, the nature
surviving company (if at all) may be held liable for the obligation of
of the action and the amount of damages prayed are within the
BMSI to respondent Rouzie for unpaid commissions. Neither these
jurisdiction of the RTC.
documents clearly speak otherwise.38
As regards jurisdiction over the parties, the trial court acquired
As correctly pointed out by the Court of Appeals, the question of
jurisdiction over herein respondent (as party plaintiff) upon the filing
whether petitioner, BMSI and RUST merged together requires the
of the complaint. On the other hand, jurisdiction over the person of
presentation of further evidence, which only a full-blown trial on the
petitioner (as party defendant) was acquired by its voluntary
merits can afford.
appearance in court.32
WHEREFORE, the instant petition for review on certiorari
That the subject contract included a stipulation that the same shall be
is DENIED. The Decision and Resolution of the Court of Appeals in
governed by the laws of the State of Connecticut does not suggest
CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against
that the Philippine courts, or any other foreign tribunal for that matter,
petitioner.
are precluded from hearing the civil action. Jurisdiction and choice of
law are two distinct concepts. Jurisdiction considers whether it is fair SO ORDERED.
to cause a defendant to travel to this state; choice of law asks the
further question whether the application of a substantive law which
will determine the merits of the case is fair to both parties.33 The
choice of law stipulation will become relevant only when the
substantive issues of the instant case develop, that is, after hearing on
the merits proceeds before the trial court.

Under the doctrine of forum non conveniens, a court, in

conflicts-of-laws cases, may refuse impositions on its jurisdiction
where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies
elsewhere.34 Petitioner’s averments of the foreign elements in the
instant case are not sufficient to oust the trial court of its jurisdiction
over Civil Case No. No. 1192-BG and the parties involved.

Moreover, the propriety of dismissing a case based on the principle

of forum non conveniens requires a factual determination; hence, it is
more properly considered as a matter of defense. While it is within

G.R. No. 149177 November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the April 18, 2001 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution2 denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co.,
Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,3 entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.4 The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.5 Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.6
When the STAR Project was near completion, the Department of
Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.7 Respondent was named as the
project manager in the contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
general manager for its International Division, informed respondent
that the company had no more intention of automatically renewing
his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.9
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondent’s
contract was for a fixed term that had already expired, and refused to
negotiate for the renewal of the ICA.10
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been
perfected in Japan and executed by and between Japanese nationals,
moved to dismiss the complaint for lack of jurisdiction. They
asserted that the claim for improper pre-termination of respondent's
ICA could only be heard and ventilated in the proper courts of Japan
following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular
Government v. Frank14 that matters connected with the performance
of contracts are regulated by the law prevailing at the place of
performance,15 denied the motion to dismiss.16 The trial court
subsequently denied petitioners' motion for
reconsideration,17 prompting them to file with the appellate court, on
85
August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].18 On August 23, 2000, the CA
resolved to dismiss the petition on procedural grounds—for lack of
statement of material dates and for insufficient verification and
certification against forum shopping.19 An Entry of Judgment was
later issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on
September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein
the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.21
Ruling on the merits of the second petition, the appellate court
rendered the assailed April 18, 2001 Decision22finding no grave
abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. The
CA thus declared that the trial court was correct in applying instead
the principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by
the CA in the assailed July 25, 2001 Resolution. 24
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review
on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS
ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE
LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S]
IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is
whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the "state of
the most significant relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising
the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.27 The same holds true
in the CA's dismissal of the said case due to defects in the formal
requirement of verification28 and in the other requirement in Rule 46
of the Rules of Court on the statement of the material dates.29 The
dismissal being without prejudice, petitioners can re-file the petition,
or file a second petition attaching thereto the appropriate verification

and certification—as they, in fact did—and stating therein the
material dates, within the prescribed period30 in Section 4, Rule 65 of
the said Rules.31
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the
merits does not bar another action involving the same parties, on the
same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has
no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural grounds,33 petitioners
are no longer required by the Rules to indicate in their certification of
non-forum shopping in the instant petition for review of the second
certiorari petition, the status of the aforesaid first petition before the
CA. In any case, an omission in the certificate of non-forum
shopping about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not
warrant the dismissal and nullification of the entire proceedings,
considering that the evils sought to be prevented by the said
certificate are no longer present.34
The Court also finds no merit in respondent's contention that
petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not
the instant petition. True, the Authorization35 dated September 4,
2000, which is attached to the second certiorari petition and which is
also attached to the instant petition for review, is limited in
scope—its wordings indicate that Hasegawa is given the authority to
sign for and act on behalf of the company only in the petition filed
with the appellate court, and that authority cannot extend to the
instant petition for review.36 In a plethora of cases, however, this
Court has liberally applied the Rules or even suspended its
application whenever a satisfactory explanation and a subsequent
fulfillment of the requirements have been made.37 Given that
petitioners herein sufficiently explained their misgivings on this point
and appended to their Reply38 an updated Authorization39 for
Hasegawa to act on behalf of the company in the instant petition, the
Court finds the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on
behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a
few cases, we have ruled that corporate powers are exercised by the
board of directors; thus, no person, not even its officers, can bind the
corporation, in the absence of authority from the
board.40 Considering that Hasegawa verified and certified the petition
only on his behalf and not on behalf of the other petitioner, the
petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.41 Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.42 While technical rules
of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court
dockets.43
Further, the Court has observed that petitioners incorrectly filed a
Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion to
dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The appropriate
86
recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of an
adverse decision, to elevate the entire case by appeal in due
course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum,
petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent. The
ICA subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese
language. Thus, petitioners posit that local courts have no substantial
relationship to the parties46 following the [state of the] most
significant relationship rule in Private International Law.47
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the
Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely
argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.49 While not
abandoning this stance in their petition before the appellate court,
petitioners on certiorari significantly invoked the defense of forum
non conveniens.50 On petition for review before this Court,
petitioners dropped their other arguments, maintained the forum non
conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship
rule.51
Be that as it may, this Court is not inclined to deny this petition
merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.52 We only pointed out
petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can
the resulting judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct
concepts.54 Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of
the lex fori will often coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the
other.55 The question of whether the law of a state can be applied to a
transaction is different from the question of whether the courts of that
state have jurisdiction to enter a judgment.56
In this case, only the first phase is at
issue—jurisdiction.1âwphi1 Jurisdiction, however, has various
aspects. For a court to validly exercise its power to adjudicate a
controversy, it must have jurisdiction over the plaintiff or the
petitioner, over the defendant or the respondent, over the subject
matter, over the issues of the case and, in cases involving property,
over the res or the thing which is the subject of the litigation.57 In
assailing the trial court's jurisdiction herein, petitioners are actually
referring to subject matter jurisdiction.
 87

Jurisdiction over the subject matter in a judicial proceeding is Neither can the other ground raised, forum non conveniens,76 be used
conferred by the sovereign authority which establishes and organizes to deprive the trial court of its jurisdiction herein. First, it is not a
the court. It is given only by law and in the manner prescribed by proper basis for a motion to dismiss because Section 1, Rule 16 of
law.58 It is further determined by the allegations of the complaint the Rules of Court does not include it as a ground.77 Second, whether
irrespective of whether the plaintiff is entitled to all or some of the a suit should be entertained or dismissed on the basis of the said
claims asserted therein.59 To succeed in its motion for the dismissal doctrine depends largely upon the facts of the particular case and is
of an action for lack of jurisdiction over the subject matter of the addressed to the sound discretion of the trial court. 78 In this case, the
claim,60 the movant must show that the court or tribunal cannot act RTC decided to assume jurisdiction. Third, the propriety of
on the matter submitted to it because no law grants it the power to dismissing a case based on this principle requires a factual
adjudicate the claims.61 determination; hence, this conflicts principle is more properly
considered a matter of defense.79
In the instant case, petitioners, in their motion to dismiss, do not
claim that the trial court is not properly vested by law with Accordingly, since the RTC is vested by law with the power to
jurisdiction to hear the subject controversy for, indeed, Civil Case No. entertain and hear the civil case filed by respondent and the grounds
00-0264 for specific performance and damages is one not capable of raised by petitioners to assail that jurisdiction are inappropriate, the
pecuniary estimation and is properly cognizable by the RTC of Lipa trial and appellate courts correctly denied the petitioners’ motion to
City.62 What they rather raise as grounds to question subject matter dismiss.
jurisdiction are the principles of lex loci celebrationis and lex
contractus, and the "state of the most significant relationship rule." WHEREFORE, premises considered, the petition for review
on certiorari is DENIED.
The Court finds the invocation of these grounds unsound.
SO ORDERED.
Lex loci celebrationis relates to the "law of the place of the
ceremony"63 or the law of the place where a contract is made.64 The
doctrine of lex contractus or lex loci contractus means the "law of the
place where a contract is executed or to be performed."65 It controls
the nature, construction, and validity of the contract66 and it may
pertain to the law voluntarily agreed upon by the parties or the law
intended by them either expressly or implicitly.67 Under the "state of
the most significant relationship rule," to ascertain what state law to
apply to a dispute, the court should determine which state has the
most substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the
contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the
parties.68 This rule takes into account several contacts and evaluates
them according to their relative importance with respect to the
particular issue to be resolved.69

Since these three principles in conflict of laws make reference to the

law applicable to a dispute, they are rules proper for the second phase,
the choice of law.70 They determine which state's law is to be applied
in resolving the substantive issues of a conflicts
problem.71 Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also not
yet called for.

Further, petitioners' premature invocation of choice-of-law rules is

exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules. 72 Also, when
the law of a foreign country is invoked to provide the proper rules for
the solution of a case, the existence of such law must be pleaded and
proved.73

It should be noted that when a conflicts case, one involving a foreign

element, is brought before a court or administrative agency, there are
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over
the case and take into account or apply the law of some other State or
States.74 The court’s power to hear cases and controversies is derived
from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign
law short of treaties or other formal agreements, even in matters
regarding rights provided by foreign sovereigns.75

G.R. No. 149177 November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING
CONSULTANTS CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court assailing the April 18, 2001 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution2 denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co.,
Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,3 entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.4 The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.5 Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.6
When the STAR Project was near completion, the Department of
Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.7 Respondent was named as the
project manager in the contract's Appendix 3.1.8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's
general manager for its International Division, informed respondent
that the company had no more intention of automatically renewing
his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.9
Threatened with impending unemployment, respondent, through his
lawyer, requested a negotiation conference and demanded that he be
assigned to the BBRI project. Nippon insisted that respondent’s
contract was for a fixed term that had already expired, and refused to
negotiate for the renewal of the ICA.10
As he was not able to generate a positive response from the
petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been
perfected in Japan and executed by and between Japanese nationals,
moved to dismiss the complaint for lack of jurisdiction. They
asserted that the claim for improper pre-termination of respondent's
ICA could only be heard and ventilated in the proper courts of Japan
following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's
request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular
Government v. Frank14 that matters connected with the performance
of contracts are regulated by the law prevailing at the place of
performance,15 denied the motion to dismiss.16 The trial court
subsequently denied petitioners' motion for
reconsideration,17 prompting them to file with the appellate court, on
88
August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].18 On August 23, 2000, the CA
resolved to dismiss the petition on procedural grounds—for lack of
statement of material dates and for insufficient verification and
certification against forum shopping.19 An Entry of Judgment was
later issued by the appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on
September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating therein
the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP
No. 60827.21
Ruling on the merits of the second petition, the appellate court
rendered the assailed April 18, 2001 Decision22finding no grave
abuse of discretion in the trial court's denial of the motion to dismiss.
The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. The
CA thus declared that the trial court was correct in applying instead
the principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by
the CA in the assailed July 25, 2001 Resolution. 24
Remaining steadfast in their stance despite the series of denials,
petitioners instituted the instant Petition for Review
on Certiorari25 imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE TRIAL COURT VALIDLY
EXERCISED JURISDICTION OVER THE INSTANT
CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS
ENTERED INTO BY AND BETWEEN TWO JAPANESE
NATIONALS, WRITTEN WHOLLY IN THE JAPANESE
LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN OVERLOOKING THE NEED TO REVIEW OUR
ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S]
IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is
whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the "state of
the most significant relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the
procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in
CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising
the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.27 The same holds true
in the CA's dismissal of the said case due to defects in the formal
requirement of verification28 and in the other requirement in Rule 46
of the Rules of Court on the statement of the material dates.29 The
dismissal being without prejudice, petitioners can re-file the petition,
or file a second petition attaching thereto the appropriate verification

and certification—as they, in fact did—and stating therein the
material dates, within the prescribed period30 in Section 4, Rule 65 of
the said Rules.31
The dismissal of a case without prejudice signifies the absence of a
decision on the merits and leaves the parties free to litigate the matter
in a subsequent action as though the dismissed action had not been
commenced. In other words, the termination of a case not on the
merits does not bar another action involving the same parties, on the
same subject matter and theory.32
Necessarily, because the said dismissal is without prejudice and has
no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural grounds,33 petitioners
are no longer required by the Rules to indicate in their certification of
non-forum shopping in the instant petition for review of the second
certiorari petition, the status of the aforesaid first petition before the
CA. In any case, an omission in the certificate of non-forum
shopping about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not
warrant the dismissal and nullification of the entire proceedings,
considering that the evils sought to be prevented by the said
certificate are no longer present.34
The Court also finds no merit in respondent's contention that
petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not
the instant petition. True, the Authorization35 dated September 4,
2000, which is attached to the second certiorari petition and which is
also attached to the instant petition for review, is limited in
scope—its wordings indicate that Hasegawa is given the authority to
sign for and act on behalf of the company only in the petition filed
with the appellate court, and that authority cannot extend to the
instant petition for review.36 In a plethora of cases, however, this
Court has liberally applied the Rules or even suspended its
application whenever a satisfactory explanation and a subsequent
fulfillment of the requirements have been made.37 Given that
petitioners herein sufficiently explained their misgivings on this point
and appended to their Reply38 an updated Authorization39 for
Hasegawa to act on behalf of the company in the instant petition, the
Court finds the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed out,
and to which we agree, Hasegawa is truly not authorized to act on
behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a
few cases, we have ruled that corporate powers are exercised by the
board of directors; thus, no person, not even its officers, can bind the
corporation, in the absence of authority from the
board.40 Considering that Hasegawa verified and certified the petition
only on his behalf and not on behalf of the other petitioner, the
petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.41 Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.42 While technical rules
of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court
dockets.43
Further, the Court has observed that petitioners incorrectly filed a
Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion to
dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The appropriate
89
recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of an
adverse decision, to elevate the entire case by appeal in due
course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum,
petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent. The
ICA subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese
language. Thus, petitioners posit that local courts have no substantial
relationship to the parties46 following the [state of the] most
significant relationship rule in Private International Law.47
The Court notes that petitioners adopted an additional but different
theory when they elevated the case to the appellate court. In the
Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely
argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.49 While not
abandoning this stance in their petition before the appellate court,
petitioners on certiorari significantly invoked the defense of forum
non conveniens.50 On petition for review before this Court,
petitioners dropped their other arguments, maintained the forum non
conveniens defense, and introduced their new argument that the
applicable principle is the [state of the] most significant relationship
rule.51
Be that as it may, this Court is not inclined to deny this petition
merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.52 We only pointed out
petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three
consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation
be initiated? (2) Which law will the court apply? and (3) Where can
the resulting judgment be enforced?53
Analytically, jurisdiction and choice of law are two distinct
concepts.54 Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to
exercise jurisdiction does not automatically give a state constitutional
authority to apply forum law. While jurisdiction and the choice of
the lex fori will often coincide, the "minimum contacts" for one do
not always provide the necessary "significant contacts" for the
other.55 The question of whether the law of a state can be applied to a
transaction is different from the question of whether the courts of that
state have jurisdiction to enter a judgment.56
In this case, only the first phase is at
issue—jurisdiction.1âwphi1 Jurisdiction, however, has various
aspects. For a court to validly exercise its power to adjudicate a
controversy, it must have jurisdiction over the plaintiff or the
petitioner, over the defendant or the respondent, over the subject
matter, over the issues of the case and, in cases involving property,
over the res or the thing which is the subject of the litigation.57 In
assailing the trial court's jurisdiction herein, petitioners are actually
referring to subject matter jurisdiction.
 90

Jurisdiction over the subject matter in a judicial proceeding is Neither can the other ground raised, forum non conveniens,76 be used
conferred by the sovereign authority which establishes and organizes to deprive the trial court of its jurisdiction herein. First, it is not a
the court. It is given only by law and in the manner prescribed by proper basis for a motion to dismiss because Section 1, Rule 16 of
law.58 It is further determined by the allegations of the complaint the Rules of Court does not include it as a ground.77 Second, whether
irrespective of whether the plaintiff is entitled to all or some of the a suit should be entertained or dismissed on the basis of the said
claims asserted therein.59 To succeed in its motion for the dismissal doctrine depends largely upon the facts of the particular case and is
of an action for lack of jurisdiction over the subject matter of the addressed to the sound discretion of the trial court. 78 In this case, the
claim,60 the movant must show that the court or tribunal cannot act RTC decided to assume jurisdiction. Third, the propriety of
on the matter submitted to it because no law grants it the power to dismissing a case based on this principle requires a factual
adjudicate the claims.61 determination; hence, this conflicts principle is more properly
considered a matter of defense.79
In the instant case, petitioners, in their motion to dismiss, do not
claim that the trial court is not properly vested by law with Accordingly, since the RTC is vested by law with the power to
jurisdiction to hear the subject controversy for, indeed, Civil Case No. entertain and hear the civil case filed by respondent and the grounds
00-0264 for specific performance and damages is one not capable of raised by petitioners to assail that jurisdiction are inappropriate, the
pecuniary estimation and is properly cognizable by the RTC of Lipa trial and appellate courts correctly denied the petitioners’ motion to
City.62 What they rather raise as grounds to question subject matter dismiss.
jurisdiction are the principles of lex loci celebrationis and lex
contractus, and the "state of the most significant relationship rule." WHEREFORE, premises considered, the petition for review
on certiorari is DENIED.
The Court finds the invocation of these grounds unsound.
SO ORDERED.
Lex loci celebrationis relates to the "law of the place of the
ceremony"63 or the law of the place where a contract is made.64 The
doctrine of lex contractus or lex loci contractus means the "law of the
place where a contract is executed or to be performed."65 It controls
the nature, construction, and validity of the contract66 and it may
pertain to the law voluntarily agreed upon by the parties or the law
intended by them either expressly or implicitly.67 Under the "state of
the most significant relationship rule," to ascertain what state law to
apply to a dispute, the court should determine which state has the
most substantial connection to the occurrence and the parties. In a
case involving a contract, the court should consider where the
contract was made, was negotiated, was to be performed, and the
domicile, place of business, or place of incorporation of the
parties.68 This rule takes into account several contacts and evaluates
them according to their relative importance with respect to the
particular issue to be resolved.69

Since these three principles in conflict of laws make reference to the

law applicable to a dispute, they are rules proper for the second phase,
the choice of law.70 They determine which state's law is to be applied
in resolving the substantive issues of a conflicts
problem.71 Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also not
yet called for.

Further, petitioners' premature invocation of choice-of-law rules is

exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules. 72 Also, when
the law of a foreign country is invoked to provide the proper rules for
the solution of a case, the existence of such law must be pleaded and
proved.73

It should be noted that when a conflicts case, one involving a foreign

element, is brought before a court or administrative agency, there are
three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume
jurisdiction over the case; (2) assume jurisdiction over the case and
apply the internal law of the forum; or (3) assume jurisdiction over
the case and take into account or apply the law of some other State or
States.74 The court’s power to hear cases and controversies is derived
from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign
law short of treaties or other formal agreements, even in matters
regarding rights provided by foreign sovereigns.75

G.R. No. 120135 March 31, 2003
BANK OF AMERICA NT & SA, BANK OF AMERICA
INTERNATIONAL, LTD., petitioners,
vs.
COURT OF APPEALS, HON. MANUEL PADOLINA,
EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA,
JR., respondents.
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the November 29, 1994 decision of the Court of
Appeals1 and the April 28, 1995 resolution denying petitioners'
motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua
(Litonjuas, for brevity) filed a Complaint2 before the Regional Trial
Court of Pasig against the Bank of America NT&SA and Bank of
America International, Ltd. (defendant banks for brevity) alleging
that: they were engaged in the shipping business; they owned two
vessels: Don Aurelio and El Champion, through their wholly-owned
corporations; they deposited their revenues from said business
together with other funds with the branches of said banks in the
United Kingdom and Hongkong up to 1979; with their business
doing well, the defendant banks induced them to increase the number
of their ships in operation, offering them easy loans to acquire said
vessels;3 thereafter, the defendant banks acquired, through their
(Litonjuas') corporations as the borrowers: (a) El Carrier4; (b) El
General5; (c) El Challenger6; and (d) El Conqueror7; the vessels were
registered in the names of their corporations; the operation and the
funds derived therefrom were placed under the complete and
exclusive control and disposition of the petitioners;8 and the
possession the vessels was also placed by defendant banks in the
hands of persons selected and designated by them (defendant
banks).9
The Litonjuas claimed that defendant banks as trustees did not fully
render an account of all the income derived from the operation of the
vessels as well as of the proceeds of the subsequent foreclosure
sale;10 because of the breach of their fiduciary duties and/or
negligence of the petitioners and/or the persons designated by them
in the operation of private respondents' six vessels, the revenues
derived from the operation of all the vessels declined drastically; the
loans acquired for the purchase of the four additional vessels then
matured and remained unpaid, prompting defendant banks to have all
the six vessels, including the two vessels originally owned by the
private respondents, foreclosed and sold at public auction to answer
for the obligations incurred for and in behalf of the operation of the
vessels; they (Litonjuas) lost sizeable amounts of their own personal
funds equivalent to ten percent (10%) of the acquisition cost of the
four vessels and were left with the unpaid balance of their loans with
defendant banks.11 The Litonjuas prayed for the accounting of the
revenues derived in the operation of the six vessels and of the
proceeds of the sale thereof at the foreclosure proceedings instituted
by petitioners; damages for breach of trust; exemplary damages and
attorney's fees.12
Defendant banks filed a Motion to Dismiss on grounds of forum non
conveniens and lack of cause of action against them.13
On December 3, 1993, the trial court issued an Order denying the
Motion to Dismiss, thus:
"WHEREFORE, and in view of the foregoing consideration, the
Motion to Dismiss is hereby DENIED. The defendant is therefore,
given a period of ten (10) days to file its Answer to the complaint.
91
"SO ORDERED."14
Instead of filing an answer the defendant banks went to the Court of
Appeals on a "Petition for Review on Certiorari"15 which was aptly
treated by the appellate court as a petition for certiorari. They
assailed the above-quoted order as well as the subsequent denial of
their Motion for Reconsideration.16 The appellate court dismissed the
petition and denied petitioners' Motion for Reconsideration. 17
Hence, herein petition anchored on the following grounds:
"1. RESPONDENT COURT OF APPEALS FAILED TO
CONSIDER THE FACT THAT THE SEPARATE
PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE
STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE
REAL BORROWERS) CLEARLY SUPPORT, BEYOND ANY
DOUBT, THE PROPOSITION THAT THE PRIVATE
RESPONDENTS HAVE NO PERSONALITIES TO SUE.
"2. THE RESPONDENT COURT OF APPEALS FAILED TO
REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON
CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER,
SOME GUIDELINES TO FOLLOW IN DETERMINING
WHETHER THE CHOICE OF FORUM SHOULD BE
DISTURBED. UNDER THE CIRCUMSTANCES
SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM
NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.
"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO
FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE
PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL
BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY
THE PRIVATE RESPONDENT. COROLLARY TO THIS, THE
RESPONDENT COURT OF APPEALS FAILED TO CONSIDER
THE FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF
FORUM SHOPPING." 18
As to the first assigned error: Petitioners argue that the borrowers and
the registered owners of the vessels are the foreign corporations and
not private respondents Litonjuas who are mere stockholders; and
that the revenues derived from the operations of all the vessels are
deposited in the accounts of the corporations. Hence, petitioners
maintain that these foreign corporations are the legal entities that
have the personalities to sue and not herein private respondents; that
private respondents, being mere shareholders, have no claim on the
vessels as owners since they merely have an inchoate right to
whatever may remain upon the dissolution of the said foreign
corporations and after all creditors have been fully paid and
satisfied;19 and that while private respondents may have allegedly
spent amounts equal to 10% of the acquisition costs of the vessels in
question, their 10% however represents their investments as
stockholders in the foreign corporations.20
Anent the second assigned error, petitioners posit that while the
application of the principle of forum non conveniens is discretionary
on the part of the Court, said discretion is limited by the guidelines
pertaining to the private as well as public interest factors in
determining whether plaintiffs' choice of forum should be disturbed,
as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co. vs.
Reyno,22 to wit:
"Private interest factors include: (a) the relative ease of access to
sources of proof; (b) the availability of compulsory process for the
attendance of unwilling witnesses; (c) the cost of obtaining
attendance of willing witnesses; or (d) all other practical problems
that make trial of a case easy, expeditious and inexpensive. Public
interest factors include: (a) the administrative difficulties flowing
from court congestion; (b) the local interest in having localized

controversies decided at home; (c) the avoidance of unnecessary
problems in conflict of laws or in the application of foreign law; or (d)
the unfairness of burdening citizens in an unrelated forum with jury
duty."23
In support of their claim that the local court is not the proper forum,
petitioners allege the following:
"i) The Bank of America Branches involved, as clearly mentioned in
the Complaint, are based in Hongkong and England. As such, the
evidence and the witnesses are not readily available in the
Philippines;
"ii) The loan transactions were obtained, perfected, performed,
consummated and partially paid outside the Philippines;
"iii) The monies were advanced outside the Philippines. Furthermore,
the mortgaged vessels were part of an offshore fleet, not based in the
Philippines;
"iv) All the loans involved were granted to the Private Respondents'
foreign CORPORATIONS;
"v) The Restructuring Agreements were ALL governed by the laws of
England;
"vi) The subsequent sales of the mortgaged vessels and
the application of the sales proceeds occurred and transpired outside
the Philippines, and the deliveries of the sold mortgaged vessels were
likewise made outside the Philippines;
"vii) The revenues of the vessels and the proceeds of the sales of
these vessels were ALL deposited to the Accounts of the
foreign CORPORATIONS abroad; and
"viii) Bank of America International Ltd. is not licensed nor engaged
in trade or business in the Philippines."24
Petitioners argue further that the loan agreements, security
documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they will be
governed by the laws of England;25that Philippine Courts would then
have to apply English law in resolving whatever issues may be
presented to it in the event it recognizes and accepts herein case; that
it would then be imposing a significant and unnecessary expense and
burden not only upon the parties to the transaction but also to the
local court. Petitioners insist that the inconvenience and difficulty of
applying English law with respect to a wholly foreign transaction in a
case pending in the Philippines may be avoided by its dismissal on
the ground of forum non conveniens. 26
Finally, petitioners claim that private respondents have already
waived their alleged causes of action in the case at bar for their
refusal to contest the foreign civil cases earlier filed by the
petitioners against them in Hongkong and England, to wit:
"1.) Civil action in England in its High Court of Justice, Queen's
Bench Division Commercial Court (1992-Folio No. 2098) against (a)
LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY
COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d)
ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP.
SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K.
LITONJUA & (h) AURELIO K. LITONJUA.
"2.) Civil action in England in its High Court of Justice, Queen's
Bench Division, Commercial Court (1992-Folio No. 2245) against (a)
EL CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY
S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO
KATIPUNAN LITONJUA.
92
"3.) Civil action in the Supreme Court of Hongkong High Court
(Action No. 4039 of 1992), against (a) ESHLEY COMPANIA
NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA
SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A.,
(f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g)
AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO
KATIPUNAN LITONJUA.
"4.) A civil action in the Supreme Court of Hong Kong High Court
(Action No. 4040 of 1992), against (a) ESHLEY COMPANIA
NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA
SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A.,
(f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g)
AURELIO KATIPUNAN LITONJUA, RJ., and (h) EDUARDO
KATIPUNAN LITONJUA."
and that private respondents' alleged cause of action is already barred
by the pendency of another action or by litis pendentia as shown
above.27
On the other hand, private respondents contend that certain material
facts and pleadings are omitted and/or misrepresented in the present
petition for certiorari; that the prefatory statement failed to state that
part of the security of the foreign loans were mortgages on a
39-hectare piece of real estate located in the Philippines;28 that while
the complaint was filed only by the stockholders of the corporate
borrowers, the latter are wholly-owned by the private respondents
who are Filipinos and therefore under Philippine laws, aside from the
said corporate borrowers being but their alter-egos, they have
interests of their own in the vessels.29 Private respondents also argue
that the dismissal by the Court of Appeals of the petition for
certiorari was justified because there was neither allegation nor any
showing whatsoever by the petitioners that they had no appeal, nor
any plain, speedy, and adequate remedy in the ordinary course of law
from the Order of the trial judge denying their Motion to Dismiss;
that the remedy available to the petitioners after their Motion to
Dismiss was denied was to file an Answer to the complaint;30 that as
upheld by the Court of Appeals, the decision of the trial court in not
applying the principle of forum non conveniens is in the lawful
exercise of its discretion.31 Finally, private respondents aver that the
statement of petitioners that the doctrine of res judicata also applies
to foreign judgment is merely an opinion advanced by them and not
based on a categorical ruling of this Court;32 and that herein private
respondents did not actually participate in the proceedings in the
foreign courts.33
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss
cannot be the subject of petition for certiorari. Petitioners should
have filed an answer to the complaint, proceed to trial and await
judgment before making an appeal. As repeatedly held by this Court:
"An order denying a motion to dismiss is interlocutory and cannot be
the subject of the extraordinary petition for certiorari or mandamus.
The remedy of the aggrieved party is to file an answer and to
interpose as defenses the objections raised in his motion to dismiss,
proceed to trial, and in case of an adverse decision, to elevate the
entire case by appeal in due course. xxx Under certain situations,
recourse to certiorari or mandamus is considered appropriate, i.e., (a)
when the trial court issued the order without or in excess of
jurisdiction; (b) where there is patent grave abuse of discretion by the
trial court; or (c) appeal would not prove to be a speedy and adequate
remedy as when an appeal would not promptly relieve a defendant
from the injurious effects of the patently mistaken order maintaining
the plaintiff's baseless action and compelling the defendant

needlessly to go through a protracted trial and clogging the court
dockets by another futile case."34
Records show that the trial court acted within its jurisdiction when it
issued the assailed Order denying petitioners' motion to dismiss.
Does the denial of the motion to dismiss constitute a patent grave
abuse of discretion? Would appeal, under the circumstances, not
prove to be a speedy and adequate remedy? We will resolve said
questions in conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in
refusing to dismiss the complaint on the ground that plaintiffs have
no cause of action against defendants since plaintiffs are merely
stockholders of the corporations which are the registered owners of
the vessels and the borrowers of petitioners?
No. Petitioners' argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities to sue,
and therefore, the complaint should be dismissed, is untenable. A
case is dismissible for lack of personality to sue upon proof that the
plaintiff is not the real party-in-interest. Lack of personality to sue
can be used as a ground for a Motion to Dismiss based on the fact
that the complaint, on the face thereof, evidently states no cause of
action.35 In San Lorenzo Village Association, Inc. vs. Court of
Appeals,36 this Court clarified that a complaint states a cause of
action where it contains three essential elements of a cause of action,
namely: (1) the legal right of the plaintiff, (2) the correlative
obligation of the defendant, and (3) the act or omission of the
defendant in violation of said legal right. If these elements are absent,
the complaint becomes vulnerable to a motion to dismiss on the
ground of failure to state a cause of action.37 To emphasize, it is not
the lack or absence of cause of action that is a ground for dismissal of
the complaint but rather the fact that the complaint states no cause of
action.38"Failure to state a cause of action" refers to the
insufficiency of allegation in the pleading, unlike "lack of cause of
action" which refers to the insufficiency of factual basis for the
action. "Failure to state a cause of action" may be raised at the
earliest stages of an action through a motion to dismiss the complaint,
while "lack of cause of action" may be raised any time after the
questions of fact have been resolved on the basis of stipulations,
admissions or evidence presented.39
In the case at bar, the complaint contains the three elements of a
cause of action. It alleges that: (1) plaintiffs, herein private
respondents, have the right to demand for an accounting from
defendants (herein petitioners), as trustees by reason of the fiduciary
relationship that was created between the parties involving the
vessels in question; (2) petitioners have the obligation, as trustees, to
render such an accounting; and (3) petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private
respondents as they are mere stockholders of the corporation; that the
corporate entities have juridical personalities separate and distinct
from those of the private respondents. Private respondents maintain
that the corporations are wholly owned by them and prior to the
incorporation of such entities, they were clients of petitioners which
induced them to acquire loans from said petitioners to invest on the
additional ships.
We agree with private respondents. As held in the San Lorenzo
case,40
"xxx assuming that the allegation of facts constituting plaintiffs'
cause of action is not as clear and categorical as would otherwise be
desired, any uncertainty thereby arising should be so resolved as to
enable a full inquiry into the merits of the action."
As this Court has explained in the San Lorenzo case, such a course,
would preclude multiplicity of suits which the law abhors, and
93
conduce to the definitive determination and termination of the
dispute. To do otherwise, that is, to abort the action on account of the
alleged fatal flaws of the complaint would obviously be indecisive
and would not end the controversy, since the institution of another
action upon a revised complaint would not be foreclosed.41
Second Issue. Should the complaint be dismissed on the ground
of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning 'the
forum is inconvenient', emerged in private international law to deter
the practice of global forum shopping,42 that is to prevent
non-resident litigants from choosing the forum or place wherein to
bring their suit for malicious reasons, such as to secure procedural
advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. Under this doctrine, a
court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum
and the parties are not precluded from seeking remedies elsewhere.43
Whether a suit should be entertained or dismissed on the basis of said
doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court. 44 In the case
of Communication Materials and Design, Inc. vs. Court of
Appeals,45 this Court held that "xxx [a Philippine Court may assume
jurisdiction over the case if it chooses to do so; provided, that the
following requisites are met: (1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and
the facts; and, (3) that the Philippine Court has or is likely to have
power to enforce its decision."46 Evidently, all these requisites are
present in the instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation
vs. Court of Appeals,47 that the doctrine of forum non
conveniens should not be used as a ground for a motion to dismiss
because Sec. 1, Rule 16 of the Rules of Court does not include said
doctrine as a ground. This Court further ruled that while it is within
the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after vital facts are established, to
determine whether special circumstances require the court's
desistance; and that the propriety of dismissing a case based on this
principle of forum non conveniens requires a factual determination,
hence it is more properly considered a matter of defense.48
Third issue. Are private respondents guilty of forum shopping
because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis pendentia are
present and where a final judgment in one case will amount to res
judicata in the other.49 Parenthetically, for litis pendentia to be a
ground for the dismissal of an action there must be: (a) identity of the
parties or at least such as to represent the same interest in both
actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same acts; and (c) the identity in the two cases
should be such that the judgment which may be rendered in one
would, regardless of which party is successful, amount to res
judicata in the other.50
In case at bar, not all the requirements for litis pendentia are present.
While there may be identity of parties, notwithstanding the presence
of other respondents,51 as well as the reversal in positions of
plaintiffs and defendants52, still the other requirements necessary
for litis pendentia were not shown by petitioner. It merely mentioned
that civil cases were filed in Hongkong and England without
however showing the identity of rights asserted and the reliefs sought
for as well as the presence of the elements of res judicata should one
of the cases be adjudged.
 94

As the Court of Appeals aptly observed:

"xxx [T]he petitioners, by simply enumerating the civil actions

instituted abroad involving the parties herein xxx, failed to provide
this Court with relevant and clear specifications that would show the
presence of the above-quoted elements or requisites for res
judicata. While it is true that the petitioners in their motion for
reconsideration (CA Rollo, p. 72), after enumerating the various civil
actions instituted abroad, did aver that "Copies of the foreign
judgments are hereto attached and made integral parts hereof as
Annexes 'B', 'C', 'D' and 'E'", they failed, wittingly or inadvertently,
to include a single foreign judgment in their pleadings submitted to
this Court as annexes to their petition. How then could We have been
expected to rule on this issue even if We were to hold that foreign
judgments could be the basis for the application of the
aforementioned principle of res judicata?"53

Consequently, both courts correctly denied the dismissal of herein

subject complaint.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioners.

SO ORDERED

G.R. No. 103493 June 19, 1997
PHILSEC INVESTMENT CORPORATION,
BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA
HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC.,
DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R.
PERLAS, and WILLIAM H. CRAIG, respondents.
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign
judgment upon the rights of the parties under the same cause of
action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in
view of the pendency at the time of the foreign action, dismissed
Civil Case No. 16563 on the ground of litis pendentia, in addition
to forum non conveniens. On appeal, the Court of Appeals affirmed.
Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained
separate loans from petitioners Ayala International Finance Limited
(hereafter called AYALA) 1 and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured
by shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans,
private respondent 1488, Inc., through its president, private
respondent Drago Daic, assumed Ducat's obligation under an
Agreement, dated January 27, 1983, whereby 1488, Inc. executed a
Warranty Deed with Vendor's Lien by which it sold to petitioner
Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land
in Harris County, Texas, U.S.A., for US$2,807,209.02, while
PHILSEC and AYALA extended a loan to ATHONA in the amount
of US$2,500,000.00 as initial payment of the purchase price. The
balance of US$307,209.02 was to be paid by means of a promissory
note executed by ATHONA in favor of 1488, Inc. Subsequently,
upon their receipt of the US$2,500,000.00 from 1488, Inc.,
PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession
belonging to Ducat.
As ATHONA failed to pay the interest on the balance of
US$307,209.02, the entire amount covered by the note became due
and demandable. Accordingly, on October 17, 1985, private
respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and
ATHONA in the United States for payment of the balance of
US$307,209.02 and for damages for breach of contract and for fraud
allegedly perpetrated by petitioners in misrepresenting the
marketability of the shares of stock delivered to 1488, Inc. under the
Agreement. Originally instituted in the United States District Court
of Texas, 165th Judicial District, where it was docketed as Case No.
85-57746, the venue of the action was later transferred to the United
States District Court for the Southern District of Texas, where 1488,
Inc. filed an amended complaint, reiterating its allegations in the
original complaint. ATHONA filed an answer with counterclaim,
impleading private respondents herein as counterdefendants, for
allegedly conspiring in selling the property at a price over its market
value. Private respondent Perlas, who had allegedly appraised the
property, was later dropped as counterdefendant. ATHONA sought
the recovery of damages and excess payment allegedly made to 1488,
Inc. and, in the alternative, the rescission of sale of the property. For
their part, PHILSEC and AYALA filed a motion to dismiss on the
ground of lack of jurisdiction over their person, but, as their motion
was denied, they later filed a joint answer with counterclaim against
95
private respondents and Edgardo V. Guevarra, PHILSEC's own
former president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United States
District Court for the Southern District of Texas dismissed the
counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and
embarrass him." For this reason, the U.S. court imposed so-called
Rule 11 sanctions on PHILSEC and AYALA and ordered them to
pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in
the United States, petitioners filed a complaint "For Sum of Money
with Damages and Writ of Preliminary Attachment" against private
respondents in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 16563. The complaint reiterated the
allegation of petitioners in their respective counterclaims in Civil
Action No. H-86-440 of the United States District Court of Southern
Texas that private respondents committed fraud by selling the
property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private
respondents' fraudulent misrepresentations, ATHONA, PHILSEC,
and AYALA were induced to enter into the Agreement and to
purchase the Houston property. Petitioners prayed that private
respondents be ordered to return to ATHONA the excess payment of
US$1,700,000.00 and to pay damages. On April 20, 1987, the trial
court issued a writ of preliminary attachment against the real and
personal properties of private respondents. 2
Private respondent Ducat moved to dismiss Civil Case No. 16563 on
the grounds of (1) litis pendentia, vis-a-vis Civil Action No.
H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non
conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to
state a cause of action. Ducat contended that the alleged overpricing
of the property prejudiced only petitioner ATHONA, as buyer, but
not PHILSEC and BPI-IFL which were not parties to the sale and
whose only participation was to extend financial accommodation to
ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint
"Special Appearance and Qualified Motion to Dismiss," contending
that the action being in personam, extraterritorial service of summons
by publication was ineffectual and did not vest the court with
jurisdiction over 1488, Inc., which is a non-resident foreign
corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducat's motion to
dismiss, stating that "the evidentiary requirements of the controversy
may be more suitably tried before the forum of the litis pendentia in
the U.S., under the principle in private international law of forum non
conveniens," even as it noted that Ducat was not a party in the U.S.
case.
A separate hearing was held with regard to 1488, Inc. and Daic's
motion to dismiss. On March 9, 1988, the trial court 3 granted the
motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that
the "main factual element" of the cause of action in this case which is
the validity of the sale of real property in the United States between
defendant 1488 and plaintiff ATHONA is the subject matter of the
pending case in the United States District Court which, under the
doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or
fluctuations of the fair market value of real estate situated in Houston,
Texas, U.S.A. from the date of the transaction in 1983 up to the
present and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc.
and Daic because they were non-residents and the action was not an

action in rem or quasi in rem, so that extraterritorial service of
summons was ineffective. The trial court subsequently lifted the writ
of attachment it had earlier issued against the shares of stocks of
1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial
court erred in applying the principle of litis pendentia and forum non
conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks
belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of
Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the
ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic,
while the defendants are Philsec, the Ayala International Finance Ltd.
(BPI-IFL's former name) and the Athona Holdings, NV. The case at
bar involves the same parties. The transaction sued upon by the
parties, in both cases is the Warranty Deed executed by and between
Athona Holdings and 1488 Inc. In the U.S. case, breach of contract
and the promissory note are sued upon by 1488 Inc., which likewise
alleges fraud employed by herein appellants, on the marketability of
Ducat's securities given in exchange for the Texas property. The
recovery of a sum of money and damages, for fraud purportedly
committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the
same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an
action in personam for the recovery of a sum of money for alleged
tortious acts, so that service of summons by publication did not vest
the trial court with jurisdiction over 1488, Inc. and Drago Daic. The
dismissal of Civil Case No. 16563 on the ground offorum non
conveniens was likewise affirmed by the Court of Appeals on the
ground that the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main
transaction, and involve foreign elements, to wit: 1) the property
subject matter of the sale is situated in Texas, U.S.A.; 2) the seller,
1488 Inc. is a non-resident foreign corporation; 3) although the buyer,
Athona Holdings, a foreign corporation which does not claim to be
doing business in the Philippines, is wholly owned by Philsec, a
domestic corporation, Athona Holdings is also owned by BPI-IFL,
also a foreign corporation; 4) the Warranty Deed was executed in
Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION
BETWEEN THE SAME PARTIES FOR THE SAME CAUSE
(LITIS PENDENTIA) RELIED UPON BY THE COURT OF
APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL
OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO
RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING
THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL
ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE
COURT OF APPEALS ERRED IN NOT HOLDING THAT
PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION,
NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS
RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR
THERE IS EVERY REASON TO PROTECT AND VINDICATE
PETITIONERS' RIGHTS FOR TORTIOUS OR WRONGFUL
ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE
96
MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM
HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are
made.
First. It is important to note in connection with the first point that
while the present case was pending in the Court of Appeals, the
United States District Court for the Southern District of Texas
rendered judgment 5 in the case before it. The judgment, which was
in favor of private respondents, was affirmed on appeal by the Circuit
Court of Appeals. 6Thus, the principal issue to be resolved in this
case is whether Civil Case No. 16536 is barred by the judgment of
the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded
as res judicata, a judgment admitting the foreign decision is not
necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving
them an opportunity to impeach it on grounds stated in Rule 39, §50
of the Rules of Court, to wit: "want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact."
Petitioners' contention is meritorious. While this Court has given the
effect of res judicata to foreign judgments in several cases, 7 it was
after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 8 It is
not necessary for this purpose to initiate a separate action or
proceeding for enforcement of the foreign judgment. What is
essential is that there is opportunity to challenge the foreign
judgment, in order for the court to properly determine its efficacy.
This is because in this jurisdiction, with respect to actions in
personam, as distinguished from actions in rem, a foreign judgment
merely constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to
the contrary. 9 Rule 39, §50 provides:
Sec. 50. Effect of foreign judgments. — The effect of a judgment of a
tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may be
repelled by evidence of a want of jurisdiction, want of notice to the
party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union
Insurance Society of Canton, Ltd., 10 which private respondents
invoke for claiming conclusive effect for the foreign judgment in
their favor, the foreign judgment was considered res judicata because
this Court found "from the evidence as well as from appellant's own
pleadings" 11 that the foreign court did not make a "clear mistake of
law or fact" or that its judgment was void for want of jurisdiction or
because of fraud or collusion by the defendants. Trial had been
previously held in the lower court and only afterward was a decision
rendered, declaring the judgment of the Supreme Court of the State
of Washington to have the effect of res judicata in the case before the
lower court. In the same vein, in Philippines International Shipping
Corp. v. Court of Appeals, 12 this Court held that the foreign
judgment was valid and enforceable in the Philippines there being no
showing that it was vitiated by want of notice to the party, collusion,
fraud or clear mistake of law or fact. The prima facie presumption
under the Rule had not been rebutted.
 97

In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary.
Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence
presented thereat, to assure a proper determination of whether the
issues then being litigated in the U.S. court were exactly the issues
raised in this case such that the judgment that might be rendered
would constitute res judicata. As the trial court stated in its disputed
order dated March 9, 1988.
On the plaintiff's claim in its Opposition that the causes of action of
this case and the pending case in the United States are not
identical, precisely the Order of January 26, 1988 never found that
the causes of action of this case and the case pending before the USA
Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that
petitioners' action is barred by the principle of res judicata.
Petitioners in fact questioned the jurisdiction of the U.S. court over
their persons, but their claim was brushed aside by both the trial
court and the Court of Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and
Daic filed a petition for the enforcement of judgment in the Regional
Trial Court of Makati, where it was docketed as Civil Case No.
92-1070 and assigned to Branch 134, although the proceedings were
suspended because of the pendency of this case. To sustain the
appellate court's ruling that the foreign judgment constitutes res
judicata and is a bar to the claim of petitioners would effectively
preclude petitioners from repelling the judgment in the case for
enforcement. An absurdity could then arise: a foreign judgment is not
subject to challenge by the plaintiff against whom it is invoked, if it
is pleaded to resist a claim as in this case, but it may be opposed by
the defendant if the foreign judgment is sought to be enforced against
him in a separate proceeding. This is plainly untenable. It has been
held therefore that:
In this case, the trial court abstained from taking jurisdiction solely
on the basis of the pleadings filed by private respondents in
connection with the motion to dismiss. It failed to consider that one
of the plaintiffs (PHILSEC) is a domestic corporation and one of the
defendants (Ventura Ducat) is a Filipino, and that it was the
extinguishment of the latter's debt which was the object of the
transaction under litigation. The trial court arbitrarily dismissed the
case even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial
court to hold that jurisdiction over 1488, Inc. and Daic could not be
obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, §17 on extraterritorial
service provides that service of summons on a non-resident
defendant may be effected out of the Philippines by leave of Court
where, among others, "the property of the defendant has been
attached within the Philippines." 18 It is not disputed that the
properties, real and personal, of the private respondents had been
attached prior to service of summons under the Order of the trial
court dated April 20, 1987. 19
Fourth. As for the temporary restraining order issued by the Court on
June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445
filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions
imposed on the petitioners by the U.S. court, the Court finds that the
judgment sought to be enforced is severable from the main judgment
under consideration in Civil Case No. 16563. The separability of
Guevara's claim is not only admitted by petitioners, 20 it appears from
the pleadings that petitioners only belatedly impleaded Guevarra as
defendant in Civil Case No. 16563. 21 Hence, the TRO should be
lifted and Civil Case No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED
and Civil Case No. 16563 is REMANDED to the Regional Trial
Court of Makati for consolidation with Civil Case No. 92-1070 and
for further proceedings in accordance with this decision. The
temporary restraining order issued on June 29, 1994 is hereby
LIFTED.

[A] foreign judgment may not be enforced if it is not recognized in SO ORDERED.

the jurisdiction where affirmative relief is being sought. Hence, in the
interest of justice, the complaint should be considered as a petition
for the recognition of the Hongkong judgment under Section 50 (b),
Rule 39 of the Rules of Court in order that the defendant, private
respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if
applicable. 14

Accordingly, to insure the orderly administration of justice, this case

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

Second. Nor is the trial court's refusal to take cognizance of the case
justifiable under the principle of forum non conveniens. First, a
motion to dismiss is limited to the grounds under Rule 16, §1, which
does not include forum non conveniens. 16 The propriety of
dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of
defense. Second, while it is within the discretion of the trial court to
abstain from assuming jurisdiction on this ground, it should do so
only after "vital facts are established, to determine whether special
circumstances" require the court's desistance. 17
 98

G.R. No. 172301, August 19, 2015 18, 1994, June 2, 1994, and June 17, 1994. The trial court granted
these motions, with the last one set to expire on July 3, 1994. On July
PHILIPPINE NATIONAL CONSTRUCTION 4, 1994, PNCC filed a Motion for another five-day extension. The
CORPORATION, Petitioner, v. ASIAVEST MERCHANT trial court denied this Motion on July 13, 1994. 21
BANKERS (M) BERHAD, Respondent.
On July 27, 1994, the trial court declared PNCC in default for failure
DECISION
to file any responsive pleading, and allowed Asiavest Merchant
LEONEN, J.: Bankers (M) Berhad to present its evidence ex parte.22

This case stemmed from an action for recovery of sum of money The Regional Trial Court, in its Decision dated November 29, 1994,
filed before the Regional Trial Court of Pasig by respondent rendered judgment in favor of Asiavest Merchant Bankers (M)
Malaysian corporation against petitioner Philippine National Berhad:chanRoblesvirtualLawlibrary
Construction Corporation (PNCC), formerly Construction &
Development Corporation of the Philippines. PNCC is a WHEREFORE, premises considered and it appearing that plaintiff
government-acquired asset corporation. hads [sic] proved its claim by preponderance of evidence, judgment
is hereby rendered in favor of plaintiff and against defendant
We resolve whether our courts have subject matter jurisdiction over Philippine National Construction Corporation ordering the latter to
an action for recovery of sum of money filed by a Malaysian pay the plaintiff:
corporation against a Philippine corporation involving a contract
1. The sum of Malaysian Ringgit M $3,915,053.54 or its
executed and performed in Malaysia, and the applicability of
equivalent in [Philippine peso at the bank rate of exchange
the forum non conveniens principle.
(on the date of payment) plus legal interest from the date of
demand until fully paid.
PNCC filed this Petition1 assailing the Court of Appeals
Decision2 dated June 10, 2005 dismissing its appeal, and 2. The sum of P300,000.00 as and by way of attorney's fees;
Resolution3 dated April 7, 2006 denying reconsideration.4 The trial and
court ruled in favor of Asiavest Merchant Bankers (M) Berhad and
ordered PNCC to reimburse it the sum of Malaysian Ringgit (MYR) 3. Cost of suit.
3,915,053.54 or its equivalent in Philippine peso.5
SO ORDERED.23ChanRoblesVirtualawlibrary
PNCC prays that this court reverse and set aside the Court of Appeals
The trial court found that Asiavest Merchant Bankers (M) Berhad
Decision and Resolution, as well as the trial court's
complied with the requisites for proof of written foreign laws.24 The
Decision6 declaring it in default.7 It prays the trial court's order of
Malaysian laws invoked were found to be similar with Articles 2066
default be reversed and it be allowed to file its Answer, or, the cause
and 2067 of the Civil Code:25cralawred
of action having already prescribed under Malaysian laws, the case
be dismissed outright.8 ART. 2066. The guarantor who pays for a debtor must be
indemnified by the latter.
PNCC and Asiavest Holdings (M) Sdn. Bhd. (Asiavest Holdings)
caused the incorporation of an associate company known as The indemnity comprises:
Asiavest-CDCP Sdn. Bhd. (Asiavest-CDCP), through which they
entered into contracts to construct rural roads and bridges for the (1) The total amount of the debt;
State of Pahang, Malaysia.9
(2) The legal interests thereon from the time the payment was made
known to the debtor, even though it did not earn interest for the
In connection with this construction contract, PNCC obtained various
creditor;
guarantees and bonds from Asiavest Merchant Bankers (M) Berhad
to guarantee the due performance of its obligations.10 The four (3) The expenses incurred by the guarantor after having notified the
contracts of guaranty stipulate that Asiavest Merchant Bankers (M) debtor that payment had been demanded of him;
Berhad shall guarantee to the State of Pahang "the due performance
by PNCC of its construction contracts . . . and the repayment of the (4) Damages, if they are due.
temporary advances given to PNCC[.]"11 These contracts were
understood to be governed by the laws of Malaysia.12
ART. 2067. The guarantor who pays is subrogated by virtue thereof
There was failure to perform the obligations under the construction to all the rights which the creditor had against the debtor.
contract, prompting the State of Pahang to demand payment against
Asiavest Merchant Bankers (M) Berhad's performance bonds.13 It If the guarantor has compromised with the creditor, he cannot
"entered into a compromise agreement with the State of Pahang by demand of the debtor more than what he has really
paying . . . the reduced amount of [Malaysian Ringgit (MYR)] paid.ChanRoblesVirtualawlibrary
3,915,053.54[.]"14 Consequently, the corporation demanded
On January 30, 1995, the trial court denied PNCC's Motion to Lift
indemnity from PNCC by demanding the amount it paid to the State
Order of Default26 filed on December 12, 1994.27 On August 11,
of Pahang.15
1995, it also denied PNCC's Motion for Reconsideration Ad
Cautelam28 dated December 21, 1994.29 PNCC brought its case
On April 12, 1994, Asiavest Merchant Bankers (M) Berhad filed a
before the Court of Appeals.30
Complaint16 for recovery of sum of money against PNCC before the
Regional Trial Court of Pasig.17 It based its action on Malaysian laws.
The Court of Appeals, in its Decision dated June 10, 2005, dismissed
Specifically, it invoked Section 9818 of the Malaysian Contracts Act
PNCC's appeal for raising pure questions of law exclusively
of 1950 and Section 1119 of the Malaysian Civil Law Act of 1956.20
cognizable by this court.31 It likewise denied reconsideration.32
PNCC filed Motions for extension of time to file its Answer on May

Hence, PNCC filed this Petition.
PNCC contends it had consistently raised the propriety of impleading
the two Malaysian corporations, Asiavest-CDCP and Asiavest
Holdings, and their participant liability, which are questions of
fact.33According to PNCC, Asiavest-CDCP undertook to hold PNCC
"free and harmless from all its obligations under the construction
agreement[,]"34 while Asiavest Holdings agreed in the guaranty
agreement to share with PNCC the guarantee liability on a 51%
(Asiavest Holdings) - 49% (PNCC) arrangement.35Since the
repayment of financing facilities received by Asiavest-CDCP was
jointly guaranteed by PNCC and Asiavest Holdings as admitted in
the Complaint,36 the lower courts "erred in ordering [PNCC] to
reimburse the entire amount claimed by the respondent."37 While the
issue on its exact liability was not assigned as an error, PNCC argues
it has amply discussed this issue in its pleadings.38
PNCC submits that the trial court could have invoked the principle
of forum non conveniens and refused to take cognizance of the case
considering the difficulty in acquiring jurisdiction over the two
Malaysian corporations and in determining PNCC's exact liability.39
PNCC adds that it was deprived of its day in court when its Motion
for another five-day extension to file an Answer was denied, and it
was subsequently declared in default.40 "[T]he transactions involved
originated from and occurred in a foreign country[.]"41 This
constrained PNCC to request several extensions in order to collate
the records in preparation for its defense.42
PNCC also raises prescription pursuant to Item 6 of the Malaysian
Limitation Act of 1953 (Act 254) in that "actions founded on contract
or to recover any sum ... by virtue of any written law . . . shall not be
brought after the expiration of six years from [accrual of cause of
action]."43 The Complaint alleged that Asiavest Merchant Bankers
(M) Berhad paid the State of Pahang "in or about 1988[.]"44 On April
14, 1982, April 2, 1983, and August 2, 1983, Asiavest Merchant
Bankers (M) Berhad made demands against PNCC for payment on
the guarantees in favor of the State of Pahang.45 Since the Complaint
was filed on April 13, 1994, six years had already elapsed from
1988.46
Lastly, PNCC submits that Asiavest Merchant Bankers (M) Berhad
already winded up voluntarily based on the Certification 47 issued by
the Director of the Insolvency and Liquidation Department for
Official Receiver, Malaysia.48 PNCC alleges that the liquidators
declared in their Account of Receipts and Payments and Statement of
the Position in the Winding Up dated August 3, 1995 and submitted
on April 4, 2006 that "there [were] no more debts or claims existing
for or against the respondent."49 Thus, the case is now moot and
academic with the termination of Asiavest Merchant Bankers (M)
Berhad's corporate existence coupled with the declaration of no
claims.50
Asiavest Merchant Bankers (M) Berhad counters that the Court of
Appeals did not err in dismissing the appeal as PNCC's Brief51 only
raised two issues that are both questions of law: lack of jurisdiction
over the subject matter, and deprivation of day in court with the
denial of its Motion for Reconsideration Ad Cautelam.52
Asiavest Merchant Bankers (M) Berhad argues that the principle
of forum non conveniens was addressed to the discretion of the trial
court.53 Moreover, this issue was not raised before the Court of
Appeals. The issue on prescription based on Malaysian laws was also
not raised. In any case, PNCC failed to plead and prove this foreign
law provision.54
On its civil personality, Asiavest Merchant Bankers (M) Berhad
99
denies it has ceased to exist, and this issue was also not raised before
the lower court. In any case, this is of no moment as Asiavest
Merchant Bankers (M) Berhad had already acquired a decision in its
favor.55
According to Asiavest Merchant Bankers (M) Berhad, PNCC was
not denied due process as it was granted a total of 60 days to file a
responsive pleading before the trial court.56 It submits that PNCC
wasted almost six months before moving to lift the default
order.57 Moreover, "the filing and consideration of a party's motion
for reconsideration accords [it] due process."58
The Petition raises the following issues:
First, whether the Court of Appeals erred in dismissing the appeal on
the ground that it raised pure questions of law;cralawlawlibrary
Second, whether the Court of Appeals erred in not finding that the
two Malaysian corporations, Asiavest Holdings (M) Sdn. Bhd. and
Asiavest-CDCP Sdn. Bhd., should have been impleaded as
parties;cralawlawlibrary
Third, whether the trial court "erred in not refusing to assume
jurisdiction on the ground of forum non-conveniens[;]"59
Fourth, whether petitioner Philippine National Construction
Corporation was deprived of due process when the trial court
declared it in default;cralawlawlibrary
Fifth, whether respondent Asiavest Merchant Bankers (M) Berhad's
claim already prescribed under Malaysian laws; and
Lastly, whether this case "should be dismissed considering that
respondent [Asiavest Merchant Bankers (M) Berhad] is no longer an
existing corporation."60
I.
On the procedural issue, petitioner submits that the Court of Appeals
erred in finding that only questions of law were raised.61
Section 9(3) of Batas Pambansa Blg. 129 enumerates the appellate
jurisdiction of the Court of Appeals. This section includes the
proviso: "except those falling within the appellate jurisdiction of the
Supreme Court[.]" This court's appellate jurisdiction is found in
Article VIII, Section 5(2)(e) of the
Constitution:chanRoblesvirtualLawlibrary
SECTION 5. The Supreme Court shall have the following powers:
....
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari ,
as the law or the Rules of Court may provide, final judgments and
orders of lower courts in:
....
(e) All cases in which only an error or question of law is
involved.ChanRoblesVirtualawlibrary
A question of law exists "when the doubt or difference arises as to
what the law is on a certain state of facts[,]"62 while a question of fact
exists "when the doubt or difference arises as to the truth or the
falsehood of alleged facts[.]"63 Questions of fact require the
examination of the probative value of the parties' evidence. 64

This Petition originated from a default judgment against petitioner.
Petitioner was not able to present evidence before the trial court.
Necessarily, the errors raised from the trial court involved only
questions of law.
II.
Petitioner insists that the issue on "the propriety of impleading the
two Malaysian corporations as well as their participant liability . . .
involves a question of fact."65
According to petitioner, Asiavest-CDCP undertook to hold petitioner
free and harmless from all its obligations under the construction
agreement, while Asiavest Holdings agreed in the guaranty
agreement to share with PNCC the guarantee liability on a 51%
(Asiavest Holdings) - 49% (PNCC) arrangement.66Petitioner submits
that "the propriety of impleading the two Malaysian corporations[,]
[and] their participant liability[,] [are] question[s] of fact."67
Petitioner adds that it has consistently mentioned its argument on the
two Malaysian companies in its pleadings before the lower
courts.68 Specifically, these pleadings were the Motion to Lift Order
of Default69 with Affidavit of Merit70 dated December 9, 1994,
Motion for Reconsideration Ad Cautelam,71Brief for PNCC,72 and
Comment73 on Asiavest Merchant Bankers (M) Berhad's Motion to
Dismiss Appeal.
Respondent counters that this was not assigned as an error before the
Court of Appeals.74
Rule 44, Section 13 of the Rules of Court enumerates the required
contents of an appellant's brief. In paragraph (e), the appellant's brief
must include "[a] clear and concise statement of the issues of fact or
law to be submitted to the court for its judgment[.]"
In its appellant's Brief before the Court of Appeals, petitioner only
assigned the following two errors:chanRoblesvirtualLawlibrary
I. THE TRIAL COURT GRAVELY ERRED IN RENDERING THE
QUESTIONED DECISION AS IT HAD NO JURISDICTION
OVER THE SUBJECT MATTER OF THE CASE.
II. THE TRIAL COURT GRAVELY ERRED IN DENYING THE
MOTION FOR RECONSIDERATION AD CAUTELAM FILED BY
DEFENDANT-APPELLANT AS IT DEPRIVED THE LATTER OF
HIS DAY IN COURT.75ChanRoblesVirtualawlibrary
The argument on the two Malaysian corporations was raised by
petitioner for the first time in its Motion to Lift Order of Default with
Affidavit of Merit dated December 9,
1994:chanRoblesvirtualLawlibrary
7. If the Defendant be given the chance to present its evidence, it will
prove the following:chanRoblesvirtualLawlibrary
....
b. Per subcontract agreement entered into by and between defendant
and a third party, Asiavest CDCP Sdn. Bhd., the liability of
defendant (CDCP) in the event of default regarding the performance
bonds and guarantees alleged in the complaint which were posted in
the name of the defendant shall be borne by Asiavest CDCP Sdn.
Bhd.
Hence, the need for impleading Asiavest CDCP Sdn. Bhd.
c. Assuming that Defendant is liable to the plaintiff, its liability is
100
joint with Asiavest Holdings Company and only to the extent of 49%
of the total amount due which is its proportionate share in the joint
venture project entered into by them.76ChanRoblesVirtualawlibrary
On January 30, 1995, the trial court denied petitioner's Motion to Lift
Order of Default.77 There is no showing whether petitioner
questioned this trial court Order as petitioner opted to file the Motion
for Reconsideration Ad Cautelam dated December 21, 1994, praying,
among others, that it "be considered as Motion for Reconsideration
of the Decision dated November 29, 1994 in the event that the
Motion to Lift Order of Default is denied[.]"78 On August 11, 1995,
the trial court also denied this later Motion,79 and there is no showing
whether petitioner questioned this trial court Order.
In any event, this court has held that "[i]t is essential, to boot, that
that party demonstrate that he has a meritorious cause of action or
defense; otherwise, nothing would be gained by setting the default
order aside."80
Petitioner's bare allegations fail to convince. The bases of its
argument to implead and hold the two Malaysian corporations liable
are the subcontract agreement and guaranty agreement. Copies of
these agreements were not submitted with any of its pleadings. Thus,
the lower courts could not have determined for certain whether the
two Malaysian corporations did enter into the alleged agreements, the
subject of the agreements, or the extent of their liabilities, if any.
Petitioner claims that respondent made admissions in its Complaint
in relation to the two Malaysian companies.81 Specifically,
paragraphs 3 and 4 of the Complaint
read:chanRoblesvirtualLawlibrary
3. While in Malaysia, defendant [PNCC] jointly with Asiavest
Holdings (M) Sdn[.] Bhd[.], caused the incorporation of an associate
company known as Asiavest-CDCP Sdn. Bhd., with which it
undertook to construct rural roads and bridges under contracts with
the State of Pahang, Malaysia.
4. In connection with defendant's construction contracts with the
State of Pahang, it obtained various guarantees and bonds from
plaintiff to guarantee to the State of Pahang and other parties the due
performance of defendant's obligations. Defendant bound itself to
indemnify plaintiff for liability or payment on these bonds and
guarantees.
Defendant also directly guaranteed to plaintiff, jointly with Asiavest
Holdings (M) Sdn. Bhd., the repayment of certain financing
facilities received from plaintiff by Asiavest-CDCP Sdn.
Bhd.82 (Emphasis supplied)ChanRoblesVirtualawlibrary
However, there was no factual finding on the connection between the
"financing facilities" received by Asiavest-CDCP from respondent,
and the performance bond transactions respondent now claims from.
This was argued by respondent in its Brief before the Court of
Appeals as follows:chanRoblesvirtualLawlibrary
The suit below was not filed to collect repayment of those financing
facilities, whether against the entity that received the facilities or its
guarantors. It was filed to enforce PNCC's obligation to indemnify
plaintiff Asiavest on its performance bond payments to project
owners that PNCC had abandoned. The Asiavest performance bonds
were transactions different from the "financing facilities" PNCC
refers to. The Asiavest indemnification claims, and the bonds and
other contracts on which they were based, were clearly identified in
the complaint as follows:....83ChanRoblesVirtualawlibrary
Also, since petitioner mentioned its argument on the two Malaysian
corporations in its Motion to Lift Order of Default84 and Motion for

Reconsideration Ad Cautelam85 filed before the trial court, these
were already considered by the lower court when it ruled on both
Motions.
Assuming that the subcontract agreement indeed provides that
Asiavest-CDCP would answer any liability upon default on the
performance bond, petitioner may later claim reimbursement from
this Malaysian corporation the amount it was made to pay by
judgment in this suit.
III.
Petitioner raised only two errors before the Court of Appeals.86 First,
the trial court had no jurisdiction over the subject matter of the case,
and it would be more convenient for both parties if the case was
heard in the forum where the contracts were executed and
performed.87 Second, petitioner was deprived of its day in court.88
Petitioner raised these contentions before the trial court in its Motion
to Lift Order of Default with Affidavit of Merit dated December 9,
199489 and Motion for Reconsideration Ad Cautelam dated
December 21, 1994.90 These were the same two errors it elevated to
the Court of Appeals in its Brief.91
On the jurisdiction issue, jurisdiction over the subject matter is
conferred by law.92 Batas Pambansa Blg. 129, otherwise known as
The Judiciary Reorganization Act of 1980, is one such law that
provides for the jurisdiction of our courts. A plain reading of Section
1993 shows that civil actions for payment of sum of money are within
the exclusive original jurisdiction of trial
courts:chanRoblesvirtualLawlibrary
SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall
exercise exclusive original jurisdiction:
....
(8) In all other cases in which the demand, exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and
costs or the value of the property in controversy exceeds One
hundred thousand pesos (P100,000) or, in such other cases in Metro
Manila, where the demand, exclusive of the abovementioned items
exceeds Two hundred thousand pesos
(P200,000).ChanRoblesVirtualawlibrary
These jurisdictional amounts were adjusted to P300,000.00, and
P400,000.00 in the case of Metro Manila.94 Thus, the Regional Trial
Court of Pasig has jurisdiction over respondent's complaint for
recovery of the sum of Malaysian Ringgit (MYR) 3,915,053.54.
Petitioner argues that "[i]n view of the compelling necessity to
implead the two foreign corporations, the Trial Court should have
refused to assume jurisdiction over the case on the ground of forum
non-conveniens, even if the Court might have acquired jurisdiction
over the subject matter and over the person of the petitioner."95 We
find that the trial court correctly assumed jurisdiction over the
Complaint.
"Forum non conveniens literally translates to 'the forum is
inconvenient.'"96 This doctrine applies in conflicts of law cases. It
gives courts the choice of not assuming jurisdiction when it appears
that it is not the most convenient forum and the parties may seek
redress in another one.97 It is a device "designed to frustrate illicit
means for securing advantages and vexing litigants that would
otherwise be possible if the venue of litigation (or dispute resolution)
were left entirely to the whim of either party."98
101
Puyat v. Zabarte99 enumerated practical reasons when courts may
refuse to entertain a case even though the exercise of jurisdiction is
authorized by law:chanRoblesvirtualLawlibrary
1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence
there;cralawlawlibrary
2) The belief that the non-resident plaintiff sought the forum[,] a
practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;cralawlawlibrary
3) The unwillingness to extend local judicial facilities to non�
residents or aliens when the docket may already be
overcrowded;cralawlawlibrary
4) The inadequacy of the local judicial machinery for effectuating the
right sought to be maintained; and
5) The difficulty of ascertaining foreign law.100 (Emphasis in the
original)ChanRoblesVirtualawlibrary
On the other hand, courts may choose to assume jurisdiction subject
to the following requisites: "(1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."101
The determination of whether to entertain a case is addressed to the
sound discretion of the court, which must carefully consider the facts
of the particular case.102 A mere invocation of the doctrine of forum
non conveniens or an easy averment that foreign elements exist
cannot operate to automatically divest a court of its jurisdiction. It is
crucial for courts to determine first if facts were established such that
special circumstances exist to warrant its desistance from assuming
jurisdiction.103
We discussed in Saudi Arabian Airlines v. Rebesencio104 how the
doctrine grounds on "comity and judicial efficiency"105 and how it
involves a recognition that other tribunals may be "better positioned
to enforce judgments[:]"106
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure undue
advantages by engaging in forum shopping on an international scale.
It is also grounded on principles of comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in
exercising jurisdiction on account of forum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs
which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that
tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation
where a tribunal is rendered incompetent in the face of the greater
capability � both analytical and practical � of a tribunal in another
jurisdiction.107 (Emphasis supplied)ChanRoblesVirtualawlibrary
Saudi Arabian Airlines also discussed the need to raise forum non
conveniens at the earliest possible time, and to show that a prior suit
has been brought in another
jurisdiction:chanRoblesvirtualLawlibrary

On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.
....
Consistent with forum non conveniens as fundamentally a factual
matter, it is imperative that it proceed from a factually established
basis. It would be improper to dismiss an action pursuant to forum
non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that
a prior suit has, in fact, been brought in another jurisdiction.
....
We deem it more appropriate and in the greater interest of prudence
that a defendant not only allege supposed dangerous tendencies in
litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.108 (Emphasis in the
original)ChanRoblesVirtualawlibrary
The trial court assumed jurisdiction and explained in its Order dated
August 11, 1995 that "[o]n the contrary[,] to try the case in the
Philippines, it is believed, would be more convenient to defendant
corporation as its principal office is located in the Philippines, its
records will be more accessible, witnesses would be readily available
and entail less expenses in terms of legal services."109 We agree.
Petitioner is a domestic corporation with its main office in the
Philippines. It is safe to assume that all of its pertinent documents in
relation to its business would be available in its main office. Most of
petitioner's officers and employees who were involved in the
construction contract in Malaysia could most likely also be found in
the Philippines. Thus, it is unexpected that a Philippine corporation
would rather engage this civil suit before Malaysian courts. Our
courts would be "better positioned to enforce [the] judgment and,
ultimately, to dispense"110 in this case against petitioner.
Also, petitioner failed to plead and show real and present danger that
another jurisdiction commenced litigation and the foreign tribunal
chose to exercise jurisdiction.111
IV.
The other error petitioner raised before the Court of Appeals
involved due process. Petitioner argues it was denied its day in court.
We find no denial of petitioner's right to due process by the lower
court.
This court has consistently held that the essence of due process is the
opportunity to be heard. In other words, there is no denial of the right
to due process if there was an opportunity for the parties to defend
their interests in due course.112
Petitioner had been able to file a Motion for Reconsideration Ad
Cautelam before the trial court, and later elevated its case before the
Court of Appeals. There is no denial of due process if a party was
given an opportunity to be heard in a Motion for Reconsideration. 113
Petitioner also did not take advantage of the opportunities it was
given to file a responsive pleading. It allowed the periods it was
given for the filing of pleadings to lapse.
The trial court granted petitioner's three Motions for extension of
102
time to file its Answer,114 yet petitioner still failed to file its Answer
on the day it was due. In its Motion to Lift Order of Default,
petitioner alleged that "[t]he Lawyer previously handling this case,
Atty. Noel de Leon, had already transferred to another government
office and that he failed to file an Answer in this case due to
excusable negligence brought about by the failure of the Defendant
to furnish and provide him with all the pertinent documents
necessary in the preparation of its defense."115 Excusable negligence
means negligence that "ordinary diligence and prudence could not
have guarded against."116 The Motion did not state the pertinent
documents it needed from respondent that prevented petitioner from
filing a timely Answer.
Petitioner never attempted to file its Answer, even belatedly. In its
Petition before this court, petitioner prays that it still be allowed to
file an Answer.117 Petitioner argued below that the trial court had no
jurisdiction over the subject matter, yet it did not file a Motion to
Dismiss on this ground pursuant to Rule 16, Section 1(b)118 of the
Rules of Court.
Also, the trial court ordered petitioner in default on July 27, 1994 and
rendered judgment on November 29, 1994. It was only after five
months or on December 12, 1994 that petitioner filed a Motion to
Lift Order of Default.
This Motion included a two-page Affidavit of Merit alleging that the
trial court has no jurisdiction over the subject matter; its subcontract
agreement with Asiavest-CDCP provides that the latter will be the
one liable in case of default in the performance bond; and it is jointly
liable with Asiavest Holdings so its liability, if any, is only to the
extent of 49%.119 The Affidavit did not state the evidence it plans to
present in the event its Motion is granted, or attach documents in
support of its claims.
V.
Petitioner contends that under Item 6 of the Malaysian Limitation
Act of 1953 (Act 254), "actions founded on contract or to recover
any sum . . . by virtue of any written law . . . shall not be brought
after the expiration of six years from [accrual of] cause of
action[.]"120 It contends that the Complaint was filed on April 13,
1994. Thus, six years already elapsed from 1988.121
Prescription is one of the grounds for a motion to dismiss,122 but
petitioner did not avail itself of this remedy. Prescription was also not
raised as an error before the Court of Appeals. Nevertheless, we have
ruled that prescription may be raised for the first time before this
court.123
Petitioner invokes Malaysian laws on prescription, but it was not able
to prove these foreign law provisions. Our courts follow the doctrine
of processual presumption:chanRoblesvirtualLawlibrary
It is hornbook principle, however, that the party invoking the
application of a foreign law has the burden of proving the law, under
the doctrine of processual presumption which, in this case,
petitioners failed to discharge. The Court's ruling
in EDI-Staffbuilders Int'l, v.
NLRC illuminates:chanRoblesvirtualLawlibrary
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters not
provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties
(lex loci intentiones) to apply to the contract, Saudi Labor Laws
should govern all matters relating to the termination of the
employment of Gran.
 103

In international law, the party who wants to have a foreign law SO ORDERED.
applied to a dispute or case has the burden of proving the foreign law.
The foreign law is treated as a question of fact to be properly pleaded
and proved as the judge or labor arbiter cannot take judicial notice of
a foreign law. He is presumed to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent Saudi laws
on the matter; thus, the International Law doctrine
of presumed-identity approachor processual presumption comes into
play. Where a foreign law is not pleaded or, even if pleaded, is not
proved, the presumption is that foreign law is the same as
ours. Thus, we apply Philippine labor laws in determining the issues
presented before us.ChanRoblesVirtualawlibrary

The Philippines does not take judicial notice of foreign laws, hence,
they must not only be alleged; they must be proven. To prove a
foreign law, the party invoking it must present a copy thereof and
comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
Court[.]124 (Emphasis supplied)ChanRoblesVirtualawlibrary

Our provisions on prescription are found in the Civil Code.

Specifically, Article 1144(1) of the Civil Code states that actions
upon a written contract must be brought within 10 years from the
accrual of the right, and not six years.

Even assuming that the six-year prescription applies, petitioner

cannot conclude prescription from the allegations in the Complaint.
The Complaint filed on April 12, 1994 states that Asiavest Merchant
Bankers (M) Berhad reached settlement with the State of Pahang
"[i]n or about 1988[.]"125 If Asiavest Merchant Bankers (M) Berhad
paid on April 13, 1988 onward, six years would not yet elapse since
the Complaint was filed on April 12, 1994.

VI.

Lastly, petitioner submits that respondent voluntarily winded up and

is no longer an existing corporation based on a Certification issued
by the Director of Insolvency and Liquidation Department for
Official Receiver, Malaysia.126 Petitioner adds that the appointed
liquidators declared that there were no more debts or claims existing
for or against respondent in their Account of Receipts and Payments
and Statement of the Position in the Winding Up dated August 3,
1995 and submitted on April 4, 2006.

Respondent denies this allegation. It argues that this was not raised
before the lower courts and, in any case, respondent already acquired
a decision in its favor.127

The Petition did not attach a copy of the alleged liquidators'

declaration that respondent had no more existing claims. Based on
petitioner's allegation, this declaration was dated August 3, 1995, an
earlier date than petitioner's Notice of Appeal128 to the Court of
Appeals dated August 31, 1995. However, petitioner only mentioned
this declaration in its Petition before this court.

It is consistent with fair play that new issues cannot be raised for the
first time before this court if these could have been raised earlier
before the lower courts.129 Justice and due process demand that this
rule be followed.

In any event, respondent is a Malaysian corporation. Petitioner has

not proven the relevant foreign law provisions to support its
allegations that respondent has ceased to exist and that all its claims
are consequently extinguished.

WHEREFORE, the Petition is DENIED for lack of merit.


G.R. No. 198587, January 14, 2015
SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J.
BETIA, Petitioners, v. MA. JOPETTE M. REBESENCIO,
MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A.
CRISTOBAL AND LORAINE S.
SCHNEIDER-CRUZ, Respondents.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in
the Constitution.
This is a Petition for Review on Certiorari with application for the
issuance of a temporary restraining order and/or writ of preliminary
injunction under Rule 45 of the 1997 Rules of Civil Procedure
praying that judgment be rendered reversing and setting aside the
June 16, 2011 Decision1 and September 13, 2011 Resolution2 of the
Court of Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation
established and existing under the laws of Jeddah, Kingdom of Saudi
Arabia. It has a Philippine office located at 4/F, Metro House
Building, Sen. Gil J. Puyat Avenue, Makati City. 3 In its Petition filed
with this court, Saudia identified itself as
follows:chanroblesvirtuallawlibrary
1. Petitioner SAUDIA is a foreign corporation established and
existing under the Royal Decree No. M/24 of 18.07.1385H
(10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its
Philippine Office is located at 4/F Metro House Building, Sen, Gil J.
Puyat Avenue, Makati City (Philippine Office). It may be served with
orders of this Honorable Court through undersigned counsel at
4th and 6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas,
Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited
and hired by Saudia as Temporary Flight Attendants with the
accreditation and approval of the Philippine Overseas Employment
Administration.5 After undergoing seminars required by the
Philippine Overseas Employment Administration for deployment
overseas, as well as training modules offered by Saudia (e.g., initial
flight attendant/training course and transition training), and after
working as Temporary Flight Attendants, respondents became
Permanent Flight Attendants. They then entered into Cabin Attendant
contracts with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on
May 16, 1990;6 Montassah B. Sacar-Adiong (Montassah) and Rouen
Ruth A. Cristobal (Rouen Ruth) on May 22, 1993;7 and Loraine
Schneider-Cruz (Loraine) on August 27, 1995.8
Respondents continued their employment with Saudia until they were
separated from service on various dates in 2006.9
Respondents contended that the termination of their employment was
illegal. They alleged that the termination was made solely because
they were pregnant.10
As respondents alleged, they had informed Saudia of their respective
pregnancies and had gone through the necessary procedures to
process their maternity leaves. Initially, Saudia had given its
approval but later on informed respondents that its management in
Jeddah, Saudi Arabia had disapproved their maternity leaves. In
addition, it required respondents to file their resignation letters. 11
Respondents were told that if they did not resign, Saudia would
terminate them all the same. The threat of termination entailed the
104
loss of benefits, such as separation pay and ticket discount
entitlements.12
Specifically, Ma. Jopette received a call on October 16, 2006 from
Saudia's Base Manager, Abdulmalik Saddik
(Abdulmalik).13 Montassah was informed personally by Abdulmalik
and a certain Faisal Hussein on October 20, 2006 after being required
to report to the office one (1) month into her maternity leave. 14Rouen
Ruth was also personally informed by Abdulmalik on October 17,
2006 after being required to report to the office by her Group
Supervisor.15 Loraine received a call on October 12, 2006 from her
Group Supervisor, Dakila Salvador.16
Saudia anchored its disapproval of respondents' maternity leaves and
demand for their resignation on its "Unified Employment Contract
for Female Cabin Attendants" (Unified Contract).17 Under the
Unified Contract, the employment of a Flight Attendant who
becomes pregnant is rendered void. It
provides:chanroblesvirtuallawlibrary
(H) Due to the essential nature of the Air Hostess functions to be
physically fit on board to provide various services required in normal
or emergency cases on both domestic/international flights beside her
role in maintaining continuous safety and security of passengers, and
since she will not be able to maintain the required medical fitness
while at work in case of pregnancy, accordingly, if the Air Hostess
becomes pregnant at any time during the term of this contract, this
shall render her employment contract as void and she will be
terminated due to lack of medical fitness.18 (Emphasis supplied)
In their Comment on the present Petition,19 respondents emphasized
that the Unified Contract took effect on September 23, 2006 (the first
day of Ramadan),20 well after they had filed and had their maternity
leaves approved. Ma. Jopette filed her maternity leave application on
September 5, 2006.21 Montassah filed her maternity leave application
on August 29, 2006, and its approval was already indicated in
Saudia's computer system by August 30, 2006.22 Rouen Ruth filed
her maternity leave application on September 13, 2006, 23 and
Loraine filed her maternity leave application on August 22, 2006. 24
Rather than comply and tender resignation letters, respondents filed
separate appeal letters that were all rejected.25
Despite these initial rejections, respondents each received calls on the
morning of November 6, 2006 from Saudia's office secretary
informing them that their maternity leaves had been approved.
Saudia, however, was quick to renege on its approval. On the
evening of November 6, 2006, respondents again received calls
informing them that it had received notification from Jeddah, Saudi
Arabia that their maternity leaves had been disapproved.26
Faced with the dilemma of resigning or totally losing their benefits,
respondents executed handwritten resignation letters. In Montassah's
and Rouen Ruth's cases, their resignations were executed on Saudia's
blank letterheads that Saudia had provided. These letterheads already
had the word "RESIGNATION" typed on the subject portions of
their headings when these were handed to respondents.27
On November 8, 2007, respondents filed a Complaint against Saudia
and its officers for illegal dismissal and for underpayment of salary,
overtime pay, premium pay for holiday, rest day, premium, service
incentive leave pay, 13th month pay, separation pay, night shift
differentials, medical expense reimbursements, retirement benefits,
illegal deduction, lay-over expense and allowances, moral and
exemplary damages, and attorney's fees.28 The case was initially
assigned to Labor Arbiter Hermino V. Suelo and docketed as NLRC
NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that
all the determining points of contact referred to foreign law and
insisted that the Complaint ought to be dismissed on the ground
of forum non conveniens.30 It added that respondents had no cause of
action as they resigned voluntarily.31
On December 12, 2008, Executive Labor Arbiter Fatima
Jambaro-Franco rendered the Decision32dismissing respondents'
Complaint. The dispositive portion of this Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, premises' considered, judgment is hereby
rendered DISMISSING the instant complaint for lack of
jurisdiction/merit.33cralawlawlibrary
On respondents' appeal, the National Labor Relations Commission's
Sixth Division reversed the ruling of Executive Labor Arbiter
Jambaro-Franco. It explained that "[considering that
complainants-appellants are OFWs, the Labor Arbiters and the
NLRC has [sic] jurisdiction to hear and decide their complaint for
illegal termination."34 On the matter of forum non conveniens, it
noted that there were no special circumstances that warranted its
abstention from exercising jurisdiction.35 On the issue of whether
respondents were validly dismissed, it held that there was nothing on
record to support Saudia's claim that respondents resigned
voluntarily.
The dispositive portion of the November 19, 2009 National Labor
Relations Commission Decision36reads:chanroblesvirtuallawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
finding the appeal impressed with merit. The respondents-appellees
are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and
separation pay plus ten (10%) percent thereof as attorney's fees. The
decision of the Labor Arbiter dated December 12, 2008 is hereby
VACATED and SET ASIDE. Attached is the computation prepared
by this Commission and made an integral part of this
Decision.37cralawlawlibrary
In the Resolution dated February 11, 2010,38 the National Labor
Relations Commission denied petitioners' Motion for
Reconsideration.
In the June 16, 2011 Decision,39 the Court of Appeals denied
petitioners' Rule 65 Petition and modified the Decision of the
National Labor Relations Commission with respect to the award of
separation pay and backwages.
The dispositive portion of the Court of Appeals Decision
reads:chanroblesvirtuallawlibrary
WHEREFORE, the instant petition is hereby DENIED. The
Decision dated November 19, 2009 issued by public respondent,
Sixth Division of the National Labor Relations Commission -
National Capital Region is MODIFIED only insofar as the
computation of the award of separation pay and backwages. For
greater clarity, petitioners are ordered to pay private respondents
separation pay which shall be computed from private respondents'
first day of employment up to the finality of this decision, at the rate
of one month per year of service and backwages which shall be
computed from the date the private respondents were illegally
terminated until finality of this decision. Consequently, the ten
percent (10%) attorney's fees shall be based on the total amount of
the award. The assailed Decision is affirmed in all other respects.
105
The labor arbiter is hereby DIRECTED to make a recomputation
based on the foregoing.40cralawlawlibrary
In the Resolution dated September 13, 2011,41 the Court of Appeals
denied petitioners' Motion for Reconsideration.
Hence, this Appeal was filed.
The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations
Commission may exercise jurisdiction over Saudi Arabian Airlines
and apply Philippine law in adjudicating the present dispute;
Second, whether respondents' voluntarily resigned or were illegally
terminated; and
Lastly, whether Brenda J. Betia may be held personally liable along
with Saudi Arabian Airlines.chanRoblesvirtualLawlibrary
I
Summons were validly served on Saudia and jurisdiction over it
validly acquired.
There is no doubt that the pleadings and summons were served on
Saudia through its counsel.42 Saudia, however, claims that the Labor
Arbiter and the National Labor Relations Commission had no
jurisdiction over it because summons were never served on it but on
"Saudia Manila."43 Referring to itself as "Saudia Jeddah," it claims
that "Saudia Jeddah" and not "Saudia Manila" was the employer of
respondents because:
First, "Saudia Manila" was never a party to the Cabin Attendant
contracts entered into by respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for
respondents' salaries and benefits; and
Lastly, it was with "Saudia Jeddah" that respondents filed their
resignations.44
Saudia posits that respondents' Complaint was brought against the
wrong party because "Saudia Manila," upon which summons was
served, was never the employer of respondents.45
Saudia is vainly splitting hairs in its effort to absolve itself of liability.
Other than its bare allegation, there is no basis for concluding that
"Saudia Jeddah" is distinct from "Saudia Manila."
What is clear is Saudia's statement in its own Petition that what it has
is a "Philippine Office . . . located at 4/F Metro House Building, Sen.
Gil J. Puyat Avenue, Makati City."46 Even in the position paper that
Saudia submitted to the Labor Arbiter,47 what Saudia now refers to as
"Saudia Jeddah" was then only referred to as "Saudia Head Office at
Jeddah, KSA,"48 while what Saudia now refers to as "Saudia Manila"
was then only referred to as "Saudia's office in Manila."49
By its own admission, Saudia, while a foreign corporation, has a
Philippine office.
Section 3(d) of Republic Act No.. 7042, otherwise known as the
Foreign Investments Act of 1991, provides the
following:chanroblesvirtuallawlibrary
The phrase "doing business" shall include . . . opening offices,
whether called "liaison" offices or branches; . . . and any other act

or acts that imply a continuity of commercial dealings or
arrangements and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident
to, and in progressive prosecution of commercial gain or of the
purpose and object of the business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act
leads to no other conclusion than that Saudia is a foreign corporation
doing business in the Philippines. As such, Saudia may be sued in the
Philippines and is subject to the jurisdiction of Philippine tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah"
and "Saudia Manila" � the latter being nothing more than Saudia's
local office � service of summons to Saudia's office in Manila
sufficed to vest jurisdiction over Saudia's person in Philippine
tribunals.chanRoblesvirtualLawlibrary
II
Saudia asserts that Philippine courts and/or tribunals are not in a
position to make an intelligent decision as to the law and the facts.
This is because respondents' Cabin Attendant contracts require the
application of the laws of Saudi Arabia, rather than those of the
Philippines.50 It claims that the difficulty of ascertaining foreign law
calls into operation the principle of forum non conveniens, thereby
rendering improper the exercise of jurisdiction by Philippine
tribunals.51
A choice of law governing the validity of contracts or the
interpretation of its provisions dees not necessarily imply forum non
conveniens. Choice of law and forum non conveniens are entirely
different matters.
Choice of law provisions are an offshoot of the fundamental principle
of autonomy of contracts. Article 1306 of the Civil Code firmly
ensconces this:chanroblesvirtuallawlibrary
Article 1306. The contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or
public policy.
In contrast, forum non conveniens is a device akin to the rule against
forum shopping. It is designed to frustrate illicit means for securing
advantages and vexing litigants that would otherwise be possible if
the venue of litigation (or dispute resolution) were left entirely to the
whim of either party.
Contractual choice of law provisions factor into transnational
litigation and dispute resolution in one of or in a combination of four
ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum,
i.e., venue; (3) governing law; and (4) basis for interpretation. Forum
non conveniens relates to, but is not subsumed by, the second of
these.
Likewise, contractual choice of law is not determinative of
jurisdiction. Stipulating on the laws of a given jurisdiction as the
governing law of a contract does not preclude the exercise of
jurisdiction by tribunals elsewhere. The reverse is equally true: The
assumption of jurisdiction by tribunals does not ipso factomean that
it cannot apply and rule on the basis of the parties' stipulation.
In Hasegawa v. Kitamura:52ChanRoblesVirtualawlibrary
Analytically, jurisdiction and choice of law are two distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to travel
to this state; choice of law asks the further question whether the
application of a substantive law V'hich will determine the merits of
106
the case is fair to both parties. The power to exercise jurisdiction
does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often,
coincide, the "minimum contacts" for one do not always provide the
necessary "significant contacts" for the other. The question of
whether the law of a state can be applied to a transaction is different
from the question of whether the courts of that state have jurisdiction
to enter a judgment.53cralawlawlibrary
As various dealings, commercial or otherwise, are facilitated by the
progressive ease of communication and travel, persons from various
jurisdictions find themselves transacting with each other. Contracts
involving foreign elements are, however, nothing new. Conflict of
laws situations precipitated by disputes and litigation anchored on
these contracts are not totally novel.
Transnational transactions entail differing laws on the requirements
Q for the validity of the formalities and substantive provisions of
contracts and their interpretation. These transactions inevitably lend
themselves to the possibility of various fora for litigation and dispute
resolution. As observed by an eminent expert on transnational
law:chanroblesvirtuallawlibrary
The more jurisdictions having an interest in, or merely even a point
of contact with, a transaction or relationship, the greater the number
of potential fora for the resolution of disputes arising out of or related
to that transaction or relationship. In a world of increased mobility,
where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily
be invoked in a single or a set of related disputes.54cralawlawlibrary
Philippine law is definite as to what governs the formal or extrinsic
validity of contracts. The first paragraph of Article 17 of the Civil
Code provides that "[t]he forms and solemnities of contracts . . . shall
be governed by the laws of the country in which they are
executed"55 (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling
conflict of laws situations on matters pertaining to substantive
content of contracts. It has been noted that three (3) modes have
emerged: (1) lex loci contractus or the law of the place of the making;
(2) lex loci solutionis or the law of the place of performance; and
(3) lex loci intentionis or the law intended by the parties.56
Given Saudia's assertions, of particular relevance to resolving the
present dispute is lex loci intentionis.
An author observed that Spanish jurists and commentators "favor lex
loci intentionis."57 These jurists and commentators proceed from the
Civil Code of Spain, which, like our Civil Code, is silent on what
governs the intrinsic validity of contracts, and the same civil law
traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan
Guarantee v. V.P. Eusebio Construction, Inc.,58 manifested
preference for allowing the parties to select the law applicable to
their contract":chanroblesvirtuallawlibrary
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or
domicile of the parties. Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the

parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive
relationship to the transaction.59 (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts
require the application of the laws of Saudi Arabia. It insists that the
need to comply with these stipulations calls into operation the
doctrine of forum non conveniens and, in turn, makes it necessary for
Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational
litigation in any or a combination of four (4) ways. Moreover, forum
non conveniens relates to one of these: choosing between multiple
possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora �
along with the host of difficulties it poses � is not unique to
transnational litigation. It is a difficulty that similarly arises in
disputes well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single
jurisdiction, such rules as those on forum shopping, litis pendentia,
and res judicata come into operation. Thus, in the Philippines, the
1997 Rules on Civil Procedure provide for willful and deliberate
forum shopping as a ground not only for summary dismissal with
prejudice but also for citing parties and counsels in direct contempt,
as well as for the imposition of administrative sanctions.60 Likewise,
the same rules expressly provide that a party may seek the dismissal
of a Complaint or another pleading asserting a claim on the ground
"[t]hat there is another action pending between the same parties for
the same cause," i.e., litis pendentia, or "[t]hat the cause of action is
barred by a prior judgment,"61 i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis
pendentia, and res judicata, is a means of addressing the problem of
parallel litigation. While the rules of forum shopping, litis pendentia,
and res judicata are designed to address the problem of parallel
litigation within a single jurisdiction, forum non conveniens is a
means devised to address parallel litigation arising in multiple
jurisdictions.
Forum non conveniens literally translates to "the forum is
inconvenient."62 It is a concept in private international law and was
devised to combat the "less than honorable" reasons and excuses that
litigants use to secure procedural advantages, annoy and harass
defendants, avoid overcrowded dockets, and select a "friendlier"
venue.63 Thus, the doctrine of forum non conveniens addresses the
same rationale that the rule against forum shopping does, albeit on a
multijurisdictional scale.
Forum non conveniens, like res judicata,64 is a concept originating in
common law.65 However, unlike the rule on res judicata, as well as
those on litis pendentia and forum shopping, forum non
conveniens finds no textual anchor, whether in statute or in
procedural rules, in our civil law system. Nevertheless, jurisprudence
has applied forum non conveniens as basis for a court to decline its
exercise of jurisdiction.66
Forum non conveniens is soundly applied not only to address parallel
litigation and undermine a litigant's capacity to vex and secure undue
advantages by engaging in forum shopping on an international scale.
It is also grounded on principles of comity and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in
exercising jurisdiction on account of forum non conveniens is a
deferential gesture to the tribunals of another sovereign. It is a
107
measure that prevents the former's having to interfere in affairs
which are better and more competently addressed by the latter.
Further, forum non conveniens entails a recognition not only that
tribunals elsewhere are better suited to rule on and resolve a
controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation
where a tribunal is rendered incompetent in the face of the greater
capability � both analytical and practical � of a tribunal in another
jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is
as much a matter of efficiency and economy as it is a matter of
international courtesy. A court would effectively be neutering itself if
it insists on adjudicating a controversy when it knows full well that it
is in no position to enforce its judgment. Doing so is not only an
exercise in futility; it is an act of frivolity. It clogs the dockets of
a.tribunal and leaves it to waste its efforts on affairs, which, given
transnational exigencies, will be reduced to mere academic, if not
trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "a court, in
conflicts of law cases, may refuse impositions on its jurisdiction
where it is not the most 'convenient' or available forum and the
parties are not precluded from seeking remedies
elsewhere."67 In Puyat v. Zabarte,68 this court recognized the
following situations as among those that may warrant a court's
desistance from exercising jurisdiction:chanroblesvirtuallawlibrary
1) The belief that the matter can be better tried and decided
elsewhere, either because the main aspects of the case
transpired in a foreign jurisdiction or the material witnesses
have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a
practice known as forum shopping[,] merely to secure
procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non�
residents or aliens when the docket may already be
overcrowded;
4) The inadequacy of the local judicial machinery for effectuating
the right sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v.
Court of Appeals,70 this court underscored that a Philippine court
may properly assume jurisdiction over a case if it chooses to do so to
the extent: "(1) that the Philippine Court is one to which the parties
may conveniently resort to; (2) that the Philippine Court is in a
position to make an intelligent decision as to the law and the facts;
and (3) that the Philippine Court has or is likely to have power to
enforce its decision."71
The use of the word "may" (i.e., "may refuse impositions on its
jurisdiction"72) in the decisions shows that the matter of jurisdiction
rests on the sound discretion of a court. Neither the mere invocation
of forum non conveniens nor the averment of foreign elements
operates to automatically divest a court of jurisdiction. Rather, a
court should renounce jurisdiction only "after 'vital facts are
established, to determine whether special circumstances' require the
court's desistance."73 As the propriety of applying forum non
conveniens is contingent on a factual determination, it is, therefore, a
matter of defense.74
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil

Procedure is exclusive in its recital of the grounds for dismissal that
are exempt from the omnibus motion rule: (1) lack of jurisdiction
over the subject matter; (2) litis pendentia; (3) res judicata; and (4)
prescription. Moreover, dismissal on account offorum non
conveniens is a fundamentally discretionary matter. It is, therefore,
not a matter for a defendant to foist upon the court at his or her own
convenience; rather, it must be pleaded at the earliest possible
opportunity.
On the matter of pleading forum non conveniens, we state the rule,
thus: Forum non conveniens must not only be clearly pleaded as a
ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,76 this court stated that forum non
conveniens is not a ground for a motion to dismiss. The factual
ambience of this case however does not squarely raise the viability of
this doctrine. Until the opportunity comes to review the use of
motions to dismiss for parallel litigation, Hasegawa remains existing
doctrine.
Consistent with forum non conveniens as fundamentally a factual
matter, it is imperative that it proceed from & factually established
basis. It would be improper to dismiss an action pursuant to forum
non conveniens based merely on a perceived, likely, or hypothetical
multiplicity of fora. Thus, a defendant must also plead and show that
a prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by
duplicitous litigation, the embarrassment of intruding into the affairs
of another sovereign, and the squandering of judicial efforts in
resolving a dispute already lodged and better resolved elsewhere. As
has been noted:chanroblesvirtuallawlibrary
A case will not be stayed o dismissed on [forum] non
conveniens grounds unless the plaintiff is shown to have an available
alternative forum elsewhere. On this, the moving party bears the
burden of proof.
A number of factors affect the assessment of an alternative forum's
adequacy. The statute of limitations abroad may have run, of the
foreign court may lack either subject matter or personal jurisdiction
over the defendant. . . . Occasionally, doubts will be raised as to the
integrity or impartiality of the foreign court (based, for example, on
suspicions of corruption or bias in favor of local nationals), as to the
fairness of its judicial procedures, or as to is operational efficiency
(due, for example, to lack of resources, congestion and delay, or
interfering circumstances such as a civil unrest). In one noted case,
[it was found] that delays of 'up to a quarter of a century' rendered
the foreign forum... inadequate for these purposes.77cralawlawlibrary
We deem it more appropriate and in the greater interest of prudence
that a defendant not only allege supposed dangerous tendencies in
litigating in this jurisdiction; the defendant must also show that such
danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has
chosen to exercise jurisdiction.
III
Forum non conveniens finds no application and does not operate to
divest Philippine tribunals of jurisdiction and to require the
application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the
stipulations of the Cabin Attendant contracts that require the
application of the laws of Saudi Arabia.
108
Forum non conveniens relates to forum, not to the choice of
governing law. Thai forum non conveniensmay ultimately result in
the application of foreign law is merely an incident of its application.
In this strict sense, forum non conveniens is not applicable. It is not
the primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum
non conveniens on the incidental matter of the law governing
respondents' relation with Saudia leads to the conclusion that it is
improper for Philippine tribunals to divest themselves of jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a
forum and'its incidents must grapple with two (2) considerations:
first, the availability and adequacy of recourse to a foreign tribunal;
and second, the question of where, as between the forum court and a
foreign court, the balance of interests inhering in a dispute weighs
more heavily.
The first is a pragmatic matter. It relates to the viability of ceding
jurisdiction to a foreign tribunal and can be resolved by juxtaposing
the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity to
enforce orders and judgments, access to records, requirements for the
acquisition of jurisdiction, and even questions relating to the integrity
of foreign courts, may render undesirable or even totally unfeasible
recourse to a foreign court. As mentioned, we consider it in the
greater interest of prudence that a defendant show, in pleading forum
non conveniens, that litigation has commenced in another jurisdiction
and that a foieign tribunal has, in fact, chosen to exercise jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of
interests inhering in a dispute: first, the vinculum which the parties
and their relation have to a given jurisdiction; and second, the public
interest that must animate a tribunal, in its capacity as an agent of the
sovereign, in choosing to assume or decline jurisdiction. The first is
more concerned with the parties, their personal circumstances, and
private interests; the second concerns itself with the state and the
greater social order.
In considering the vinculum, a court must look into the
preponderance of linkages which the parties and their transaction
may have to either jurisdiction. In this respect, factors, such as the
parties' respective nationalities and places of negotiation, execution,
performance, engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness
that it is an organ of the state. It must, thus, determine if the interests
of the sovereign (which acts through it) are outweighed by those of
the alternative jurisdiction. In this respect, the court delves into a
consideration of public policy. Should it find that public interest
weighs more heavily in favor of its assumption of jurisdiction, it
should proceed in adjudicating the dispute, any doubt or .contrary
view arising from the preponderance of linkages notwithstanding.
Our law on contracts recognizes the validity of contractual choice of
law provisions. Where such provisions exist, Philippine tribunals,
acting as the forum court, generally defer to the parties' articulated
choice.
This is consistent with the fundamental principle of autonomy of
contracts. Article 1306 of the Civ:l Code expressly provides that
"[t]he contracting parties may establish 'such stipulations, clauses,
terms and conditions as they may deem convenient."78 Nevertheless,
while a Philippine tribunal (acting as the forum court) is called upon
to respect the parties' choice of governing law, such respect must not
be so permissive as to lose sight of considerations of law, morals,

good customs, public order, or public policy that underlie the
contract central to the controversy.
Specifically with respect to public policy, in Pakistan International
Airlines Corporation v. Ople,79 this court explained
that:chanroblesvirtuallawlibrary
counter-balancing the principle of autonomy of contracting parties is
the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy,
are deemed written inta the contract. Put a little differently, the
governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with
matters heavily impressed with public interest.80(Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he
State ... shall ensure the fundamental equality before the law of
women and men." Contrasted with Article II, Section 1 of the 1987
Constitution's statement that "[n]o person shall ... be denied the equal
protection of the laws," Article II, Section 14 exhorts the State to
"ensure." This does not only mean that the Philippines shall not
countenance nor lend legal recognition and approbation to measures
that discriminate on the basis of one's being male or female. It
imposes an obligation to actively engage in securing the fundamental
equality of men and women.
The Convention on the Elimination of all Forms of Discrimination
against Women (CEDAW), signed and ratified by the Philippines on
July 15, 1980, and on August 5, 1981, respectively,81 is part of the
law of the land. In view of the widespread signing and ratification of,
as well as adherence (in practice) to it by states, it may even be said
that many provisions of the CEDAW may have become customary
international law. The CEDAW gives effect to the Constitution's
policy statement in Article II, Section 14. Article I of the CEDAW
defines "discrimination against women"
as:chanroblesvirtuallawlibrary
any distinction, exclusion or restriction made on the basis of sex
which has the effect or purpose of impairing or nullifying the
recognition, enjoyment or exercise by women, irrespective of their
marital status, on a basis of equality of men and women, of human
rights and fundamental freedoms in the political, economic, social,
cultural, civil or any other field.82cralawlawlibrary
The constitutional exhortation to ensure fundamental equality, as
illumined by its enabling law, the CEDAW, must inform and animate
all the actions of all personalities acting on behalf of the State. It is,
therefore, the bounden duty of this court, in rendering judgment on
the disputes brought before it, to ensure that no discrimination is
heaped upon women on the mere basis of their being women. This is
a point so basic and central that all our discussions and
pronouncements � regardless of whatever averments there may be
of foreign law � must proceed from this premise.
So informed and animated, we emphasize the glaringly
discriminatory nature of Saudia's policy. As argued by respondents,
Saudia's policy entails the termination of employment of flight
attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to
women. Saudia's policy excludes from and restricts employment on
the basis of no other consideration but sex.
We do not lose sight of the reality that pregnancy does present
physical limitations that may render difficult the performance of
functions associated with being a flight attendant. Nevertheless, it
would be the height of iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the termination of one's
employment. It is clear to us that any individual, regardless of gender,
109
may be subject to exigencies that limit the performance of functions.
However, we fail to appreciate how pregnancy could be such an
impairing occurrence that it leaves no other recourse but the
complete termination of the means through which a woman earns a
living.
Apart from the constitutional policy on the fundamental equality
before the law of men and women, it is settled that contracts relating
to labor and employment are impressed with public interest. Article
1700 of the Civil Code provides that "[t]he relation between capital
and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan
International Airlines Corporation83 are clear and
unmistakable:chanroblesvirtuallawlibrary
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the
applicable law of the agreement, and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi, Pakistan". The first clause of
paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and'regulations to the subject matter of this
case, i.e., the employer-employee relationship between petitioner
PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to
govern their relationship. . . . Under these circumstances, paragraph
10 of the employment agreement cannot be given effect so as to oust
Philippine agencies and courts of the jurisdiction vested upon them
by Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be)
the illegal termination of respondents' employment, this case is
immutably a matter of public interest and public policy. Consistent
with clear pronouncements in law and jurisprudence, Philippine laws
properly find application in and govern this case. 'Moreover, as this
premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals
may properly assume jurisdiction over the present controversy.
Philippine jurisprudence provides ample illustrations of when a
court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'
In Philsec Investment Corporation v. Court of Appeals,85 this court
noted that the trial court failed to consider that one of the plaintiffs
was a domestic corporation, that one of the defendants was a Filipino,
and that it was the extinguishment of the latter's debt that was the
object of the transaction subject of the litigation. Thus, this court held,
among others, that the trial court's refusal to assume jurisdiction was
not justified by forum non conveniens and remanded the case to the
trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained
the trial court's assumption of jurisdiction considering that the trial
court could properly enforce judgment on the petitioner which was a
foreign corporation licensed to do business in the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no
reason to disturb the trial court's assumption of jurisdiction over a
case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the
plaintiff] resides in the Philippines and the contract allegedly
breached involve[d] employment in the Philippines."88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this
court held that the fact that the complainant in an illegal dismissal
case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor
Code does not include forum non conveniens as a ground for the
dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a factual
determination; and (3) the requisites for assumption of jurisdiction as
laid out in Bank of America, NT&SA90 were all satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National
Labor Relations Commission91 that the National Labor Relations Q
Commission was a seriously inconvenient forum. In that case, private
respondent Marcelo G. Santos was working in the Sultanate of Oman
when he received a letter from Palace Hotel recruiting him for
employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment
supposedly due to business reverses arising from political upheavals
in China (i.e., the Tiananmen Square incidents of 1989). Santos later
filed a Complaint for illegal dismissal impleading Palace Hotel's
General Manager, Mr. Gerhard Schmidt, the Manila Hotel
International Company Ltd. (which was, responsible for training
Palace Hotel's personnel and staff), and the Manila Hotel
Corporation (which owned 50% of Manila Hotel International
Company Ltd.'s capital stock).
In ruling against the National Labor Relations Commission's exercise
of jurisdiction, this court noted that the main aspects of the case
transpired in two (2) foreign jurisdictions, Oman and China, and that
the case involved purely foreign elements. Specifically, Santos was
directly hired by a foreign employer through correspondence sent to
Oman. Also, the proper defendants were neither Philippine nationals
nor engaged in business in the Philippines, while the main witnesses
were not residents of the Philippines. Likewise, this court noted that
the National Labor Relations Commission was in no position to
conduct the following: first, determine the law governing the
employment contract, as it was entered into in foreign soil; second,
determine the facts, as Santos' employment was terminated in Beijing;
and third, enforce its judgment, since Santos' employer, Palace Hotel,
was incorporated under the laws of China and was not even served
with summons.
Contrary to Manila Hotel, the case now before us does not entail a
preponderance of linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not
approximate the circumstances enumerated in Puyat,92 which this
court recognized as possibly justifying the desistance of Philippine
tribunals from exercising jurisdiction.
First, there is no basis for concluding that the case can be more
conveniently tried elsewhere. As established earlier, Saudia is doing
business in the Philippines. For their part, all four (4) respondents are
Filipino citizens maintaining residence in the Philippines and, apart
from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to
respondents' inconvenience if this case were to be tried elsewhere.
Second, the records are bereft of any indication that respondents filed
their Complaint in an effort to engage in forum shopping or to vex
and inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial
facilities to non-residents or aliens."93That Saudia has managed to
bring the present controversy all the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is
110
inadequate for effectuating the right sought to be maintained.
Summons was properly served on Saudia and jurisdiction over its
person was validly acquired.
Lastly, there is not even room for considering foreign law. Philippine
law properly governs the present dispute.
As the question of applicable law has been settled, the supposed
difficulty of ascertaining foreign law (which requires the application
of forum non conveniens) provides no insurmountable inconvenience
or special circumstance that will justify depriving Philippine
tribunals of jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the
laws of Saudi Arabia which should apply, it does not follow that
Philippine tribunals should refrain from exercising jurisdiction. To.
recall our pronouncements in Puyat,94 as well as in Bank of America,
NT&SA,95 it is not so much the mere applicability of foreign law
which calls into operation forum non conveniens. Rather, what
justifies a court's desistance from exercising jurisdiction is
"[t]he difficulty of ascertaining foreign law"96 or the inability of a
"Philippine Court to make an intelligent decision as to the law[.]"97
Consistent with lex loci intentionis, to the extent that it is proper and
practicable (i.e., "to make an intelligent decision"98), Philippine
tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy
and reliability of respondents' citation) in this case, respondents
themselves have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write:chanroblesvirtuallawlibrary
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is
illegal and unlawful to terminate the employment of any woman by
virtue of pregnancy. The law in Saudi Arabia is even more harsh and
strict [sic] in that no employer can terminate the employment of a
female worker or give her a warning of the same while on Maternity
Leave, the specific provision of Saudi Labor Laws on the matter is
hereto quoted as follows:chanroblesvirtuallawlibrary
"An employer may not terminate the employment of a female worker
or give her a warning of the same while on maternity leave." (Article
155, Labor Law of the Kingdom of Saudi Arabia, Royal Decree No.
M/51.)99cralawlawlibrary
All told, the considerations for assumption of jurisdiction by
Philippine tribunals as outlined in Bank of America, NT&SA100 have
been satisfied. First, all the parties are based in the Philippines and all
the material incidents transpired in this jurisdiction. Thus, the parties
may conveniently seek relief from Philippine tribunals. Second,
Philippine tribunals are in a position to make an intelligent decision
as to the law and the facts. Third, Philippine tribunals are in a
position to enforce their decisions. There is no compelling basis for
ceding jurisdiction to a foreign tribunal. Quite the contrary, the
immense public policy considerations attendant to this case behoove
Philippine tribunals to not shy away from their duty to rule on the
case.chanRoblesvirtualLawlibrary
IV
Respondents were illegally terminated.
In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary
resignation as "the voluntary act of an employee who is in a situation
where one believes that personal reasons cannot be sacrificed in
favor of the exigency of the service, and one has no other choice but
to dissociate oneself from employment. It is a formal pronouncement
or relinquishment of an office, with the intention of relinquishing the

office accompanied by the act of relinquishment."102 Thus, essential
to the act of resignation is voluntariness. It must be the result of an
employee's exercise of his or her own will.
In the same case of Bilbao, this court advanced a means for
determining whether an employee resigned
voluntarily:chanroblesvirtuallawlibrary
As the intent to relinquish must concur with the overt act of
relinquishment, the acts of the employee before and after the alleged
resignation must be considered in determining whether he or she, in
fact, intended, to sever his or her employment.103 (Emphasis
supplied)
On the other hand, constructive dismissal has been defined as
"cessation of work because 'continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a
demotion in rank or a diminution in pay' and other benefits."104
In Penaflor v. Outdoor Clothing Manufacturing
Corporation,105 constructive dismissal has been described as
tantamount to "involuntarily [sic] resignation due to the harsh, hostile,
and unfavorable conditions set by the employer."106 In the same case,
it was noted that "[t]he gauge for constructive dismissal is whether a
reasonable person in the employee's position would feel compelled to
give up his employment under the prevailing circumstances."107
Applying the cited standards on resignation and constructive
dismissal, it is clear that respondents were constructively dismissed.
Hence, their termination was illegal.
The termination of respondents' employment happened when they
were pregnant and expecting to incur costs on account of child
delivery and infant rearing. As noted by the Court of Appeals,
pregnancy is a time when they need employment to sustain their
families.108 Indeed, it goes against normal and reasonable human
behavior to abandon one's livelihood in a time of great financial need.
It is clear that respondents intended to remain employed with Saudia.
All they did was avail of their maternity leaves. Evidently, the very
nature of a maternity leave means that a pregnant employee will not
report for work only temporarily and that she will resume the
performance of her duties as soon as the leave allowance expires.
It is also clear that respondents exerted all efforts to' remain
employed with Saudia. Each of them repeatedly filed appeal letters
(as much as five [5] letters in the case of Rebesencio 109) asking
Saudia to reconsider the ultimatum that they resign or be terminated
along with the forfeiture of their benefits. Some of them even went to
Saudia's office to personally seek reconsideration.110
Respondents also adduced a copy of the "Unified Employment
Contract for Female Cabin Attendants."111This contract deemed void
the employment of a flight attendant who becomes pregnant and
threatened termination due to lack of medical fitness.112 The threat of
termination (and the forfeiture of benefits that it entailed) is enough
to compel a reasonable person in respondents' position to give up his
or her employment.
Saudia draws attention to how respondents' resignation letters were
supposedly made in their own handwriting. This minutia fails to
surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of
how any supposed resignation did not arise from respondents' own
initiative. As earlier pointed out, respondents' resignations were
executed on Saudia's blank letterheads that Saudia had provided.
These letterheads already had the word "RESIGNATION" typed on
111
the subject portion of their respective headings when these were
handed to respondents.113ChanRoblesVirtualawlibrary
"In termination cases, the burden of proving just or valid cause for
dismissing an employee rests on the employer."114 In this case,
Saudia makes much of how respondents supposedly completed their
exit interviews, executed quitclaims, received their separation pay,
and took more than a year to file their Complaint.115 If at all,
however, these circumstances prove only the fact of their occurrence,
nothing more. The voluntariness of respondents' departure from
Saudia is non sequitur.
Mere compliance with standard procedures or processes, such as the
completion of their exit interviews, neither negates compulsion nor
indicates voluntariness.
As with respondent's resignation letters, their exit interview forms
even support their claim of illegal dismissal and militates against
Saudia's arguments. These exit interview forms, as reproduced by
Saudia in its own Petition, confirms the unfavorable conditions as
regards respondents' maternity leaves. Ma. Jopette's and Loraine's
exit interview forms are particularly
telling:chanroblesvirtuallawlibrary
a. From Ma. Jopette's exit interview form:
�� �3. In what respects has the job met or failed to meet your
expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE
MATERNITY LEAVE.116
b. From Loraine's exit interview form:
�� �1. What are your main reasons for leaving Saudia? What
company are you joining?
�� ��� �xxx xxx xxx
�� ��� �Others
CHANGING POLICIES REGARDING MATERNITY LEAVE
(PREGNANCY)117
As to respondents' quitclaims, in Phil. Employ Services and
Resources, Inc. v. Paramio,118 this court noted that "[i]f (a) there is
clear proof that the waiver was wangled from an unsuspecting or
gullible person; or (b) the terms of the settlement are unconscionable,
and on their face invalid, such quitclaims must be struck down as
invalid or illegal."119 Respondents executed their quitclaims after
having been unfairly given an ultimatum to resign or be terminated
(and forfeit their benefits).chanRoblesvirtualLawlibrary
V
Having been illegally and unjustly dismissed, respondents are
entitled to full backwages and benefits from the time of their
termination until the finality of this Decision. They are likewise
entitled to separation pay in the amount of one (1) month's salary for
every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1)
whole year.
Moreover, "[m]oral damages are awarded in termination cases where
the employee's dismissal was attended by bad faith, malice or fraud,
or where it constitutes an act oppressive to labor, or where it was
 112

done in a manner contrary to morals, good customs or public
policy."120 In this case, Saudia terminated respondents' employment
in a manner that is patently discriminatory and running afoul of the
public interest that underlies employer-employee relationships. As
such, respondents are entitled to moral damages.
To provide an "example or correction for the public good"121 as
against such discriminatory and callous schemes, respondents are
likewise entitled to exemplary damages.
In a long line of cases, this court awarded exemplary damages to
illegally dismissed employees whose "dismissal[s were] effected in a
wanton, oppressive or malevolent manner."122 This court has
awarded exemplary damages to employees who were terminated on
such frivolous, arbitrary, and unjust grounds as membership in or
involvement with labor unions,123 injuries sustained in the course of
employment,124development of a medical condition due to the
employer's own violation of the employment contract, 125and lodging
of a Complaint against the employer.126 Exemplary damages were
also awarded to employees who were deemed illegally dismissed by
an employer in an attempt to evade compliance with statutorily
established employee benefits.127 Likewise, employees dismissed for
supposedly just causes, but in violation of due process requirements,
were awarded exemplary damages.128
WHEREFORE, with the MODIFICATIONS that first, petitioner
Brenda J. Betia is not solidarity liable with petitioner Saudi Arabian
Airlines, and second, that petitioner Saudi Arabian Airlines is liable
for moral and exemplary damages. The June 16, 2011 Decision and
the September 13, 2011 Resolution of the Court of Appeals in
CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other
respects. Accordingly, petitioner Saudi Arabian Airlines is ordered to
pay respondents:
(1) Full backwages and all other benefits computed from the
respective dates in which each of the respondents were illegally
terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which
each of the respondents commenced employment until the
finality of this Decision at the rate of one (1) month's salary for
every year of service, with a fraction of a year of at least six (6)
months being counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per
respondent; and
(5) Attorney's fees equivalent to 10% of the total award.

These examples pale in comparison to the present controversy.
Stripped of all unnecessary complexities, respondents were dismissed
for no other reason than simply that they were pregnant. This is as
wanton, oppressive, and tainted with bad faith as any reason for
termination of employment can be. This is no ordinary case of illegal
dismissal. This is a case of manifest gender discrimination. It is an
affront not only to our statutes and policies on employees' security of
tenure, but more so, to the Constitution's dictum of fundamental
equality between men and women.129
Interest of 6% per annum shall likewise be imposed on the total
judgment award from the finality of this Decision until full
satisfaction thereof.
This case is REMANDED to the Labor Arbiter to make a detailed
computation of the amounts due to respondents which petitioner
Saudi Arabian Airlines should pay without delay.
SO ORDERED.cha

The award of exemplary damages is, therefore, warranted, not only

to remind employers of the need to adhere to the requirements of
procedural and substantive due process in termination of employment,
but more importantly, to demonstrate that gender discrimination
should in no case be countenanced.

Having been compelled to litigate to seek reliefs for their illegal and
unjust dismissal, respondents are likewise entitled to attorney's fees
in the amount of 10% of the total monetary award.130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of

the persons composing it. Thus, as a rule, corporate directors and
officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice that
they become solidarity liable with the corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang

Manggagawa ng Ever Electrical,132 this court clarified that "[b]ad
faith does not connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud."133

Respondents have not produced proof to show that Brenda J. Betia

acted in bad faith or with malice as regards their termination. Thus,
she may not be held solidarity liable with Saudia.cralawred

III. CHOICE OF LAW
[G.R. No. 122191. October 8, 1998]
SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF
APPEALS, MILAGROS P. MORADA and HON. RODOLFO A.
ORTIZ, in his capacity as Presiding Judge of Branch 89,
Regional Trial Court of Quezon City, respondents.
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court
seeks to annul and set aside the Resolution[1] dated September 27,
1995 and the Decision[2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated
August 29, 1994[6] and February 2, 1995[7] that were issued by the
trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition,
as stated in the questioned Decision[9], are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight
Attendant for its airlines based in Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff
went to a disco dance with fellow crew members Thamer
Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it
was almost morning when they returned to their hotels, they agreed
to have breakfast together at the room of Thamer. When they were in
te (sic) room, Allah left on some pretext. Shortly after he did,
Thamer attempted to rape plaintiff. Fortunately, a roomboy and
several security personnel heard her cries for help and rescued
her. Later, the Indonesian police came and arrested Thamer and
Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA
officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of
Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad
and base manager Baharini negotiated with the police for the
immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might
be tricked into something she did not want because of her inability to
understand the local dialect. She also declined to sign a blank paper
and a document written in the local dialect. Eventually, SAUDIA
allowed plaintiff to return to Jeddah but barred her from the Jakarta
flights.
Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDI (sic). In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
113
One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report
to Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take flight. At the Inflight Service Office where she was told to go,
the secretary of Mr. Yahya Saddick took away her passport and told
her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to
the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing and listening to the
music in violation of Islamic laws; and (3) socializing with the male
crew, in contravention of Islamic tradition.[10]
Facing conviction, private respondent sought the help of her
employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help
her while her case is on appeal. Meanwhile, to pay for her upkeep,
she worked on the domestic flight of SAUDIA, while Thamer and
Allah continued to serve in the international flights.[11]
Because she was wrongfully convicted, the Prince of Makkah
dismissed the case against her and allowed her to leave Saudi
Arabia. Shortly before her return to Manila,[12] she was terminated
from the service by SAUDIA, without her being informed of the
cause.
On November 23, 1993, Morada filed a Complaint[13] for damages
against SAUDIA, and Khaled Al-Balawi (Al- Balawi), its country
manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To
Dismiss[14] which raised the following grounds, to wit: (1) that the
Complaint states no cause of action against Saudia; (2) that defendant
Al-Balawi is not a real party in interest; (3) that the claim or demand
set forth in the Complaint has been waived, abandoned or otherwise
extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to
Dismiss)[15] Saudia filed a reply[16] thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint[17] wherein
Al-Balawi was dropped as party defendant. On August 11, 1994,
Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint[18].

The trial court issued an Order[19] dated August 29, 1994 denying
the Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge[20] denying the Motion to
Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration[21] of the Order dated August 29, 1994. It alleged
that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable
is the law of the Kingdom of Saudi Arabia. On October 14, 1994,
Morada filed her Opposition[22] (To Defendants Motion for
Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994,
SAUDIA alleged that since its Motion for Reconsideration raised
lack of jurisdiction as its cause of action, the Omnibus Motion Rule
does not apply, even if that ground is raised for the first time on
appeal. Additionally, SAUDIA alleged that the Philippines does not
have any substantial interest in the prosecution of the instant case,
and hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order[24] dated
February 2, 1995, denying SAUDIAs Motion for
Reconsideration. The pertinent portion of the assailed Order reads as
follows:
Acting on the Motion for Reconsideration of defendant Saudi
Arabian Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14,
1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a
perusal of the plaintiffs Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorneys fees,
upon the basis of the applicable Philippine law, Article 21 of the
New Civil Code of the Philippines, is, clearly, within the jurisdiction
of this Court as regards the subject matter, and there being nothing
new of substance which might cause the reversal or modification of
the order sought to be reconsidered, the motion for reconsideration of
the defendant, is DENIED.
SO ORDERED.[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition
for Certiorari and Prohibition with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order[26] with
the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with
Temporary Restraining Order[27] dated February 23, 1995,
prohibiting the respondent Judge from further conducting any
proceeding, unless otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now
assailed, the appellate court denied SAUDIAs Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18, 1995,
to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is
hereby DENIED, after considering the Answer, with Prayer to Deny
Writ of Preliminary Injunction (Rollo, p. 135) the Reply and
Rejoinder, it appearing that herein petitioner is not clearly entitled
thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et.
Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the
instant Petition[29] for Review with Prayer for Temporary
Restraining Order dated October 13, 1995.
114
However, during the pendency of the instant Petition, respondent
Court of Appeals rendered the Decision[30] dated April 10, 1996,
now also assailed. It ruled that the Philippines is an appropriate
forum considering that the Amended Complaints basis for recovery
of damages is Article 21 of the Civil Code, and thus, clearly within
the jurisdiction of respondent Court. It further held that certiorari is
not the proper remedy in a denial of a Motion to Dismiss, inasmuch
as the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for
Review with Prayer for Temporary Restraining Order[31] dated
April 30, 1996, given due course by this Court. After both parties
submitted their Memoranda,[32] the instant case is now deemed
submitted for decision.
Petitioner SAUDIA raised the following issues:
I
The trial court has no jurisdiction to hear and try Civil Case No.
Q-93-18394 based on Article 21 of the New Civil Code since the
proper law applicable is the law of the Kingdom of Saudi Arabia
inasmuch as this case involves what is known in private international
law as a conflicts problem. Otherwise, the Republic of the
Philippines will sit in judgment of the acts done by another sovereign
state which is abhorred.
II.
Leave of court before filing a supplemental pleading is not a
jurisdictional requirement. Besides, the matter as to absence of leave
of court is now moot and academic when this Honorable Court
required the respondents to comment on petitioners April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary
Restraining Order Within Ten (10) Days From Notice
Thereof. Further, the Revised Rules of Court should be construed
with liberality pursuant to Section 2, Rule 1 thereof.
III.
Petitioner received on April 22, 1996 the April 10, 1996 decision in
CA-G.R. SP NO. 36533 entitled Saudi Arabian Airlines v. Hon.
Rodolfo A. Ortiz, et al. and filed its April 30, 1996 Supplemental
Petition For Review With Prayer For A Temporary Restraining
Order on May 7, 1996 at 10:29 a.m. or within the 15-day
reglementary period as provided for under Section 1, Rule 45 of the
Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO.
36533 has not yet become final and executory and this Honorable
Court can take cognizance of this case.[33]
From the foregoing factual and procedural antecedents, the following
issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON
CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE
NO. Q-93-18394 ENTITLED MILAGROS P. MORADA V. SAUDI
ARABIAN AIRLINES.
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN
RULING THAT IN THE CASE PHILIPPINE LAW SHOULD
GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that
must be settled at the outset. It maintains that private respondents
claim for alleged abuse of rights occurred in the Kingdom of Saudi

Arabia. It alleges that the existence of a foreign element qualifies the
instant case for the application of the law of the Kingdom of Saudi
Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her
Amended Complaint is based on Articles 19[35] and 21[36] of the
Civil Code, then the instant case is properly a matter of domestic
law.[37]
Under the factual antecedents obtaining in this case, there is no
dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint[38] dated
June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a
foreign airlines corporation doing business in the Philippines. It may
be served with summons and other court processes at Travel Wide
Associated Sales (Phils.), Inc., 3rd Floor, Cougar Building, 114
Valero St., Salcedo Village, Makati, Metro Manila.
xxxxxxxxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian
government, the Indonesian authorities agreed to deport Thamer and
Allah after two weeks of detention. Eventually, they were again put
in service by defendant SAUDIA. In September 1990, defendant
SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta
incident was already behind her, her superiors requested her to see
MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah,
Saudi Arabia. When she saw him, he brought her to the police station
where the police took her passport and questioned her about the
Jakarta incident. Miniewy simply stood by as the police put pressure
on her to make a statement dropping the case against Thamer and
Allah. Not until she agreed to do so did the police return her passport
and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi
Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to
take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA
office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to
close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27,
1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to
report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from
SAUDIAs Manila manager, Aslam Saleemi, that the investigation
was routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same
Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take
off, a SAUDIA officer told her that the airline had forbidden her to
take that flight. At the Inflight Service Office where she was told to
go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff
to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to
115
five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and
Allah, for what happened in Jakarta. The court found plaintiff guilty
of (1) adultery; (2) going to a disco, dancing, and listening to the
music in violation of Islamic laws; (3) socializing with the male crew,
in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff
sought the help of the Philippine Embassy in Jeddah. The latter
helped her pursue an appeal from the decision of the court. To pay
for her upkeep, she worked on the domestic flights of defendant
SAUDIA while, ironically, Thamer and Allah freely served the
international flights.[39]
Where the factual antecedents satisfactorily establish the existence of
a foreign element, we agree with petitioner that the problem herein
could present a conflicts case.
A factual situation that cuts across territorial lines and is affected by
the diverse laws of two or more states is said to contain a foreign
element. The presence of a foreign element is inevitable since social
and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception.[40]
The forms in which this foreign element may appear are
many.[41] The foreign element may simply consist in the fact that
one of the parties to a contract is an alien or has a foreign domicile,
or that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may
assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that
private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight
stewardess, events did transpire during her many occasions of travel
across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a conflicts situation
to arise.
We thus find private respondents assertion that the case is purely
domestic, imprecise. A conflicts problem presents itself here, and the
question of jurisdiction[43]confronts the court a quo.
After a careful study of the private respondents Amended
Complaint,[44] and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil
Code.
On one hand, Article 19 of the New Civil Code provides;
Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in
a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of
Appeals,[45] this Court held that:
The aforecited provisions on human relations were intended to
expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21
gives flesh to its provisions. Thus, we agree with private respondents

assertion that violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the
light of the Rules of Court on jurisdiction[47] we find that the
Regional Trial Court (RTC) of Quezon City possesses jurisdiction
over the subject matter of the suit.[48] Its authority to try and hear
the case is provided for under Section 1 of Republic Act No. 7691, to
wit:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known
as the Judiciary Reorganization Act of 1980, is hereby amended to
read as follows:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall
exercise exclusive jurisdiction:
xxxxxxxxx
(8) In all other cases in which demand, exclusive of interest, damages
of whatever kind, attorneys fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand
pesos (P100,000.00) or, in such other cases in Metro Manila, where
the demand, exclusive of the above-mentioned items exceeds Two
hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxxxxxxxx
And following Section 2 (b), Rule 4 of the Revised Rules of Courtthe
venue, Quezon City, is appropriate:
SEC. 2 Venue in Courts of First Instance. [Now Regional Trial
Court]
(a) x x x x x x x x x
(b) Personal actions. All other actions may be commenced and tried
where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiff resides, at the election of
the plaintiff.
Pragmatic considerations, including the convenience of the parties,
also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the
litigant. Enforceability of a judgment if one is obtained is quite
obvious. Relative advantages and obstacles to a fair trial are equally
important. Plaintiff may not, by choice of an inconvenient forum, vex,
harass, or oppress the defendant, e.g. by inflicting upon him needless
expense or disturbance. But unless the balance is strongly in favor of
the defendant, the plaintiffs choice of forum should rarely be
disturbed.[49]
Weighing the relative claims of the parties, the court a quo found it
best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the
Kingdom of Saudi Arabia where she no longer maintains substantial
connections.That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary
difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent)
should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons
of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary
submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several
motions[50] praying for the dismissal of Moradas Amended
116
Complaint. SAUDIA also filed an Answer In Ex Abundante
Cautelam dated February 20, 1995. What is very patent and explicit
from the motions filed, is that SAUDIA prayed for other reliefs under
the premises.Undeniably, petitioner SAUDIA has effectively
submitted to the trial courts jurisdiction by praying for the dismissal
of the Amended Complaint on grounds other than lack of
jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
We observe that the motion to dismiss filed on April 14, 1962, aside
from disputing the lower courts jurisdiction over defendants person,
prayed for dismissal of the complaint on the ground that plaintiffs
cause of action has prescribed. By interposing such second ground in
its motion to dismiss, Ker and Co., Ltd. availed of an affirmative
defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea
of defendant Ker & Co., Ltd., it necessarily had to acquire
jurisdiction upon the latters person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special
appearance and voluntarily submitted itself to the jurisdiction of the
court.
Similarly, the case of De Midgely vs. Ferandos, held that:
When the appearance is by motion for the purpose of objecting to the
jurisdiction of the court over the person, it must be for the sole and
separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of
the court over his person, he thereby submits himself to the
jurisdiction of the court. A special appearance by motion made for
the purpose of objecting to the jurisdiction of the court over the
person will be held to be a general appearance, if the party in said
motion should, for example, ask for a dismissal of the action upon
the further ground that the court had no jurisdiction over the subject
matter.[52]
Clearly, petitioner had submitted to the jurisdiction of the Regional
Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law
problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant
facts occurred in two or more states; and (2) to what extent should
the chosen legal system regulate the situation.[53]
Several theories have been propounded in order to identify the legal
system that should ultimately control. Although ideally, all
choice-of-law theories should intrinsically advance both notions of
justice and predictability, they do not always do so. The forum is
then faced with the problem of deciding which of these two
important values should be stressed.[54]
Before a choice can be made, it is necessary for us to determine
under what category a certain set of facts or rules fall. This process is
known as characterization, or the doctrine of qualification. It is the
process of deciding whether or not the facts relate to the kind of
question specified in a conflicts rule.[55] The purpose
ofcharacterization is to enable the forum to select the proper law.[56]
Our starting point of analysis here is not a legal relation, but a factual
situation, event, or operative fact.[57] An essential element of
conflict rules is the indication of a test or connecting factor or point
of contact. Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting
factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of
wrongdoing.[58]

Note that one or more circumstances may be present to serve as the
possible test for the determination of the applicable law.[59] These
test factors or points of contact or connecting factors could be any of
the following:
(1) The nationality of a person, his domicile, his residence, his place
of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is
deemed to be situated. In particular, the lex situs is decisive when
real rights are involved;
(4) the place where an act has been done, the locus actus, such as the
place where a contract has been made, a marriage celebrated, a will
signed or a tort committed. The lex loci actus is particularly
important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the
place of performance of contractual duties, or the place where a
power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should
govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are
instituted or done. The lex forithe law of the forumis particularly
important because, as we have seen earlier, matters of procedure not
going to the substance of the claim involved are governed by it; and
because the lex fori applies whenever the content of the otherwise
applicable foreign law is excluded from application in a given case
for the reason that it falls under one of the exceptions to the
applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically
all legal relationships of the ship and of its master or owner as
such. It also covers contractual relationships particularly contracts of
affreightment.[60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations
in the Amended Complaint deemed submitted for purposes of the
motion to dismiss, we are convinced that there is reasonable basis for
private respondents assertion that although she was already working
in Manila, petitioner brought her to Jeddah on the pretense that she
would merely testify in an investigation of the charges she made
against the two SAUDIA crew members for the attack on her person
while they were in Jakarta. As it turned out, she was the one made to
face trial for very serious charges, including adultery and violation of
Islamic laws and tradition.
There is likewise logical basis on record for the claim that the
handing over or turning over of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioners purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering
of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the
guise of petitioners authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found
by the Prince of Makkah, the alleged conviction and imprisonment of
private respondent was wrongful. But these capped the injury or
harm allegedly inflicted upon her person and reputation, for which
petitioner could be liable as claimed, to provide compensation or
redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving
torts, the connecting factor or point of contact could be the place or
places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the
117
Philippines could be said as a situs of the tort (the place where the
alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent, a
Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights
and in the performance of its duties, act with justice, give her her due
and observe honesty and good faith. Instead, petitioner failed to
protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment.For in our
view what is important here is the place where the over-all harm or
the fatality of the alleged injury to the person, reputation, social
standing and human rights of complainant, had lodged, according to
the plaintiff below (herein private respondent). All told, it is not
without basis to identify the Philippines as the situs of the alleged
tort.
Moreover, with the widespread criticism of the traditional rule of lex
loci delicti commissi, modern theories and rules on tort
liability[61] have been advanced to offer fresh judicial approaches to
arrive at just results. In keeping abreast with the modern theories on
tort liability, we find here an occasion to apply the State of the most
significant relationship rule, which in our view should be appropriate
to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most
significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred;
(b) the place where the conduct causing the injury occurred; (c) the
domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if
any, between the parties is centered.[62]
As already discussed, there is basis for the claim that over-all injury
occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with
petitioner, a resident foreign corporation engaged here in the business
of international air carriage. Thus, the relationship between the
parties was centered here, although it should be stressed that this suit
is not based on mere labor law violations. From the record, the claim
that the Philippines has the most significant contact with the matter
in this dispute,[63] raised by private respondent as plaintiff below
against defendant (herein petitioner), in our view, has been properly
established.
Prescinding from this premise that the Philippines is the situs of the
tort complaint of and the place having the most interest in the
problem, we find, by way of recapitulation, that the Philippine law on
tort liability should have paramount application to and control in the
resolution of the legal issues arising out of this case. Further, we hold
that the respondent Regional Trial Court has jurisdiction over the
parties and the subject matter of the complaint; the appropriate venue
is in Quezon City, which could properly apply Philippine
law. Moreover, we find untenable petitioners insistence that [s]ince
private respondent instituted this suit, she has the burden of pleading
and proving the applicable Saudi law on the matter.[64] As aptly said
by private respondent, she has no obligation to plead and prove the
law of the Kingdom of Saudi Arabia since her cause of action is
based on Articles 19 and 21 of the Civil Code of the Philippines. In
her Amended Complaint and subsequent pleadings she never alleged
that Saudi law should govern this case.[65] And as correctly held by
the respondent appellate court, considering that it was the petitioner
who was invoking the applicability of the law of Saudi Arabia, thus
the burden was on it [petitioner] to plead and to establish what the
law of Saudi Arabia is.[66]
Lastly, no error could be imputed to the respondent appellate court in
upholding the trial courts denial of defendants (herein petitioners)
 118

motion to dismiss the case. Not only was jurisdiction in order and
venue properly laid, but appeal after trial was obviously available,
and the expeditious trial itself indicated by the nature of the case at
hand. Indubitably, the Philippines is the state intimately concerned
with the ultimate outcome of the case below not just for the benefit
of all the litigants, but also for the vindication of the countrys system
of law and justice in a transnational setting. With these guidelines in
mind, the trial court must proceed to try and adjudge the case in the
light of relevant Philippine law, with due consideration of the foreign
element or elements involved. Nothing said herein, of course, should
be construed as prejudging the results of the case in any manner
whatsoever.

WHEREFORE, the instant petition for certiorari is hereby

DISMISSED. Civil Case No. Q-93-18394 entitled Milagros P.
Morada vs. Saudi Arabia Airlines is hereby REMANDED to
Regional Trial Court of Quezon City, Branch 89 for further
proceedings. SO ORDERED.

G.R. No. 140047 July 13, 2004
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner,
vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX
INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD
C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA SANTOS;
AND FIRST INTEGRATED BONDING AND INSURANCE
COMPANY, INC., respondents.
DECISION
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a
Filipino construction firm with the Iraqi Government for the
construction of the Institute of Physical Therapy-Medical Center,
Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was
ongoing.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch 58,
petitioner Philippine Export and Foreign Loan Guarantee
Corporation1 (hereinafter Philguarantee) sought reimbursement from
the respondents of the sum of money it paid to Al Ahli Bank of
Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB),
Ministry of Housing and Construction, Baghdad, Iraq, awarded the
construction of the Institute of Physical Therapy–Medical
Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the
Project) to Ajyal Trading and Contracting Company (hereinafter
Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce
for a total contract price of ID5,416,089/046 (or about
US$18,739,668).2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos,
in behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex),
a local contractor engaged in construction business, entered into a
joint venture agreement with Ajyal wherein the former undertook the
execution of the entire Project, while the latter would be entitled to a
commission of 4% of the contract price.3 Later, or on 8 April 1981,
respondent 3-Plex, not being accredited by or registered with the
Philippine Overseas Construction Board (POCB), assigned and
transferred all its rights and interests under the joint venture
agreement to VPECI, a construction and engineering firm duly
registered with the POCB.4 However, on 2 May 1981, 3-Plex and
VPECI entered into an agreement that the execution of the Project
would be under their joint management.5
The SOB required the contractors to submit (1) a performance bond
of ID271,808/610 representing 5% of the total contract price and (2)
an advance payment bond of ID541,608/901 representing 10% of the
advance payment to be released upon signing of the contract.6 To
comply with these requirements, respondents 3-Plex and VPECI
applied for the issuance of a guarantee with petitioner Philguarantee,
a government financial institution empowered to issue guarantees for
qualified Filipino contractors to secure the performance of approved
service contracts abroad.7
119
Petitioner Philguarantee approved respondents' application.
Subsequently, letters of guarantee8 were issued by Philguarantee to
the Rafidain Bank of Baghdad covering 100% of the performance
and advance payment bonds, but they were not accepted by SOB.
What SOB required was a letter-guarantee from Rafidain Bank, the
government bank of Iraq. Rafidain Bank then issued a performance
bond in favor of SOB on the condition that another foreign bank, not
Philguarantee, would issue a counter-guarantee to cover its exposure.
Al Ahli Bank of Kuwait was, therefore, engaged to provide a
counter-guarantee to Rafidain Bank, but it required a similar
counter-guarantee in its favor from the petitioner. Thus, three layers
of guarantees had to be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner
Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of
Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the
amount of ID271,808/610 and Letter of Guarantee No.
81-195-F11 (Advance Payment Guarantee) in the amount of
ID541,608/901, both for a term of eighteen months from 25 May
1981. These letters of guarantee were secured by (1) a Deed of
Undertaking12executed by respondents VPECI, Spouses Vicente P.
Eusebio and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E.
Santos and Iluminada Santos; and (2) a surety bond 13 issued by
respondent First Integrated Bonding and Insurance Company, Inc.
(FIBICI). The Surety Bond was later amended on 23 June 1981 to
increase the amount of coverage from P6.4 million to P6.967 million
and to change the bank in whose favor the petitioner's guarantee was
issued, from Rafidain Bank to Al Ahli Bank of Kuwait. 14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal
executed the service contract15 for the construction of the Institute of
Physical Therapy – Medical Rehabilitation Center, Phase II, in
Baghdad, Iraq, wherein the joint venture contractor undertook to
complete the Project within a period of 547 days or 18 months.
Under the Contract, the Joint Venture would supply manpower and
materials, and SOB would refund to the former 25% of the project
cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of
1 Dinar to 3.37777 US Dollars.16
The construction, which was supposed to start on 2 June 1981,
commenced only on the last week of August 1981. Because of this
delay and the slow progress of the construction work due to some
setbacks and difficulties, the Project was not completed on 15
November 1982 as scheduled. But in October 1982, upon foreseeing
the impossibility of meeting the deadline and upon the request of Al
Ahli Bank, the joint venture contractor worked for the renewal or
extension of the Performance Bond and Advance Payment Guarantee.
Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond)
and 81-195-F (Advance Payment Bond) with expiry date of 25
November 1982 were then renewed or extended to 9 February 1983
and 9 March 1983, respectively.17 The surety bond was also extended
for another period of one year, from 12 May 1982 to 12 May
1983.18 The Performance Bond was further extended twelve times
with validity of up to 8 December 1986,19 while the Advance
Payment Guarantee was extended three times more up to 24 May
1984 when the latter was cancelled after full refund or
reimbursement by the joint venture contractor.20 The surety bond was
likewise extended to 8 May 1987.21
As of March 1986, the status of the Project was 51% accomplished,
meaning the structures were already finished. The remaining 47%
consisted in electro-mechanical works and the 2%, sanitary works,
which both required importation of equipment and materials.22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the
petitioner demanding full payment of its performance bond
counter-guarantee.

Upon receiving a copy of that telex message on 27 October 1986,
respondent VPECI requested Iraq Trade and Economic Development
Minister Mohammad Fadhi Hussein to recall the telex call on the
performance guarantee for being a drastic action in contravention of
its mutual agreement with the latter that (1) the imposition of penalty
would be held in abeyance until the completion of the project; and (2)
the time extension would be open, depending on the developments
on the negotiations for a foreign loan to finance the completion of the
project.23 It also wrote SOB protesting the call for lack of factual or
legal basis, since the failure to complete the Project was due to (1)
the Iraqi government's lack of foreign exchange with which to pay its
(VPECI's) accomplishments and (2) SOB's noncompliance for the
past several years with the provision in the contract that 75% of the
billings would be paid in US dollars.24 Subsequently, or on 19
November 1986, respondent VPECI advised the petitioner not to pay
yet Al Ahli Bank because efforts were being exerted for the amicable
settlement of the Project.25
On 14 April 1987, the petitioner received another telex message from
Al Ahli Bank stating that it had already paid to Rafidain Bank the
sum of US$876,564 under its letter of guarantee, and demanding
reimbursement by the petitioner of what it paid to the latter bank plus
interest thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the
assistance of some government agencies of the Philippines. On 10
August 1987, VPECI requested the Central Bank to hold in abeyance
the payment by the petitioner "to allow the diplomatic machinery to
take its course, for otherwise, the Philippine government , through
the Philguarantee and the Central Bank, would become instruments
of the Iraqi Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for
its account of the amount of US$876,564 (equivalent to ID271,
808/610) to Al Ahli Bank representing full payment of the
performance counter-guarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would
remit US$876,564 to Al Ahli Bank, and reiterated the joint and
solidary obligation of the respondents to reimburse the petitioner for
the advances made on its counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank
of Kuwait on 21 January 1988.30 Then, on 6 May 1988, the petitioner
paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest
and penalty charges demanded by the latter bank.31
On 19 June 1991, the petitioner sent to the respondents separate
letters demanding full payment of the amount of P47,872,373.98 plus
accruing interest, penalty charges, and 10% attorney's fees pursuant
to their joint and solidary obligations under the deed of undertaking
and surety bond.32 When the respondents failed to pay, the petitioner
filed on 9 July 1991 a civil case for collection of a sum of money
against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held
that the latter had no valid cause of action against the respondents. It
opined that at the time the call was made on the guarantee which was
executed for a specific period, the guarantee had already lapsed or
expired. There was no valid renewal or extension of the guarantee for
failure of the petitioner to secure respondents' express consent thereto.
The trial court also found that the joint venture contractor incurred no
delay in the execution of the Project. Considering the Project owner's
violations of the contract which rendered impossible the joint venture
contractor's performance of its undertaking, no valid call on the
guarantee could be made. Furthermore, the trial court held that no
valid notice was first made by the Project owner SOB to the joint
venture contractor before the call on the guarantee. Accordingly, it
120
dismissed the complaint, as well as the counterclaims and
cross-claim, and ordered the petitioner to pay attorney's fees
of P100,000 to respondents VPECI and Eusebio Spouses
and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial
court's decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the
status of project implementation as well as the problems besetting the
contractors, between 1982 to 1985, having sent some of its people to
Baghdad during that period. The successive renewals/extensions of
the guarantees in fact, was prompted by delays, not solely
attributable to the contractors, and such extension understandably
allowed by the SOB (project owner) which had not anyway complied
with its contractual commitment to tender 75% of payment in US
Dollars, and which still retained overdue amounts collectible by
VPECI.
…
Second, appellant was very much aware of the violations committed
by the SOB of its contractual undertakings with VPECI, principally,
the payment of foreign currency (US$) for 75% of the total contract
price, as well as of the complications and injustice that will result
from its payment of the full amount of the performance guarantee, as
evident in PHILGUARANTEE's letter dated 13 May 1987 ….
…
Third, appellant was fully aware that SOB was in fact still obligated
to the Joint Venture and there was still an amount collectible from
and still being retained by the project owner, which amount can be
set-off with the sum covered by the performance guarantee.
…
Fourth, well-apprised of the above conditions obtaining at the Project
site and cognizant of the war situation at the time in Iraq, appellant,
though earlier has made representations with the SOB regarding a
possible amicable termination of the Project as suggested by VPECI,
made a complete turn-around and insisted on acting in favor of the
unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of
Court claiming that the Court of Appeals erred in affirming the trial
court's ruling that
I
…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF
UNDERTAKING THEY EXECUTED IN FAVOR OF
PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF
ITS COUNTER-GUARANTEE AND THAT PETITIONER
CANNOT PASS ON TO RESPONDENTS WHAT IT HAD PAID
UNDER THE SAID COUNTER-GUARANTEE.
II
…PETITIONER CANNOT CLAIM SUBROGATION.
III
…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO
HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF
UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to
reimbursement of what it paid under Letter of Guarantee No.
81-194-F it issued to Al Ahli Bank of Kuwait based on the deed of
undertaking and surety bond from the respondents.

The petitioner asserts that since the guarantee it issued was absolute,
unconditional, and irrevocable the nature and extent of its liability
are analogous to those of suretyship. Its liability accrued upon the
failure of the respondents to finish the construction of the Institute of
Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so. If a person binds himself solidarily with
the principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of
the principles are common to both. In both contracts, there is a
promise to answer for the debt or default of another. However, in this
jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same consideration.
On the other hand, the contract of guaranty is the guarantor's own
separate undertaking often supported by a consideration separate
from that supporting the contract of the principal; the original
contract of his principal is not his contract.
2. A surety assumes liability as a regular party to the undertaking;
while the liability of a guarantor is conditional depending on the
failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor is
secondary.
4. A surety is an original promissor and debtor from the beginning,
while a guarantor is charged on his own undertaking.
5. A surety is, ordinarily, held to know every default of his principal;
whereas a guarantor is not bound to take notice of the
non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere
indulgence of the creditor to the principal or by want of notice of the
default of the principal, no matter how much he may be injured
thereby. A guarantor is often discharged by the mere indulgence of
the creditor to the principal, and is usually not liable unless notified
of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of
Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you
on your first written or telex demand Iraq Dinars Two Hundred
Seventy One Thousand Eight Hundred Eight and fils six hundred ten
(ID271,808/610) representing 100% of the performance bond
required of V.P. EUSEBIO for the construction of the Physical
Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other
incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100%
of the obligation unpaid but in no case shall such amount exceed
Iraq Dinars (ID) 271,808/610 plus interest and other incidental
expenses…. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a
guaranty, as well as the factual milieu of this case, we find that the
Court of Appeals and the trial court were correct in ruling that the
petitioner is a guarantor and not a surety. That the guarantee issued
by the petitioner is unconditional and irrevocable does not make the
petitioner a surety. As a guaranty, it is still characterized by its
subsidiary and conditional quality because it does not take effect
until the fulfillment of the condition, namely, that the principal
121
obligor should fail in his obligation at the time and in the form he
bound himself.40 In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default in his
obligation first before resort to the guarantor could be had. A
conditional guaranty, as opposed to an unconditional guaranty, is one
which depends upon some extraneous event, beyond the mere default
of the principal, and generally upon notice of the principal's default
and reasonable diligence in exhausting proper remedies against the
principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that
in the event of default by respondent VPECI the petitioner shall pay,
the obligation assumed by the petitioner was simply that of an
unconditional guaranty, not conditional guaranty. But as earlier ruled
the fact that petitioner's guaranty is unconditional does not make it a
surety. Besides, surety is never presumed. A party should not be
considered a surety where the contract itself stipulates that he is
acting only as a guarantor. It is only when the guarantor binds
himself solidarily with the principal debtor that the contract becomes
one of suretyship.42
Having determined petitioner's liability as guarantor, the next
question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify resort to
the guaranty. This is a mixed question of fact and law that is better
addressed by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial
court and the Court of Appeals are binding or conclusive upon this
Court unless they are not supported by the evidence or unless strong
and cogent reasons dictate otherwise.43 The factual findings of the
Court of Appeals are normally not reviewable by us under Rule 45 of
the Rules of Court except when they are at variance with those of the
trial court. 44 The trial court and the Court of Appeals were in unison
that the respondent contractor cannot be considered to have defaulted
in its obligations because the cause of the delay was not primarily
attributable to it.
A corollary issue is what law should be applied in determining
whether the respondent contractor has defaulted in the performance
of its obligations under the service contract. The question of whether
there is a breach of an agreement, which
includes default or mora,45 pertains to the essential or intrinsic
validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or
domicile of the parties.47 Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive
relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI
contains no express choice of the law that would govern it. In the
United States and Europe, the two rules that now seem to have
emerged as "kings of the hill" are (1) the parties may choose the
governing law; and (2) in the absence of such a choice, the applicable
law is that of the State that "has the most significant relationship to
the transaction and the parties."49 Another authority proposed that all
matters relating to the time, place, and manner of performance and

valid excuses for non-performance are determined by the law of the
place of performance or lex loci solutionis, which is useful because it
is undoubtedly always connected to the contract in a significant
way.50
In this case, the laws of Iraq bear substantial connection to the
transaction, since one of the parties is the Iraqi Government and the
place of performance is in Iraq. Hence, the issue of whether
respondent VPECI defaulted in its obligations may be determined by
the laws of Iraq. However, since that foreign law was not properly
pleaded or proved, the presumption of identity or similarity,
otherwise known as the processual presumption, comes into play.
Where foreign law is not pleaded or, even if pleaded, is not proved,
the presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code,
provides: "In reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper
manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the
fulfillment of the prestation by reason of a cause imputable to the
former. 52 It is the non-fulfillment of an obligation with respect to
time.53
It is undisputed that only 51.7% of the total work had been
accomplished. The 48.3% unfinished portion consisted in the
purchase and installation of electro-mechanical equipment and
materials, which were available from foreign suppliers, thus
requiring US Dollars for their importation. The monthly billings and
payments made by SOB54 reveal that the agreement between the
parties was a periodic payment by the Project owner to the contractor
depending on the percentage of accomplishment within the
period. 55 The payments were, in turn, to be used by the contractor to
finance the subsequent phase of the work. 56 However, as explained
by VPECI in its letter to the Department of Foreign Affairs (DFA),
the payment by SOB purely in Dinars adversely affected the
completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the
accomplishment billings of the Contractor purely in Iraqi Dinars and
which payment came only after some delays.
5. SOB is fully aware of the following:
… As found by both the Court of Appeals and the trial court, the delay
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would
need foreign currency (US$), to finance the purchase of various
equipment, materials, supplies, tools and to pay for the cost of project
management, supervision and skilled labor not available in Iraq and
therefore have to be imported and or obtained from the Philippines
and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines
requires the remittance into the Philippines of 70% of the salaries of
Filipino workers working abroad in US Dollars;
…
5.5 That the Iraqi Dinar is not a freely convertible currency such that
the same cannot be used to purchase equipment, materials, supplies,
etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT
are not available in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local
currency (Iraqui Dinars) out of Iraq and hence, imported materials,
122
equipment, etc., cannot be purchased or obtained using Iraqui Dinars
as medium of acquisition.
…
8. Following the approved construction program of the CONTRACT,
upon completion of the civil works portion of the installation of
equipment for the building, should immediately follow, however, the
CONTRACT specified that these equipment which are to be installed
and to form part of the PROJECT have to be procured outside Iraq
since these are not being locally manufactured. Copy f the relevant
portion of the Technical Specification is hereto attached as Annex
"C" and made an integral part hereof;
…
10. Due to the lack of Foreign currency in Iraq for this purpose, and
if only to assist the Iraqi government in completing the PROJECT,
the Contractor without any obligation on its part to do so but with the
knowledge and consent of SOB and the Ministry of Housing &
Construction of Iraq, offered to arrange on behalf of SOB, a foreign
currency loan, through the facilities of Circle International S.A., the
Contractor's Sub-contractor and SACE MEDIO CREDITO which
will act as the guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation
started in June 1985. SOB is informed of the developments of this
negotiation, attached is a copy of the draft of the loan Agreement
between SOB as the Borrower and Agent. The Several Banks, as
Lender, and counter-guaranteed by Istituto Centrale Per II Credito A
Medio Termine (Mediocredito) Sezione Speciale Per
L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations
went on and continued until it suddenly collapsed due to the reported
default by Iraq in the payment of its obligations with Italian
government, copy of the news clipping dated June 18, 1986 is hereto
attached as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from
Circle International S.A. that because of the news report that Iraq
defaulted in its obligations with European banks, the approval by
Banco di Roma of the loan to SOB shall be deferred indefinitely, a
copy of the letter of Circle International together with the news
clippings are hereto attached as Annexes "F" and "F-1",
respectively.57
or the non-completion of the Project was caused by factors not
imputable to the respondent contractor. It was rather due mainly to
the persistent violations by SOB of the terms and conditions of the
contract, particularly its failure to pay 75% of the accomplished
work in US Dollars. Indeed, where one of the parties to a contract
does not perform in a proper manner the prestation which he is bound
to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the
other party fails to perform the obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the
monthly billings in purely Iraqi Dinars did not render impossible the
performance of the Project by VPECI. Such posture is quite contrary
to its previous representations. In his 26 March 1987 letter to the
Office of the Middle Eastern and African Affairs (OMEAA), DFA,
Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated
that while VPECI had taken every possible measure to complete the
Project, the war situation in Iraq, particularly the lack of foreign
exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the
project but the war situation in Iraq particularly the lack of foreign
exchange is proving to be a great obstacle. Our performance

counterguarantee was called last 26 October 1986 when the
negotiations for a foreign currency loan with the Italian government
through Banco de Roma bogged down following news report that
Iraq has defaulted in its obligation with major European banks.
Unless the situation in Iraq is improved as to allay the bank's
apprehension, there is no assurance that the project will ever be
completed. 58
In order that the debtor may be in default it is necessary that the
following requisites be present: (1) that the obligation be demandable
and already liquidated; (2) that the debtor delays performance; and (3)
that the creditor requires the performance because it must appear that
the tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance
from VPECI because it has not yet itself performed its obligation in a
proper manner, particularly the payment of the 75% of the cost of the
Project in US Dollars. The VPECI cannot yet be said to have
incurred in delay. Even assuming that there was delay and that the
delay was attributable to VPECI, still the effects of that delay ceased
upon the renunciation by the creditor, SOB, which could be implied
when the latter granted several extensions of time to the
former. 60 Besides, no demand has yet been made by SOB against the
respondent contractor. Demand is generally necessary even if a
period has been fixed in the obligation. And default generally begins
from the moment the creditor demands judicially or extra-judicially
the performance of the obligation. Without such demand, the effects
of default will not arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of
excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all
legal remedies against the said debtor have been resorted to by the
creditor.62 It could also set up compensation as regards what the
creditor SOB may owe the principal debtor VPECI.63 In this case,
however, the petitioner has clearly waived these rights and remedies
by making the payment of an obligation that was yet to be shown to
be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the
joint venture contractor had collectibles from SOB which could be
set off with the amount covered by the performance guarantee. In
February 1987, the OMEAA transmitted to the petitioner a copy of a
telex dated 10 February 1987 of the Philippine Ambassador in
Baghdad, Iraq, informing it of the note verbale sent by the Iraqi
Ministry of Foreign Affairs stating that the past due obligations of
the joint venture contractor from the petitioner would "be deducted
from the dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA
dated 26 March 1987, the petitioner raised as among the arguments
to be presented in support of the cancellation of the
counter-guarantee the fact that the amount of ID281,414/066 retained
by SOB from the Project was more than enough to cover the
counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
· The Iraqi Government does not have the foreign exchange to fulfill
its contractual obligations of paying 75% of progress billings in US
dollars.
… of the debtor VPECI, the debtor VPECI may set up against it
· It could also be argued that the amount of ID281,414/066 retained
by SOB from the proposed project is more than the amount of the
outstanding counterguarantee.65
123
In a nutshell, since the petitioner was aware of the contractor's
outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of
the respondents. In fact, in its 13 May 1987 letter to the OMEAA,
DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project
was mainly due to SOB's violation of contract terms and as such, call
on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a Filipino
contractor. It is for this reason that we are constrained to seek your
assistance not only in ascertaining the veracity of Al Ahli Bank's
claim that it has paid Rafidain Bank but possibly averting such an
event. As any payment effected by the banks will complicate matters,
we cannot help underscore the urgency of VPECI's bid for
government intervention for the amicable termination of the contract
and release of the performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the
service contract and VPECI's outstanding receivables from SOB, as
well as the situation obtaining in the Project site compounded by the
Iran-Iraq war, the petitioner opted to pay the second layer guarantor
not only the full amount of the performance bond counter-guarantee
but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor
secure reimbursement from the respondents for what it has paid
under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified
by the latter67 and would be legally subrogated to the rights which the
creditor has against the debtor.68 However, a person who makes
payment without the knowledge or against the will of the debtor has
the right to recover only insofar as the payment has been beneficial to
the debtor.69 If the obligation was subject to defenses on the part of
the debtor, the same defenses which could have been set up against
the creditor can be set up against the paying guarantor.70
From the findings of the Court of Appeals and the trial court, it is
clear that the payment made by the petitioner guarantor did not in
any way benefit the principal debtor, given the project status and the
conditions obtaining at the Project site at that time. Moreover, the
respondent contractor was found to have valid defenses against SOB,
which are fully supported by evidence and which have been
meritoriously set up against the paying guarantor, the petitioner in
this case. And even if the deed of undertaking and the surety bond
secured petitioner's guaranty, the petitioner is precluded from
enforcing the same by reason of the petitioner's undue payment on
the guaranty. Rights under the deed of undertaking and the surety
bond do not arise because these contracts depend on the validity of
the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of
guaranty: the debtor VPECI should have, in the first place, defaulted
in its obligation and that the creditor SOB should have first made a
demand from the principal debtor. It is only when the debtor does not
or cannot pay, in whole or in part, that the guarantor should
pay.71 When the petitioner guarantor in this case paid against the will
defenses available against the creditor SOB at the time of payment.
This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the
necessary support and assistance in order to enable … [Filipino
 124

exporters and contractors to operate viably under the prevailing

economic and business conditions,"72 the petitioner should have
exercised prudence and caution under the circumstances. As aptly put
by the Court of Appeals, it would be the height of inequity to allow
the petitioner to pass on its losses to the Filipino contractor VPECI
which had sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project
implementation.

WHEREFORE, the petition for review on certiorari is hereby

DENIED for lack of merit, and the decision of the Court of appeals
in CA-G.R. CV No. 39302 is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

CRESCENT PETROLEUM, LTD., G.R. No. 155014 Petitioner,
Present:
Puno, J.,
- versus - Chairman,
Austria-Martinez,
Callejo, Sr.,
Tinga, and
*Chico-Nazario, JJ.
M/V LOK MAHESHWARI,
THE SHIPPING CORPORATION
OF INDIA, and PORTSERV LIMITED Promulgated:
and/or TRANSMAR SHIPPING, INC.,
Respondents. November 11, 2005
x----------------------------------------------
----x
DECISION
PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a)
reversal of the November 28, 2001 Decision of the Court of Appeals
in CA-G.R. No. CV-54920,[1] which dismissed for want of
jurisdiction the instant case, and the September 3, 2002 Resolution of
the same appellate court,[2] which denied petitioners motion for
reconsideration, and (b) reinstatement of the July 25, 1996
Decision[3] of the Regional Trial Court (RTC) in Civil Case No.
CEB-18679, which held that respondents were solidarily liable to pay
petitioner the sum prayed for in the complaint.
The facts are as follows: Respondent M/V Lok Maheshwari (Vessel)
is an oceangoing vessel of Indian registry that is owned by
respondent Shipping Corporation of India (SCI), a corporation
organized and existing under the laws of India and principally owned
by the Government of India. It was time-chartered by respondent SCI
to Halla Merchant Marine Co. Ltd. (Halla), a South Korean company.
Halla, in turn, sub-chartered the Vessel through a time charter to
Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered
the Vessel to Portserv Limited (Portserv). Both Transmar and
Portserv are corporations organized and existing under the laws of
Canada.
On or about November 1, 1995, Portserv requested petitioner
Crescent Petroleum, Ltd. (Crescent), a corporation organized and
existing under the laws of Canada that is engaged in the business of
selling petroleum and oil products for the use and operation of
oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the
Vessel. Petitioner Crescent granted and confirmed the request
through an advice via facsimile dated November 2, 1995. As security
for the payment of the bunker fuels and related services, petitioner
Crescent received two (2) checks in the amounts of US$100,000.00
and US$200,000.00. Thus, petitioner Crescent contracted with its
supplier, Marine Petrobulk Limited (Marine Petrobulk), another
Canadian corporation, for the physical delivery of the bunker fuels to
the Vessel.
125
On or about November 4, 1995, Marine Petrobulk delivered the
bunker fuels amounting to US$103,544 inclusive of barging and
demurrage charges to the Vessel at the port of Pioneer Grain,
Vancouver, Canada. The Chief Engineer Officer of the Vessel duly
acknowledged and received the delivery receipt. Marine Petrobulk
issued an invoice to petitioner Crescent for the US$101,400.00 worth
of the bunker fuels. Petitioner Crescent issued a check for the same
amount in favor of Marine Petrobulk, which check was duly
encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised
invoice dated November 21, 1995 to Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V
Lok Maheshwari in the amount of US$103,544.00 with instruction to
remit the amount on or before December 1, 1995. The period lapsed
and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment
of the bunker fuels were dishonored for insufficiency of funds. As a
consequence, petitioner Crescent incurred additional expenses of
US$8,572.61 for interest, tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu
City, petitioner Crescent instituted before the RTC of Cebu City an
action for a sum of money with prayer for temporary restraining
order and writ of preliminary attachment against respondents Vessel
and SCI, Portserv and/or Transmar. The case was raffled to Branch
10 and docketed as Civil Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of attachment against
the Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew
its prayer for a temporary restraining order and posted the required
bond.
On May 18, 1996, summonses were served to respondents Vessel
and SCI, and Portserv and/or Transmar through the Master of the
Vessel. On May 28, 1996, respondents Vessel and SCI, through
Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent
ex-parte motion to approve Pioneers letter of undertaking, to consider
it as counter-bond and to discharge the attachment. On May 29, 1996,
the trial court granted the motion; thus, the letter of undertaking was
approved as counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of
petitioner Crescent, the trial court declared respondents Vessel and
SCI, Portserv and/or Transmar in default. Petitioner Crescent was
allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor of
petitioner Crescent, thus:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiff [Crescent] and against the defendants [Vessel, SCI,
Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff jointly
and solidarily, the following:
(a) the sum of US$103,544.00, representing the outstanding
obligation;
(b) interest of US$10,978.50 as of July 3, 1996, plus additional
interest at 18% per annum for the period thereafter, until the principal
account is fully paid;
(c) attorneys fees of P300,000.00; and
(d) P200,000.00 as litigation expenses.
 126

6. The law of the state of New York is inapplicable to the

present controversy as the same has not been properly pleaded and
SO ORDERED. proved;

On August 19, 1996, respondents Vessel and SCI appealed to the 7. Petitioner has legal capacity to sue before Philippine
Court of Appeals. They attached copies of the charter parties courts as it is suing upon an isolated business transaction;
between respondent SCI and Halla, between Halla and Transmar, and
between Transmar and Portserv. They pointed out that Portserv was a
time charterer and that there is a clause in the time charters between
respondent SCI and Halla, and between Halla and Transmar, which 8. Respondents were duly served summons although
states that the Charterers shall provide and pay for all the fuel except service of summons upon respondents is not a jurisdictional
as otherwise agreed. They submitted a copy of Part II of the Bunker requirement, the action being a suit quasi in rem;
Fuel Agreement between petitioner Crescent and Portserv containing
a stipulation that New York law governs the construction, validity
and performance of the contract. They likewise submitted certified 9. The trial courts decision has factual and legal bases;
copies of the Commercial Instruments and Maritime Lien Act of the and,
United States (U.S.), some U.S. cases, and some Canadian cases to
support their defense.

On November 28, 2001, the Court of Appeals issued its assailed 10. The respondents should be held jointly and solidarily
Decision, which reversed that of the trial court, viz: liable.

WHEREFORE, premises considered, the Decision dated July 25,

1996, issued by the Regional Trial Court of Cebu City, Branch 10, is
In a nutshell, this case is for the satisfaction of unpaid supplies
hereby REVERSED and SET ASIDE, and a new one is entered
furnished by a foreign supplier in a foreign port to a vessel of foreign
DISMISSING the instant case for want of jurisdiction.
registry that is owned, chartered and sub-chartered by foreign
entities.

The appellate court denied petitioner Crescents motion for Under Batas Pambansa Bilang 129, as amended by Republic Act No.
reconsideration explaining that it dismissed the instant action 7691, RTCs exercise exclusive original jurisdiction (i)n all actions in
primarily on the ground of forum non conveniensconsidering that the admiralty and maritime where the demand or claim exceeds two
parties are foreign corporations which are not doing business in the hundred thousand pesos (P200,000) or in Metro Manila, where such
Philippines. demand or claim exceeds four hundred thousand pesos (P400,000).
Two (2) tests have been used to determine whether a case involving a
Hence, this petition submitting the following issues for contract comes within the admiralty and maritime jurisdiction of a
resolution, viz: court - the locational test and the subject matter test. The English
rule follows the locational test wherein maritime and admiralty
1. Philippine courts have jurisdiction over a foreign vessel
jurisdiction, with a few exceptions, is exercised only on contracts
found inside Philippine waters for the enforcement of a maritime lien
made upon the sea and to be executed thereon. This is totally rejected
against said vessel and/or its owners and operators;
under the American rule where the criterion in determining whether a
contract is maritime depends on the nature and subject matter of the
contract, having reference to maritime service and
2. The principle of forum non conveniens is inapplicable transactions.[4] In International Harvester Company of the
to the instant case; Philippines v. Aragon,[5] we adopted the American rule and held
that (w)hether or not a contract is maritime depends not on the place
where the contract is made and is to be executed, making the locality
the test, but on the subject matter of the contract, making the true
3. The trial court acquired jurisdiction over the subject
criterion a maritime service or a maritime transaction.
matter of the instant case, as well as over the res and over the persons
of the parties; A contract for furnishing supplies like the one involved in this case is
maritime and within the jurisdiction of admiralty.[6] It may be
invoked before our courts through an action in rem or quasi in rem or
4. The enforcement of a maritime lien on the subject an action in personam. Thus: [7]
vessel is expressly granted by law. The Ship Mortgage Acts as well
xxx
as the Code of Commerce provides for relief to petitioner for its
unpaid claim; Articles 579 and 584 [of the Code of Commerce] provide a method
of collecting or enforcing not only the liens created under Section
580 but also for the collection of any kind of lien whatsoever. [8] In
5. The arbitration clause in the contract was not rigid or the Philippines, we have a complete legislation, both substantive and
inflexible but expressly allowed petitioner to enforce its maritime adjective, under which to bring an action in remagainst a vessel for
lien in Philippine courts provided the vessel was in the Philippines; the purpose of enforcing liens. The substantive law is found in
Article 580 of the Code of Commerce. The procedural law is to be
found in Article 584 of the same Code. The result is, therefore, that
in the Philippines any vessel even though it be a foreign vessel found
in any port of this Archipelago may be attached and sold under the
substantive law which defines the right, and the procedural law

contained in the Code of Commerce by which this right is to be
enforced.[9] x x x. But where neither the law nor the contract between
the parties creates any lien or charge upon the vessel, the only way in
which it can be seized before judgment is by pursuing the remedy
relating to attachment under Rule 59 [now Rule 57] of the Rules of
Court.[10]
But, is petitioner Crescent entitled to a maritime lien under our laws?
Petitioner Crescent bases its claim of a maritime lien on Sections
21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also
known as the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien.
- Any person furnishing repairs, supplies, towage, use of dry dock or
maritime railway, or other necessaries, to any vessel, whether foreign
or domestic, upon the order of the owner of such vessel, or of a
person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be
necessary to allege or prove that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs, Supplies and
Necessaries. - The following persons shall be presumed to have
authority from the owner to procure repairs, supplies, towage, use of
dry dock or marine railway, and other necessaries for the vessel: The
managing owner, ships husband, master or any person to whom the
management of the vessel at the port of supply is entrusted. No
person tortuously or unlawfully in possession or charge of a vessel
shall have authority to bind the vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies and
Necessaries. - The officers and agents of a vessel specified in Section
22 of this Decree shall be taken to include such officers and agents
when appointed by a charterer, by an owner pro hac vice, or by an
agreed purchaser in possession of the vessel; but nothing in this
Decree shall be construed to confer a lien when the furnisher knew,
or by exercise of reasonable diligence could have ascertained, that
because of the terms of a charter party, agreement for sale of the
vessel, or for any other reason, the person ordering the repairs,
supplies, or other necessaries was without authority to bind the vessel
therefor.
Petitioner Crescent submits that these provisions apply to both
domestic and foreign vessels, as well as domestic and foreign
suppliers of necessaries. It contends that the use of the term any
person in Section 21 implies that the law is not restricted to domestic
suppliers but also includes all persons who supply provisions and
necessaries to a vessel, whether foreign or domestic. It points out
further that the law does not indicate that the supplies or necessaries
must be furnished in the Philippines in order to give petitioner the
right to seek enforcement of the lien with a Philippine court.[11]
Respondents Vessel and SCI, on the other hand, maintain that
Section 21 of the P.D. No. 1521 or the Ship Mortgage Decree of
1978 does not apply to a foreign supplier like petitioner Crescent as
the provision refers only to a situation where the person furnishing
the supplies is situated inside the territory of the Philippines and not
where the necessaries were furnished in a foreign jurisdiction like
Canada.[12]
We find against petitioner Crescent.
I.
127
P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to
accelerate the growth and development of the shipping industry and
to extend the benefits accorded to overseas shipping under
Presidential Decree No. 214 to domestic shipping.[13] It is patterned
closely from the U.S. Ship Mortgage Act of 1920 and the Liberian
Maritime Law relating to preferred mortgages.[14] Notably, Sections
21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978
are identical to Subsections P, Q, and R, respectively, of the U.S.
Ship Mortgage Act of 1920, which is part of the Federal Maritime
Lien Act. Hence, U.S. jurisprudence finds relevance to determining
whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies
in the present case.
The various tests used in the U.S. to determine whether a maritime
lien exists are the following:
One. In a suit to establish and enforce a maritime lien for supplies
furnished to a vessel in a foreign port, whether such lien exists, or
whether the court has or will exercise jurisdiction, depends on
the law of the country where the supplies were furnished, which
must be pleaded and proved.[15] This principle was laid down in the
1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm
II[17] (1916), in The Woudrichem[18] (1921) and in The City of
Atlanta[19] (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which
replaced such single-factor methodologies as the law of the place of
supply.[20]
In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in
New York, joined the crew of a ship of Danish flag and registry that
is owned by a Danish citizen. He signed the ships articles providing
that the rights of the crew members would be governed by Danish
law and by the employers contract with the Danish Seamens Union,
of which he was a member. While in Havana and in the course of his
employment, he was negligently injured. He sued the shipowner in a
federal district court in New York for damages under the Jones Act.
In holding that Danish law and not the Jones Act was applicable, the
Supreme Court adopted a multiple-contact test to determine, in the
absence of a specific Congressional directive as to the statutes reach,
which jurisdictions law should be applied. The following factors
were considered: (1) place of the wrongful act; (2) law of the flag;
(3) allegiance or domicile of the injured; (4) allegiance of the
defendant shipowner; (5) place of contract; (6) inaccessibility of
foreign forum; and (7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case
of Romero v. International Terminal Operating Co.[22] again
considered a foreign seamans personal injury claim under both the
Jones Act and the general maritime law. The Court held that the
factors first announced in the case of Lauritzen were applicable not
only to personal injury claims arising under the Jones Act but to
all matters arising under maritime law in general.[23]
Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones
Act by a Greek seaman injured aboard a ship of Greek registry while
in American waters. The ship was operated by a Greek corporation
which has its largest office in New York and another office in New
Orleans and whose stock is more than 95% owned by a U.S.
domiciliary who is also a Greek citizen. The ship was engaged in
regularly scheduled runs between various ports of the U.S. and the
Middle East, Pakistan, and India, with its entire income coming from
either originating or terminating in the U.S. The contract of
employment provided that Greek law and a Greek collective
bargaining agreement would apply between the employer and the
seaman and that all claims arising out of the employment contract
were to be adjudicated by a Greek court. The U.S. Supreme Court
observed that of the seven factors listed in the Lauritzen test, four

were in favor of the shipowner and against jurisdiction. In
arriving at the conclusion that the Jones Act applies, it ruled that the
application of the Lauritzen test is not a mechanical one. It stated
thus: [t]he significance of one or more factors must be considered in
light of the national interest served by the assertion of Jones Act
jurisdiction. (footnote omitted) Moreover, the list of seven factors in
Lauritzen was not intended to be exhaustive. x x x [T]he shipowners
base of operations is another factor of importance in determining
whether the Jones Act is applicable; and there well may be others.
The principles enunciated in these maritime tort cases have been
extended to cases involving unpaid supplies and necessaries such as
the
cases of Forsythe International U.K., Ltd. v. M/V Ruth
Venture,[25] and Comoco Marine Services v. M/V El
Centroamericano.[26]
Three. The factors provided in Restatement (Second) of Conflicts
of Law have also been applied, especially in resolving cases brought
under the Federal Maritime Lien Act. Their application suggests that
in the absence of an effective choice of law by the parties, the forum
contacts to be considered include: (a) the place of contracting; (b) the
place of negotiation of the contract; (c) the place of performance; (d)
the location of the subject matter of the contract; and (e) the domicile,
residence, nationality, place of incorporation and place of business of
the parties.[27]
In Gulf Trading and Transportation Co. v. The Vessel Hoegh
Shield,[28] an admiralty action in rem was brought by an American
supplier against a vessel of Norwegian flag owned by a Norwegian
Company and chartered by a London time charterer for unpaid fuel
oil and marine diesel oil delivered while the vessel was in U.S.
territory. The contract was executed in London. It was held that
because the bunker fuel was delivered to a foreign flag vessel within
the jurisdiction of the U.S., and because the invoice specified
payment in the U.S., the admiralty and maritime law of the U.S.
applied. The U.S. Court of Appeals recognized the modern approach
to maritime conflict of law problems introduced in the Lauritzen case.
However, it observed that Lauritzen involved a torts claim under the
Jones Act while the present claim involves an alleged maritime lien
arising from unpaid supplies. It made a disclaimer that its conclusion
is limited to the unique circumstances surrounding a maritime lien as
well as the statutory directives found in the Maritime Lien Statute
and that the initial choice of law determination is significantly
affected by the statutory policies surrounding a maritime lien. It
ruled that the facts in the case call for the application of the
Restatement (Second) of Conflicts of Law. The U.S. Court gave
much significance to the congressional intent in enacting the
Maritime Lien Statute to protect the interests of American supplier of
goods, services or necessaries by making maritime liens available
where traditional services are routinely rendered. It concluded that
the Maritime Lien Statute represents a relevant policy of the forum
that serves the needs of the international legal system as well as the
basic policies underlying maritime law. The court also gave equal
importance to the predictability of result and protection of justified
expectations in a particular field of law. In the maritime realm, it is
expected that when necessaries are furnished to a vessel in an
American port by an American supplier, the American Lien Statute
will apply to protect that supplier regardless of the place where the
contract was formed or the nationality of the vessel.
The same principle was applied in the case of Swedish Telecom
Radio v. M/V Discovery I[29] where the American court refused to
apply the Federal Maritime Lien Act to create a maritime lien for
goods and services supplied by foreign companies in foreign ports. In
this case, a Swedish company supplied radio equipment in a Spanish
port to refurbish a Panamanian vessel damaged by fire. Some of the
contract negotiations occurred in Spain and the agreement for
128
supplies between the parties indicated Swedish companys
willingness to submit to Swedish law. The ship was later sold under a
contract of purchase providing for the application of New York law
and was arrested in the U.S. The U.S. Court of Appeals also held that
while the contacts-based framework set forth in Lauritzen was useful
in the analysis of all maritime choice of law situations, the factors
were geared towards a seamans injury claim. As in Gulf Trading,
the lien arose by operation of law because the ships owner was not a
party to the contract under which the goods were supplied. As a
result, the court found it more appropriate to consider the factors
contained in Section 6 of the Restatement (Second) of Conflicts of
Law. The U.S. Court held that the primary concern of the Federal
Maritime Lien Act is the protection of American suppliers of goods
and services.
The same factors were applied in the case of Ocean Ship Supply,
Ltd. v. M/V Leah.[30]
II.
Finding guidance from the foregoing decisions, the Court cannot
sustain petitioner Crescents insistence on the application of P.D. No.
1521 or the Ship Mortgage Decree of 1978 and hold that a maritime
lien exists.
First. Out of the seven basic factors listed in the case of Lauritzen,
Philippine law only falls under one the law of the forum. All other
elements are foreign Canada is the place of the wrongful act, of the
allegiance or domicile of the injured and the place of contract; India
is the law of the flag and the allegiance of the defendant shipowner.
Balancing these basic interests, it is inconceivable that the Philippine
court has any interest in the case that outweighs the interests of
Canada or India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is
inapplicable following the factors under Restatement (Second) of
Conflict of Laws. Like the Federal Maritime Lien Act of the U.S.,
P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted
primarily to protect Filipino suppliers and was not intended to create
a lien from a contract for supplies between foreign entities delivered
in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of
1978 and rule that a maritime lien exists would not promote the
public policy behind the enactment of the law to develop the
domestic shipping industry. Opening up our courts to foreign
suppliers by granting them a maritime lien under our laws even if
they are not entitled to a maritime lien under their laws will
encourage forum shopping.
Finally. The submission of petitioner is not in keeping with the
reasonable expectation of the parties to the contract. Indeed, when
the parties entered into a contract for supplies in Canada, they could
not have intended the laws of a remote country like the Philippines to
determine the creation of a lien by the mere accident of the Vessels
being in Philippine territory.
III.
But under which law should petitioner Crescent prove the existence
of its maritime lien?
In light of the interests of the various foreign elements involved, it is
clear that Canada has the most significant interest in this dispute. The
injured party is a Canadian corporation, the sub-charterer which
placed the orders for the supplies is also Canadian, the entity which
physically delivered the bunker fuels is in Canada, the place of
contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
 129

The arbitration clause contained in the Bunker Fuel Agreement
which states that New York law governs the construction, validity
and performance of the contract is only a factor that may be
considered in the choice-of-law analysis but is not conclusive. As in
the cases of Gulf Trading and Swedish Telecom, the lien that is the
subject matter of this case arose by operation of law and not by
contract because the shipowner was not a party to the contract under
which the goods were supplied.
It is worthy to note that petitioner Crescent never alleged and proved
Canadian law as basis for the existence of a maritime lien. To the end,
it insisted on its theory that Philippine law applies. Petitioner
contends that even if foreign law applies, since the same was not
properly pleaded and proved, such foreign law must be presumed to
be the same as Philippine law pursuant to the doctrine of processual
presumption.
Thus, we are left with two choices: (1) dismiss the case for
petitioners failure to establish a cause of action[31] or (2) presume that
Canadian law is the same as Philippine law. In either case, the case
has to be dismissed.
It is well-settled that a party whose cause of action or defense
depends upon a foreign law has the burden of proving the foreign law.
Such foreign law is treated as a question of fact to be properly
pleaded and proved.[32] Petitioner Crescents insistence on enforcing a
maritime lien before our courts depended on the existence of a
maritime lien under the proper law. By erroneously claiming a
maritime lien under Philippine law instead of proving that a maritime
lien exists under Canadian law, petitioner Crescent failed to establish
a cause of action.[33]
respondent SCI and Halla and between Halla and Transmar were
shown to contain a clause which states that the Charterers shall
provide and pay for all the fuel except as otherwise agreed. This
militates against petitioner Crescents position that Portserv is
authorized by the shipowner to contract for supplies upon the credit
of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of
credit will be presumed where it appears that the repairs and supplies
were necessary for the ship and that they were ordered by the master.
This presumption does not arise in this case since the fuels were not
ordered by the master and there was no proof of necessity for the
supplies.
Finally. The necessaries were not ordered by persons authorized to
contract in behalf of the vessel as provided under Section 22 of P.D.
No. 1521 or the Ship Mortgage Decree of 1978 - the managing
owner, the ships husband, master or any person with whom the
management of the vessel at the port of supply is entrusted. Clearly,
Portserv, a sub-charterer under a time charter, is not someone to
whom the management of the vessel has been entrusted. A time
charter is a contract for the use of a vessel for a specified period of
time or for the duration of one or more specified voyages wherein the
owner of the time-chartered vessel retains possession and control
through the master and crew who remain his employees.[37] Not
enjoying the presumption of authority, petitioner Crescent should
have proved that Portserv was authorized by the shipowner to
contract for supplies. Petitioner failed.
A discussion on the principle of forum non conveniens is
unnecessary.

Even if we apply the doctrine of processual presumption, the result
will still be the same. Under P.D. No. 1521 or the Ship Mortgage
Decree of 1978, the following are the requisites for maritime liens on
necessaries to exist: (1) the necessaries must have been furnished to
and for the benefit of the vessel; (2) the necessaries must have been
necessary for the continuation of the voyage of the vessel; (3) the
credit must have been extended to the vessel; (4) there must be
necessity for the extension of the credit; and (5) the necessaries must
be ordered by persons authorized to contract on behalf of the
vessel.[34] These do not avail in the instant case.
IN VIEW WHEREOF, the Decision of the Court of Appeals in
CA-G.R. No. CV 54920, dated November 28, 2001, and its
subsequent Resolution of September 3, 2002 are AFFIRMED. The
instant petition for review on certiorari is DENIED for lack of merit.
Cost against petitioner.
SO ORDERED.

First. It was not established that benefit was extended to the vessel.
While this is presumed when the master of the ship is the one who
placed the order, it is not disputed that in this case it was the
sub-charterer Portserv which placed the orders to petitioner
Crescent.[35] Hence, the presumption does not arise and it is
incumbent upon petitioner Crescent to prove that benefit was
extended to the vessel. Petitioner did not.

Second. Petitioner Crescent did not show any proof that the marine
products were necessary for the continuation of the vessel.

Third. It was not established that credit was extended to the vessel. It
is presumed that in the absence of fraud or collusion, where advances
are made to a captain in a foreign port, upon his request, to pay for
necessary repairs or supplies to enable his vessel to prosecute her
voyage, or to pay harbor dues, or for pilotage, towage and like
services rendered to the vessel, that they are made upon the credit of
the vessel as well as upon that of her owners.[36] In this case, it was
the sub-charterer Portserv which requested for the delivery of the
bunker fuels. The issuance of two checks amounting to US$300,000
in favor of petitioner Crescent prior to the delivery of the bunkers as
security for the payment of the obligation weakens petitioner
Crescents contention that credit was extended to the Vessel.

We also note that when copies of the charter parties were submitted
by respondents in the Court of Appeals, the time charters between

G.R. No. 172342 July 13, 2009
LWV CONSTRUCTION CORPORATION, Petitioner,
vs.
MARCELO B. DUPO, Respondent.
DECISION
QUISUMBING, J.:
Petitioner LWV Construction Corporation appeals the
Decision1 dated December 6, 2005 of the Court of Appeals in
CA-G.R. SP No. 76843 and its Resolution2 dated April 12, 2006,
denying the motion for reconsideration. The Court of Appeals had
ruled that under Article 87 of the Saudi Labor and Workmen Law
(Saudi Labor Law), respondent Marcelo Dupo is entitled to a service
award or longevity pay amounting to US$12,640.33.
The antecedent facts are as follows:
Petitioner, a domestic corporation which recruits Filipino workers,
hired respondent as Civil Structural Superintendent to work in Saudi
Arabia for its principal, Mohammad Al-Mojil Group/Establishment
(MMG). On February 26, 1992, respondent signed his first overseas
employment contract, renewable after one year. It was renewed five
times on the following dates: May 10, 1993, November 16, 1994,
January 22, 1996, April 14, 1997, and March 26, 1998. All were
fixed-period contracts for one year. The sixth and last contract stated
that respondent’s employment starts upon reporting to work and ends
when he leaves the work site. Respondent left Saudi Arabia on April
30, 1999 and arrived in the Philippines on May 1, 1999.
On May 28, 1999, respondent informed MMG, through the petitioner,
that he needs to extend his vacation because his son was hospitalized.
He also sought a promotion with salary adjustment.3 In reply, MMG
informed respondent that his promotion is subject to management’s
review; that his services are still needed; that he was issued a plane
ticket for his return flight to Saudi Arabia on May 31, 1999; and that
his decision regarding his employment must be made within seven
days, otherwise, MMG "will be compelled to cancel [his] slot."4
On July 6, 1999, respondent resigned. In his letter to MMG, he also
stated:
xxxx
I am aware that I still have to do a final settlement with the company
and hope that during my more than seven (7) [years] services, as the
Saudi Law stated, I am entitled for a long service award.5 (Emphasis
supplied.)
xxxx
According to respondent, when he followed up his claim for long
service award on December 7, 2000, petitioner informed him that
MMG did not respond.6
On December 11, 2000, respondent filed a complaint7 for payment of
service award against petitioner before the National Labor Relations
Commission (NLRC), Regional Arbitration Branch, Cordillera
Administrative Region, Baguio City. In support of his claim,
respondent averred in his position paper that:
xxxx
Under the Law of Saudi Arabia, an employee who rendered at least
five (5) years in a company within the jurisdiction of Saudi Arabia, is
entitled to the so-called long service award which is known to others
as longevity pay of at least one half month pay for every year of
service. In excess of five years an employee is entitled to one month
130
pay for every year of service. In both cases inclusive of all benefits
and allowances.
This benefit was offered to complainant before he went on vacation,
hence, this was engrained in his mind. He reconstructed the
computation of his long service award or longevity pay and he
arrived at the following computation exactly the same with the
amount he was previously offered [which is
US$12,640.33].8 (Emphasis supplied.)
xxxx
Respondent said that he did not grab the offer for he intended to
return after his vacation.
For its part, petitioner offered payment and prescription as defenses.
Petitioner maintained that MMG "pays its workers their Service
Award or Severance Pay every conclusion of their Labor Contracts
pursuant to Article 87 of the [Saudi Labor Law]." Under Article 87,
"payment of the award is at the end or termination of the Labor
Contract concluded for a specific period." Based on the
payroll,9 respondent was already paid his service award or severance
pay for his latest (sixth) employment contract.
Petitioner added that under Article 1310 of the Saudi Labor Law, the
action to enforce payment of the service award must be filed within
one year from the termination of a labor contract for a specific period.
Respondent’s six contracts ended when he left Saudi Arabia on the
following dates: April 15, 1993, June 8, 1994, December 18, 1995,
March 21, 1997, March 16, 1998 and April 30, 1999. Petitioner
concluded that the one-year prescriptive period had lapsed because
respondent filed his complaint on December 11, 2000 or one year
and seven months after his sixth contract ended.11
In his June 18, 2001 Decision,12 the Labor Arbiter ordered petitioner
to pay respondent longevity pay of US$12,640.33 or ₱648,562.69
and attorney’s fees of ₱64,856.27 or a total of ₱713,418.96.13
The Labor Arbiter ruled that respondent’s seven-year employment
with MMG had sufficiently oriented him on the benefits given to
workers; that petitioner was unable to convincingly refute
respondent’s claim that MMG offered him longevity pay before he
went on vacation on May 1, 1999; and that respondent’s claim was
not barred by prescription since his claim on July 6, 1999, made a
month after his cause of action accrued, interrupted the prescriptive
period under the Saudi Labor Law until his claim was categorically
denied.
Petitioner appealed. However, the NLRC dismissed the appeal and
affirmed the Labor Arbiter’s decision.14 The NLRC ruled that
respondent is entitled to longevity pay which is different from
severance pay.
Aggrieved, petitioner brought the case to the Court of Appeals
through a petition for certiorari under Rule 65 of the Rules of Court.
The Court of Appeals denied the petition and affirmed the NLRC.
The Court of Appeals ruled that service award is the same as
longevity pay, and that the severance pay received by respondent
cannot be equated with service award. The dispositive portion of the
Court of Appeals decision reads:
WHEREFORE, finding no grave abuse of discretion amounting to
lack or in (sic) excess of jurisdiction on the part of public respondent
NLRC, the petition is denied. The NLRC decision dated November
29, 2002 as well as and (sic) its January 31, 2003 Resolution are
hereby AFFIRMED in toto.
SO ORDERED.15

After its motion for reconsideration was denied, petitioner filed the
instant petition raising the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN FINDING NO GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON
THE PART OF PUBLIC RESPONDENT NATIONAL LABOR
RELATIONS COMMISSION.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN FINDING THAT THE SERVICE AWARD OF THE
RESPONDENT [HAS] NOT PRESCRIBED WHEN HIS
COMPLAINT WAS FILED ON DECEMBER 11, 2000.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN APPLYING IN THE CASE AT BAR [ARTICLE 1155
OF THE CIVIL CODE].
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
ERRED IN APPLYING ARTICLE NO. 7 OF THE SAUDI LABOR
AND WORKMEN LAW TO SUPPORT ITS FINDING THAT THE
BASIS OF THE SERVICE AWARD IS LONGEVITY [PAY] OR
LENGTH OF SERVICE RENDERED BY AN EMPLOYEE.16
Essentially, the issue is whether the Court of Appeals erred in ruling
that respondent is entitled to a service award or longevity pay of
US$12,640.33 under the provisions of the Saudi Labor Law. Related
to this issue are petitioner’s defenses of payment and prescription.
Petitioner points out that the Labor Arbiter awarded longevity pay
although the Saudi Labor Law grants no such benefit, and the NLRC
confused longevity pay and service award. Petitioner maintains that
the benefit granted by Article 87 of the Saudi Labor Law is service
award which was already paid by MMG each time respondent’s
contract ended.
Petitioner insists that prescription barred respondent’s claim for
service award as the complaint was filed one year and seven months
after the sixth contract ended. Petitioner alleges that the Court of
Appeals erred in ruling that respondent’s July 6, 1999 claim
interrupted the running of the prescriptive period. Such ruling is
contrary to Article 13 of the Saudi Labor Law which provides that no
case or claim relating to any of the rights provided for under said law
shall be heard after the lapse of 12 months from the date of the
termination of the contract.
Respondent counters that he is entitled to longevity pay under the
provisions of the Saudi Labor Law and quotes extensively the
decision of the Court of Appeals. He points out that petitioner has not
refuted the Labor Arbiter’s finding that MMG offered him longevity
pay of US$12,640.33 before his one-month vacation in the
Philippines in 1999. Thus, he "submits that such offer indeed exists"
as he sees no reason for MMG to offer the benefit if no law grants it.
After a careful study of the case, we are constrained to reverse the
Court of Appeals. We find that respondent’s service award under
Article 87 of the Saudi Labor Law has already been paid. Our
computation will show that the severance pay received by respondent
was his service award.
Article 87 clearly grants a service award. It reads:
Article 87
131
Where the term of a labor contract concluded for a specified period
comes to an end or where the employer cancels a contract of
unspecified period, the employer shall pay to the workman an award
for the period of his service to be computed on the basis of half a
month’s pay for each of the first five years and one month’s pay for
each of the subsequent years. The last rate of pay shall be taken as
basis for the computation of the award. For fractions of a year, the
workman shall be entitled to an award which is proportionate to his
service period during that year. Furthermore, the workman shall be
entitled to the service award provided for at the beginning of this
article in the following cases:
A. If he is called to military service.
B. If a workman resigns because of marriage or childbirth.
C. If the workman is leaving the work as a result of a force majeure
beyond his control.17 (Emphasis supplied.)
Respondent, however, has called the benefit other names such as
long service award and longevity pay. On the other hand, petitioner
claimed that the service award is the same as severance pay. Notably,
the Labor Arbiter was unable to specify any law to support his award
of longevity pay.18 He anchored the award on his finding that
respondent’s allegations were more credible because his seven-year
employment at MMG had sufficiently oriented him on the benefits
given to workers. To the NLRC, respondent is entitled to service
award or longevity pay under Article 87 and that longevity pay is
different from severance pay. The Court of Appeals agreed.
Considering that Article 87 expressly grants a service award, why is
it correct to agree with respondent that service award is the same as
longevity pay, and wrong to agree with petitioner that service award
is the same as severance pay? And why would it be correct to say
that service award is severance pay, and wrong to call service award
as longevity pay?
We found the answer in the pleadings and evidence presented.
Respondent’s position paper mentioned how his long service award
or longevity pay is computed: half-month’s pay per year of service
and one-month’s pay per year after five years of service. Article 87
has the same formula to compute the service award.
The payroll submitted by petitioner showed that respondent received
severance pay of SR2,786 for his sixth employment contract
covering the period April 21, 1998 to April 29, 1999.19 The
computation below shows that respondent’s severance pay of
SR2,786 was his service award under Article 87.
Service Award = ½ (SR5,438)20 + (9 days/365 days)21 x ½ (SR5,438)
Service Award = SR2,786.04
Respondent’s service award for the sixth contract is equivalent only
to half-month’s pay plus the proportionate amount for the additional
nine days of service he rendered after one year. Respondent’s
employment contracts expressly stated that his employment ended
upon his departure from work. Each year he departed from work and
successively new contracts were executed before he reported for
work anew. His service was not cumulative. Pertinently, in Brent
School, Inc. v. Zamora,22 we said that "a fixed term is an essential
and natural appurtenance" of overseas employment contracts,23 as in
this case. We also said in that case that under American law,
"[w]here a contract specifies the period of its duration, it terminates
on the expiration of such period. A contract of employment for a
definite period terminates by its own terms at the end of such
period."24 As it is, Article 72 of the Saudi Labor Law is also of
similar import. It reads:

A labor contract concluded for a specified period shall terminate
upon the expiry of its term. If both parties continue to enforce the
contract, thereafter, it shall be considered renewed for an unspecified
period.25
Regarding respondent’s claim that he was offered US$12,640.33 as
longevity pay before he returned to the Philippines on May 1, 1999,
we find that he was not candid on this particular point. His
categorical assertion about the offer being "engrained in his mind"
such that he "reconstructed the computation … and arrived at the …
computation exactly the same with the amount he was previously
offered" is not only beyond belief. Such assertion is also a stark
departure from his July 6, 1999 letter to MMG where he could only
express his hope that he was entitled to a long service award and
where he never mentioned the supposed previous offer. Moreover,
respondent’s claim that his monthly compensation is
SR10,248.9226 is belied by the payroll which shows that he receives
SR5,438 per month.
We therefore emphasize that such payroll should have prompted the
lower tribunals to examine closely respondent’s computation of his
supposed longevity pay before adopting that computation as their
own.
On the matter of prescription, however, we cannot agree with
petitioner that respondent’s action has prescribed under Article 13 of
the Saudi Labor Law. What applies is Article 291 of our Labor Code
which reads:
ART. 291. Money claims. — All money claims arising from
employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
xxxx
In Cadalin v. POEA’s Administrator,27 we held that Article 291
covers all money claims from employer-employee relationship and is
broader in scope than claims arising from a specific law. It is not
limited to money claims recoverable under the Labor Code, but
applies also to claims of overseas contract workers.28 The following
ruling in Cadalin v. POEA’s Administrator is instructive:
First to be determined is whether it is the Bahrain law on prescription
of action based on the Amiri Decree No. 23 of 1976 or a Philippine
law on prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
"A claim arising out of a contract of employment shall not be
actionable after the lapse of one year from the date of the expiry of
the contract" x x x.
As a general rule, a foreign procedural law will not be applied in the
forum.1avvphi1 Procedural matters, such as service of process,
joinder of actions, period and requisites for appeal, and so forth, are
governed by the laws of the forum. This is true even if the action is
based upon a foreign substantive law (Restatement of the Conflict of
Laws, Sec. 685; Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in
the sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
xxxx
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the forum
has a "borrowing statute." Said statute has the practical effect of
treating the foreign statute of limitation as one of substance
132
(Goodrich, Conflict of Laws, 152-153 [1938]). A "borrowing statute"
directs the state of the forum to apply the foreign statute of
limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing
statutes," one form provides that an action barred by the laws of the
place where it accrued, will not be enforced in the forum even though
the local statute has not run against it (Goodrich and Scoles, Conflict
of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure
is of this kind. Said Section provides:
"If by the laws of the state or country where the cause of action arose,
the action is barred, it is also barred in the Philippine Islands."
Section 48 has not been repealed or amended by the Civil Code of
the Philippines. Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedure as to which were
inconsistent with it. There is no provision in the Civil Code of the
Philippines, which is inconsistent with or contradictory to Section 48
of the Code of Civil Procedure (Paras, Philippine Conflict of Laws,
104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 [of the
Code of Civil Procedure] cannot be enforced ex proprio vigore
insofar as it ordains the application in this jurisdiction of [Article]
156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious
to the forum’s public policy x x x. To enforce the one-year
prescriptive period of the Amiri Decree No. 23 of 1976 as regards the
claims in question would contravene the public policy on the
protection to labor.29
xxxx
Thus, in our considered view, respondent’s complaint was filed well
within the three-year prescriptive period under Article 291 of our
Labor Code. This point, however, has already been mooted by our
finding that respondent’s service award had been paid, albeit the
payroll termed such payment as severance pay.
WHEREFORE, the petition is GRANTED. The assailed Decision
dated December 6, 2005 and Resolution dated April 12, 2006, of the
Court of Appeals in CA-G.R. SP No. 76843, as well as the Decision
dated June 18, 2001 of the Labor Arbiter in NLRC Case No.
RAB-CAR-12-0649-00 and the Decision dated November 29, 2002
and Resolution dated January 31, 2003 of the NLRC in NLRC CA
No. 028994-01 (NLRC RAB-CAR-12-0649-00) are REVERSED
and SET ASIDE. The Complaint of respondent is hereby
DISMISSED.
No pronouncement as to costs.
SO ORDERED.
 133

DEUTSCHE GESELLSCHAFT FR G.R. No. 152318 On 10 December 1999, the Philippine government, through then
Foreign Affairs Secretary Domingo Siazon, and the German
TECHNISCHE ZUSAMMENARBEIT, government, agreed to an Arrangement in furtherance of the 1971
Agreement. This Arrangement affirmed the common commitment of
also known as GERMAN AGENCY Present:
both governments to promote jointly a project called, Social Health
FOR TECHNICAL COOPERATION, InsuranceNetworking and Empowerment (SHINE), which was
designed to enable Philippine familiesespecially poor onesto
(GTZ) HANS PETER PAULENZ and QUISUMBING, J., maintain their health and secure health care of sustainable
quality.[3] It appears that SHINE had already been in existence even
ANNE NICOLAY, Chairperson,
prior to the effectivity of the Arrangement, though the record does
Petitioners, CARPIO MORALES, not indicate when exactly SHINE was constituted. Nonetheless, the
Arrangement stated the various obligations of the Filipino and
TINGA, German governments. The relevant provisions of the Arrangement
are reproduced as follows:
VELASCO, and

- versus - BRION, JJ.

3. The Government of the Federal Republic of Germany
Promulgated: shall make the following contributions to the project.
HON. COURT OF APPEALS, HON.

ARIEL CADIENTE SANTOS, Labor April 16, 2009 It shall

Arbiter of the Arbitration Branch,

National Labor Relations Commission, (a) second

and BERNADETTE CARMELLA

MAGTAAS, CAROLINA DIONCO, - one expert in health economy, insurance and health systems
for up to 48 expert/months,
CHRISTOPHER RAMOS, MELVIN

DELA PAZ, RANDY TAMAYO and

- one expert in system development for up to 10 expert/months
EDGARDO RAMILLO,

Respondents.
- short-term experts to deal with special tasks for a total of up to
18 expert/months,
x----------------------------------------------------------------------------x

- project assistants/guest students as required, who shall work

DECISION on the project as part of their basic and further training and assume
specific project tasks under the separately financed junior staff
promotion programme of the Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ);
TINGA, J.:

(b) provide in situ

On 7 September 1971, the governments of the Federal Republic of

Germany and the Republic of the Philippines ratified an Agreement - short-term experts to deal with diverse special tasks for a total
concerning Technical Co-operation (Agreement) in Bonn, capital of of up to 27 expert/months,
what was then West Germany. The Agreement affirmed the countries
common interest in promoting the technical and economic
development of their States, and recogni[zed] the benefits to be
- five local experts in health economy, health insurance,
derived by both States from closer technical co-operation, and
community health systems, information technology, information
allowed for the conclusion of arrangements concerning individual
systems, training and community mobilization for a total of up to 240
projects of technical co-operation.[1] While the Agreement provided
expert/months,
for a limited term of effectivity of five (5) years, it nonetheless was
stated that [t]he Agreement shall be tacitly extended for successive
periods of one year unless either of the two Contracting Parties
denounces it in writing three months prior to its expiry, and that even - local and auxiliary personnel for a total of up to 120 months;
upon the Agreements expiry, its provisions would continue to apply
to any projects agreed upon x x x until their completion.[2]
(c) supply inputs, in particular

- two cross-country vehicles,
- ten computers with accessories,
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand
Deutsche Mark);
(c) meet
- the cost of accommodation for the seconded experts and their
families in so far as this cost is not met by the seconded experts
themselves,
- the cost of official travel by the experts referred to in
sub-paragraph (a) above within and outside the Republic of
the Philippines,
- the cost of seminars and courses,
- the cost of transport and insurance to the project site of inputs
to be supplied pursuant to sub-paragraph (c) above, excluding the
charges and storage fees referred to in paragraph 4(d) below,
- a proportion of the operating and administrative costs;
xxx
4. The Government of the Republic of
the Philippines shall make the following contributions to the project:
It shall
(a) provide the necessary Philippine experts for the project,
in particular one project coordinator in the Philippine Health
Insurance Corporation (Philhealth), at least three further experts and
a sufficient number of administrative and auxiliary personnel, as well
as health personnel in the pilot provinces and in the other project
partners, in particular one responsible expert for each pilot province
and for each association representing the various target groups,
- release suitably qualified experts from their duties for
attendance at the envisaged basic and further training activities; it
shall only nominate such candidates as have given an undertaking to
134
work on the project for at least five years after completing their
training and shall ensure that these Philippine experts receive
appropriate remuneration,
- ensure that the project field offices have sufficient
expendables,
- make available the land and buildings required for the
project;
(b) assume an increasing proportion of the running and
operating costs of the project;
(c) afford the seconded experts any assistance they may
require in carrying out the tasks assigned to them and place at their
disposal all necessary records and documents;
(d) guarantee that
- the project is provided with an itemized budget of its own in
order to ensure smooth continuation of the project.
- the necessary legal and administrative framework is created
for the project,
- the project is coordinated in close cooperation with other
national and international agencies relevant to implementation,
- the inputs supplied for the project on behalf of the
Government of the Federal Republic of Germany are exempted from
the cost of licenses, harbour dues, import and export duties and other
public charges and fees, as well as storage fees, or that any costs
thereof are met, and that they are cleared by customs without
delay. The aforementioned exemptions shall, at the request of the
implementing agencies also apply to inputs procured in the Republic
of the Philippines,
- the tasks of the seconded experts are taken over as soon as
possible by Philippine experts,
- examinations passed by Philippine nationals pursuant to this
Arrangement are recognized in accordance with their respective
standards and that the persons concerned are afforded such
opportunities with regard to careers, appointments and advancement
as are commensurate with their training.[4]
In the arraignment, both governments likewise named their
respective implementing organizations for SHINE.
The Philippines designated the Department of Health (DOH) and the
Philippine Health Insurance Corporation (Philhealth) with the
implementation of SHINE. For their part, the German government
charge[d] the Deustche Gesellschaft fr Technische
Zusammenarbeit[[5]] (GTZ[[6]]) GmbH, Eschborn, with the
implementation of its contributions.[7]

Private respondents were engaged as contract employees hired by
GTZ to work for SHINE on various dates between December of
1998 to September of 1999. Bernadette Carmela Magtaas was hired
as an information systems manager and project officer of
SHINE;[8] Carolina Dionco as a Project Assistant of
SHINE;[9] Christopher Ramos as a project assistant and liason
personnel of NHI related SHINE activities by GTZ;[10] Melvin Dela
Paz and Randy Tamayo as programmers;[11] and Edgardo Ramilo as
driver, messenger and multipurpose service man.[12] The employment
contracts of all six private respondents all specified Dr. Rainer
Tollkotter, identified as an adviser of GTZ, as the employer. At the
same time, all the contracts commonly provided that [i]t is mutually
agreed and understood that [Dr. Tollkotter, as employer] is a
seconded GTZ expert who is hiring the Employee on behalf of GTZ
and for a Philippine-German bilateral project named Social Health
InsuranceNetworking and Empowerment (SHINE) which will end at
a given time.[13]
In September of 1999, Anne Nicolay (Nicolay), a Belgian national,
assumed the post of SHINE Project Manager. Disagreements
eventually arose between Nicolay and private respondents in matters
such as proposed salary adjustments, and the course Nicolay was
taking in the implementation of SHINE different from her
predecessors. The dispute culminated in a letter[14] dated 8 June 2000,
signed by the private respondents, addressed to Nicolay, and copies
furnished officials of the DOH, Philheath, and the director of
the Manila office of GTZ. The letter raised several issues which
private respondents claim had been brought up several times in the
past, but have not been given appropriate response. It was claimed
that SHINE under Nicolay had veered away from its original purpose
to facilitate the development of social health insurance by shoring up
the national health insurance program and strengthening local
initiatives, as Nicolay had refused to support local partners and new
initiatives on the premise that community and local government unit
schemes were not sustainablea philosophy that supposedly betrayed
Nicolays lack of understanding of the purpose of the project. Private
respondents further alleged that as a result of Nicolays new thrust,
resources have been used inappropriately; that the new management
style was not congruent with the original goals of the project; that
Nicolay herself suffered from cultural insensitivity that consequently
failed to sustain healthy relations with SHINEs partners and staff.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very
crucial to us in working for the project. We could no longer find any
reason to stay with the project unless ALL of these issues be
addressed immediately and appropriately.[15]
In response, Nicolay wrote each of the private respondents a letter
dated 21 June 2000, all similarly worded except for their respective
addressees. She informed private respondents that the projects
orientations and evolution were decided in consensus with partner
institutions, Philhealth and the DOH, and thus no longer subject to
modifications. More pertinently, she stated:
135
You have firmly and unequivocally stated in the last paragraph of
your 8th June 2000 letter that you and the five other staff could no
longer find any reason to stay with the project unless ALL of these
issues be addressed immediately and appropriately. Under the
foregoing premises and circumstances, it is now imperative that I am
to accept your resignation, which I expect to receive as soon as
possible.[16]
Taken aback, private respondents replied with a common letter,
clarifying that their earlier letter was not intended as a resignation
letter, but one that merely intended to raise attention to what they
perceived as vital issues.[17] Negotiations ensued between private
respondents and Nicolay, but for naught. Each of the private
respondents received a letter from Nicolay dated 11 July 2000,
informing them of the pre-termination of their contracts of
employment on the grounds of serious and gross insubordination,
among others, resulting to loss of confidence and trust. [18]
On 21 August 2000, the private respondents filed a complaint for
illegal dismissal with the NLRC. Named as respondents therein
where GTZ, the Director of its Manila office Hans Peter Paulenz, its
Assistant Project Manager Christian Jahn, and Nicolay.
On 25 October 2005, GTZ, through counsel, filed a Motion to
Dismiss, on the ground that the Labor Arbiter had no jurisdiction
over the case, as its acts were undertaken in the discharge of the
governmental functions and sovereign acts of the Government of the
Federal Republic of Germany. This was opposed by private
respondents with the arguments that GTZ had failed to secure a
certification that it was immune from suit from the Department of
Foreign Affairs, and that it was GTZ and not the German government
which had implemented the SHINE Project and entered into the
contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order[19] denying
the Motion to Dismiss. The Order cited, among others, that GTZ was
a private corporation which entered into an employment contract;
and that GTZ had failed to secure from the DFA a certification as to
its diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a Reiterating
Motion to Dismiss, again praying that the Motion to Dismiss be
granted on the jurisdictional ground, and reprising the arguments for
dismissal it had earlier raised.[20] No action was taken by the Labor
Arbiter on this new motion. Instead, on 15 October 2001, the Labor
Arbiter rendered a Decision[21] granting the complaint for illegal
dismissal. The Decision concluded that respondents were dismissed
without lawful cause, there being a total lack of due process both
substantive and procedural [sic].[22] GTZ was faulted for failing to
observe the notice requirements in the labor law. The Decision
likewise proceeded from the premise that GTZ had treated the letter
dated 8 June 2000 as a resignation letter, and devoted some focus in
debunking this theory.

The Decision initially offered that it need not discuss the
jurisdictional aspect considering that the same had already been
lengthily discussed in the Order de[n]ying respondents Motion to
Dismiss.[23] Nonetheless, it proceeded to discuss the jurisdictional
aspect, in this wise:
Under pain of being repetitious, the undersigned Labor Arbiter has
jurisdiction to entertain the complaint on the following grounds:
Firstly, under the employment contract entered into between
complainants and respondents, specifically Section 10 thereof, it
provides that contract partners agree that his contract shall be subject
to the LAWS of the jurisdiction of the locality in which the service is
performed.
Secondly, respondent having entered into contract, they can no
longer invoke the sovereignty of the Federal Republic of Germany.
Lastly, it is imperative to be immune from suit, respondents should
have secured from the Department of Foreign Affairs a certification
of respondents diplomatic status and entitlement to diplomatic
privileges including immunity from suits. Having failed in this regard,
respondents cannot escape liability from the shelter of sovereign
immunity.[sic][24]
Notably, GTZ did not file a motion for reconsideration to the Labor
Arbiters Decision or elevate said decision for appeal to the NLRC.
Instead, GTZ opted to assail the decision by way of a special civil
action for certiorari filed with the Court of Appeals.[25] On 10
December 2001, the Court of Appeals promulgated a
Resolution[26] dismissing GTZs petition, finding that judicial recourse
at this stage of the case is uncalled for[,] [t]he appropriate remedy of
the petitioners [being] an appeal to the NLRC x x x. [27] A motion for
reconsideration to this Resolution proved fruitless for GTZ.[28]
Thus, the present petition for review under Rule 45, assailing the
decision and resolutions of the Court of Appeals and of the Labor
Arbiter. GTZs arguments center on whether the Court of Appeals
could have entertained its petition for certiorari despite its not having
undertaken an appeal before the NLRC; and whether the complaint
for illegal dismissal should have been dismissed for lack of
jurisdiction on account of GTZs insistence that it enjoys immunity
from suit. No special arguments are directed with respect to
petitioners Hans Peter Paulenz and Anne Nicolay, respectively the
then Director and the then Project Manager of GTZ in the Philippines;
136
so we have to presume that the arguments raised in behalf of GTZs
alleged immunity from suit extend to them as well.
The Court required the Office of the Solicitor General (OSG) to file a
Comment on the petition. In its Comment dated 7 November 2005,
the OSG took the side of GTZ, with the prayer that the petition be
granted on the ground that GTZ was immune from suit, citing in
particular its assigned functions in implementing the SHINE
programa joint undertaking of the Philippine and German
governments which was neither proprietary nor commercial in
nature.
The Court of Appeals had premised the dismissal of GTZs petition
on its procedural misstep in bypassing an appeal to NLRC and
challenging the Labor Arbiters Decision directly with the appellate
court by way of a Rule 65 petition. In dismissing the petition, the
Court of Appeals relied on our ruling in Air Service Cooperative v.
Court of Appeals.[29] The central issue in that case was whether a
decision of a Labor Arbiter rendered without jurisdiction over the
subject matter may be annulled in a petition before a Regional Trial
Court. That case may be differentiated from the present case, since
the Regional Trial Court does not have original or appellate
jurisdiction to review a decision rendered by a Labor Arbiter. In
contrast, there is no doubt, as affirmed by jurisprudence, that the
Court of Appeals has jurisdiction to review, by way of its original
certiorari jurisdiction, decisions ruling on complaints for illegal
dismissal.
Nonetheless, the Court of Appeals is correct in pronouncing the
general rule that the proper recourse from the decision of the Labor
Arbiter is to first appeal the same to the NLRC. Air Services is in fact
clearly detrimental to petitioners position in one regard. The Court
therein noted that on account of the failure to correctly appeal the
decision of the Labor Arbiter to the NLRC, such judgment
consequently became final and executory.[30] GTZ goes as far as to
request that the Court re-examine Air Services, a suggestion that is
needlessly improvident under the circumstances. Air Services affirms
doctrines grounded in sound procedural rules that have allowed for
the considered and orderly disposition of labor cases.
The OSG points out, citing Heirs of Mayor Nemencio Galvez v.
Court of Appeals,[31] that even when appeal is available, the Court
has nonetheless allowed a writ of certiorari when the orders of the
lower court were issued either in excess of or without jurisdiction.
Indeed, the Court has ruled before that the failure to employ available
intermediate recourses, such as a motion for reconsideration, is not a
fatal infirmity if the ruling assailed is a patent nullity. This approach
suggested by the OSG allows the Court to inquire directly into what
is the main issuewhether GTZ enjoys immunity from suit.

The arguments raised by GTZ and the OSG are rooted in several
indisputable facts. The SHINE project was implemented pursuant to
the bilateral agreements between the Philippine and German
governments. GTZ was tasked, under the 1991 agreement, with the
implementation of the contributions of the German government. The
activities performed by GTZ pertaining to the SHINE project are
governmental in nature, related as they are to the promotion of health
insurance in the Philippines. The fact that GTZ entered into
employment contracts with the private respondents did not disqualify
it from invoking immunity from suit, as held in cases such as Holy
See v. Rosario, Jr.,[32]which set forth what remains valid doctrine:
Certainly, the mere entering into a contract by a foreign state with a
private party cannot be the ultimate test. Such an act can only be the
start of the inquiry. The logical question is whether the foreign state
is engaged in the activity in the regular course of business. If the
foreign state is not engaged regularly in a business or trade, the
particular act or transaction must then be tested by its nature. If the
act is in pursuit of a sovereign activity, or an incident thereof, then it
is an act jure imperii, especially when it is not undertaken for gain or
profit.[33]
Beyond dispute is the tenability of the comment points raised by
GTZ and the OSG that GTZ was not performing proprietary
functions notwithstanding its entry into the particular employment
contracts. Yet there is an equally fundamental premise which GTZ
and the OSG fail to address, namely: Is GTZ, by conception, able to
enjoy the FederalRepublics immunity from suit?
The principle of state immunity from suit, whether a local state or a
foreign state, is reflected in Section 9, Article XVI of the
Constitution, which states that the State may not be sued without its
consent. Who or what consists of the State? For one, the doctrine is
available to foreign States insofar as they are sought to be sued in the
courts of the local State,[34] necessary as it is to avoid unduly vexing
the peace of nations.
If the instant suit had been brought directly against the Federal
Republic of Germany, there would be no doubt that it is a suit
brought against a State, and the only necessary inquiry is whether
said State had consented to be sued. However, the present suit was
brought against GTZ. It is necessary for us to understand what
precisely are the parameters of the legal personality of GTZ.
137
Counsel for GTZ characterizes GTZ as the implementing agency of
the Government of the Federal Republic of Germany, a depiction
similarly adopted by the OSG. Assuming that characterization is
correct, it does not automatically invest GTZ with the ability to
invoke State immunity from suit. The distinction lies in whether the
agency is incorporated or unincorporated. The following lucid
discussion from Justice Isagani Cruz is pertinent:
Where suit is filed not against the government itself or its officials
but against one of its entities, it must be ascertained whether or not
the State, as the principal that may ultimately be held liable, has
given its consent to be sued. This ascertainment will depend in the
first instance on whether the government agency impleaded is
incorporated or unincorporated.
An incorporated agency has a charter of its own that invests it
with a separate juridical personality, like the Social Security
System, the University of the Philippines, and the City of Manila. By
contrast, the unincorporated agency is so called because it has no
separate juridical personality but is merged in the general machinery
of the government, like the Department of Justice, the Bureau of
Mines and the Government Printing Office.
If the agency is incorporated, the test of its suability is found in
its charter. The simple rule is that it is suable if its charter says
so, and this is true regardless of the functions it is
performing. Municipal corporations, for example, like provinces
and cities, are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the sovereign
immunity from suit. Nevertheless, they are subject to suit even in
the performance of such functions because their charter provides
that they can sue and be sued.[35]
State immunity from suit may be waived by general or special
law.[36] The special law can take the form of the original charter of
the incorporated government agency. Jurisprudence is replete with
examples of incorporated government agencies which were ruled not
entitled to invoke immunity from suit, owing to provisions in their
charters manifesting their consent to be sued. These include the
National Irrigation Administration,[37] the former Central
Bank, and the National Power Corporation.[39] In SSS v. Court of
[38]
Appeals,[40] the Court through Justice Melencio-Herrera explained
that by virtue of an express provision in its charter allowing it to sue
and be sued, the Social Security System did not enjoy immunity from
suit:
We come now to the amendability of the SSS to judicial action and
legal responsibility for its acts. To our minds, there should be no
question on this score considering that the SSS is a juridical entity
with a personality of its own. It has corporate powers separate and
distinct from the Government. SSS' own organic act specifically
provides that it can sue and be sued in Court. These words "sue and
be sued" embrace all civil process incident to a legal action. So that,
even assuming that the SSS, as it claims, enjoys immunity from suit

as an entity performing governmental functions, by virtue of the
explicit provision of the aforecited enabling law, the Government
must be deemed to have waived immunity in respect of the SSS,
although it does not thereby concede its liability. That statutory law
has given to the private citizen a remedy for the enforcement and
protection of his rights. The SSS thereby has been required to submit
to the jurisdiction of the Courts, subject to its right to interpose any
lawful defense. Whether the SSS performs governmental or
proprietary functions thus becomes unnecessary to belabor. For by
that waiver, a private citizen may bring a suit against it for varied
objectives, such as, in this case, to obtain compensation in damages
arising from contract, and even for tort.
A recent case squarely in point anent the principle, involving the
National Power Corporation, is that of Rayo v. Court of First
Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court,
speaking through Mr. Justice Vicente Abad Santos, ruled:
"It is not necessary to write an extended dissertation on whether or
not the NPC performs a governmental function with respect to the
management and operation of the Angat Dam. It is sufficient to say
that the government has organized a private corporation, put money
in it and has allowed it to sue and be sued in any court under its
charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and
controlled corporation, it has a personality of its own, distinct and
separate from that of the Government. Moreover, the charter
provision that the NPC can 'sue and be sued in any court' is without
qualification on the cause of action and accordingly it can include a
tort claim such as the one instituted by the petitioners."[41]
It is useful to note that on the part of the Philippine government, it
had designated two entities, the Department of Health and the
Philippine Health Insurance Corporation (PHIC), as the
implementing agencies in behalf of the Philippines. The PHIC was
established under Republic Act No. 7875, Section 16(g) of which
grants the corporation the power to sue and be sued in court.
Applying the previously cited jurisprudence, PHIC would not enjoy
immunity from suit even in the performance of its functions
connected with SHINE, however, governmental in nature as they
may be.
Is GTZ an incorporated agency of the German government? There is
some mystery surrounding that question. Neither GTZ nor the OSG
go beyond the claim that petitioner is the implementing agency of the
Government of the Federal Republic of Germany. On the other hand,
private respondents asserted before the Labor Arbiter that GTZ was a
private corporation engaged in the implementation of development
projects.[42] The Labor Arbiter accepted that claim in his Order
denying the Motion to Dismiss,[43] though he was silent on that point
in his Decision. Nevertheless, private respondents argue in their
Comment that the finding that GTZ was a private corporation was
never controverted, and is therefore deemed admitted.[44] In its Reply,
GTZ controverts that finding, saying that it is a matter of public
knowledge that the status of petitioner GTZ is that of the
implementing agency, and not that of a private corporation.[45]
In truth, private respondents were unable to adduce any evidence to
substantiate their claim that GTZ was a private corporation, and the
Labor Arbiter acted rashly in accepting such claim without
explanation. But neither has GTZ supplied any evidence defining its
138
legal nature beyond that of the bare descriptive implementing agency.
There is no doubt that the 1991 Agreement designated GTZ as the
implementing agency in behalf of the German government. Yet the
catch is that such term has no precise definition that is responsive to
our concerns. Inherently, an agent acts in behalf of a principal, and
the GTZ can be said to act in behalf of the German state. But that is
as far as implementing agency could take us. The term by itself does
not supply whether GTZ is incorporated or unincorporated, whether
it is owned by the German state or by private interests, whether it has
juridical personality independent of the German government or none
at all.
GTZ itself provides a more helpful clue, inadvertently, through its
own official Internet website.[46] In the Corporate Profile section of
the English language version of its site, GTZ describes itself as
follows:
As an international cooperation enterprise for sustainable
development with worldwide operations, the federally owned
Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH
supports the German Government in achieving its
development-policy objectives. It provides viable, forward-looking
solutions for political, economic, ecological and social development
in a globalised world. Working under difficult conditions, GTZ
promotes complex reforms and change processes. Its corporate
objective is to improve peoples living conditions on a sustainable
basis.
GTZ is a federal enterprise based in Eschborn near Frankfurt am
Main. It was founded in 1975 as a company under private law. The
German Federal Ministry for Economic Cooperation and
Development (BMZ) is its major client. The company also operates
on behalf of other German ministries, the governments of other
countries and international clients, such as the European Commission,
the United Nations and the World Bank, as well as on behalf of
private enterprises. GTZ works on a public-benefit basis. All
surpluses generated are channeled [sic] back into its own
international cooperation projects for sustainable development.[47]
GTZs own website elicits that petitioner is federally owned, a federal
enterprise, and founded in 1975 as a company under private law.
GTZ clearly has a very meaningful relationship with the Federal
Republic of Germany, which apparently owns it. At the same time, it
appears that GTZ was actually organized not through a legislative
public charter, but under private law, in the same way that Philippine
corporations can be organized under the Corporation Code even if
fully owned by the Philippine government.
This self-description of GTZ in its own official website gives further
cause for pause in adopting petitioners argument that GTZ is entitled
to immunity from suit because it is an implementing agency. The
above-quoted statement does not dispute the characterization of GTZ
as an implementing agency of the Federal Republic of Germany, yet
it bolsters the notion that as a company organized under private law,
it has a legal personality independent of that of the Federal Republic
of Germany.

The Federal Republic of Germany, in its own official website,[48] also
makes reference to GTZ and describes it in this manner:
x x x Going by the principle of sustainable development, the German
Technical Cooperation (Deutsche Gesellschaft fr Technische
Zusammenarbeit GmbH, GTZ) takes on non-profit projects in
international technical cooperation. The GTZ is a private company
owned by the Federal Republic of Germany.[49]
Again, we are uncertain of the corresponding legal implications
under German law surrounding a private company owned by the
Federal Republic of Germany. Yet taking the description on face
value, the apparent equivalent under Philippine law is that of a
corporation organized under the Corporation Code but owned by the
Philippine government, or a government-owned or controlled
corporation without original charter. And it bears notice that Section
36 of the Corporate Code states that [e]very corporation incorporated
under this Code has the power and capacity x x x to sue and be sued
in its corporate name.[50]
It is entirely possible that under German law, an entity such as GTZ
or particularly GTZ itself has not been vested or has been specifically
deprived the power and capacity to sue and/or be sued. Yet in the
proceedings below and before this Court, GTZ has failed to establish
that under German law, it has not consented to be sued despite it
being owned by the Federal Republic of Germany. We
adhere to the rule that in the absence of evidence to the contrary,
foreign laws on a particular subject are presumed to be the same as
those of the Philippines,[51] and following the most intelligent
assumption we can gather, GTZ is akin to a governmental owned or
controlled corporation without original charter which, by virtue of
the Corporation Code, has expressly consented to be sued. At the
very least, like the Labor Arbiter and the Court of Appeals, this Court
has no basis in fact to conclude or presume that GTZ enjoys
immunity from suit.
This absence of basis in fact leads to another important point, alluded
to by the Labor Arbiter in his rulings. Our ruling in Holy See v. Del
Rosario[52] provided a template on how a foreign entity desiring to
invoke State immunity from suit could duly prove such immunity
before our local courts. The principles enunciated in that case were
derived from public international law. We stated then:
In Public International Law, when a state or international agency
wishes to plead sovereign or diplomatic immunity in a foreign court,
it requests the Foreign Office of the state where it is sued to convey
to the court that said defendant is entitled to immunity.
139
In the United States, the procedure followed is the process of
"suggestion," where the foreign state or the international organization
sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the
Secretary of State finds that the defendant is immune from suit, he, in
turn, asks the Attorney General to submit to the court a "suggestion"
that the defendant is entitled to immunity. In England, a similar
procedure is followed, only the Foreign Office issues a certification
to that effect instead of submitting a "suggestion" (O'Connell, I
International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal
1088 [1941]).
In the Philippines, the practice is for the foreign government or the
international organization to first secure an executive endorsement of
its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts
varies. In International Catholic Migration Commission v. Calleja,
190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a
letter directly to the Secretary of Labor and Employment, informing
the latter that the respondent-employer could not be sued because it
enjoyed diplomatic immunity. In World Health Organization v.
Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs sent
the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1
(1974), the U.S. Embassy asked the Secretary of Foreign Affairs to
request the Solicitor General to make, in behalf of the Commander of
the United States Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor General embodied
the "suggestion" in a Manifestation and Memorandum as amicus
curiae.[53]
It is to be recalled that the Labor Arbiter, in both of his rulings, noted
that it was imperative for petitioners to secure from the Department
of Foreign Affairs a certification of respondents diplomatic status
and entitlement to diplomatic privileges including immunity from
suits.[54] The requirement might not necessarily be imperative.
However, had GTZ obtained such certification from the DFA, it
would have provided factual basis for its claim of immunity that
would, at the very least, establish a disputable evidentiary
presumption that the foreign party is indeed immune which the
opposing party will have to overcome with its own factual evidence.
We do not see why GTZ could not have secured such certification or
endorsement from the DFA for purposes of this case. Certainly, it
would have been highly prudential for GTZ to obtain the same after
the Labor Arbiter had denied the motion to dismiss. Still, even at this
juncture, we do not see any evidence that the DFA, the office of the
executive branch in charge of our diplomatic relations, has indeed
endorsed GTZs claim of immunity. It may be possible that GTZ tried,
but failed to secure such certification, due to the same concerns that
we have discussed herein.
Would the fact that the Solicitor General has endorsed GTZs claim of
States immunity from suit before this Court sufficiently substitute for
the DFA certification? Note that the rule in public international law
quoted in Holy See referred to endorsement by the Foreign Office of
the State where the suit is filed, such foreign office in
the Philippines being the Department of Foreign Affairs. Nowhere in
the Comment of the OSG is it manifested that the DFA has endorsed
GTZs claim, or that the OSG had solicited the DFAs views on the
issue. The arguments raised by the OSG are virtually the same as the
arguments raised by GTZ without any indication of any special and
 140

distinct perspective maintained by the Philippine government on the WHEREFORE, the petition is DENIED. No pronouncement as to
issue. The Comment filed by the OSG does not inspire the same costs.
degree of confidence as a certification from the DFA would have
elicited.
SO ORDERED.

Holy See made reference to Baer v. Tizon,[55] and that in the said case,
the United States Embassy asked the Secretary of Foreign Affairs to
request the Solicitor General to make a suggestion to the trial court,
accomplished by way of a Manifestation and Memorandum, that the
petitioner therein enjoyed immunity as the Commander of the Subic
Bay Naval Base. Such circumstance is actually not narrated in the
text of Baer itself and was likely supplied in Holy See because its
author, Justice Camilio Quiason, had appeared as the Solicitor in
behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it
was the Secretary of Foreign Affairs which directed the OSG to
intervene in behalf of the United States government in the Baer case,
and such fact is manifest enough of the endorsement by the Foreign
Office. We do not find a similar circumstance that bears here.

The Court is thus holds and so rules that GTZ consistently has been
unable to establish with satisfaction that it enjoys the immunity from
suit generally enjoyed by its parent country, the Federal Republic of
Germany. Consequently, both the Labor Arbiter and the Court of
Appeals acted within proper bounds when they refused to
acknowledge that GTZ is so immune by dismissing the complaint
against it. Our finding has additional ramifications on the failure of
GTZ to properly appeal the Labor Arbiters decision to the NLRC. As
pointed out by the OSG, the direct recourse to the Court of Appeals
while bypassing the NLRC could have been sanctioned had the
Labor Arbiters decision been a patent nullity. Since the Labor Arbiter
acted properly in deciding the complaint, notwithstanding GTZs
claim of immunity, we cannot see how the decision could have
translated into a patent nullity.

As a result, there was no basis for petitioners in foregoing the appeal

to the NLRC by filing directly with the Court of Appeals the petition
for certiorari. It then follows that the Court of Appeals acted
correctly in dismissing the petition on that ground. As a further
consequence, since petitioners failed to perfect an appeal from the
Labor Arbiters Decision, the same has long become final and
executory. All other questions related to this case, such as whether or
not private respondents were illegally dismissed, are no longer
susceptible to review, respecting as we do the finality of the Labor
Arbiters Decision.

A final note. This decision should not be seen as deviation from the
more common methodology employed in ascertaining whether a
party enjoys State immunity from suit, one which focuses on the
particular functions exercised by the party and determines whether
these are proprietary or sovereign in nature. The nature of the acts
performed by the entity invoking immunity remains the most
important barometer for testing whether the privilege of State
immunity from suit should apply. At the same time, our Constitution
stipulates that a State immunity from suit is conditional on its
withholding of consent; hence, the laws and circumstances pertaining
to the creation and legal personality of an instrumentality or agency
invoking immunity remain relevant. Consent to be sued, as exhibited
in this decision, is often conferred by the very same statute or general
law creating the instrumentality or agency.

G.R. No. 178551 October 11, 2010
ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and
MINISTRY OF PUBLIC HEALTH-KUWAITPetitioners,
vs.
MA. JOSEFA ECHIN, Respondent.
DECISION
CARPIO MORALES, J.:
Josefina Echin (respondent) was hired by petitioner ATCI Overseas
Corporation in behalf of its principal-co-petitioner, the Ministry of
Public Health of Kuwait (the Ministry), for the position of medical
technologist under a two-year contract, denominated as a
Memorandum of Agreement (MOA), with a monthly salary of
US$1,200.00.
Under the MOA,1 all newly-hired employees undergo a probationary
period of one (1) year and are covered by Kuwait’s Civil Service
Board Employment Contract No. 2.
Respondent was deployed on February 17, 2000 but was terminated
from employment on February 11, 2001, she not having allegedly
passed the probationary period.
As the Ministry denied respondent’s request for reconsideration, she
returned to the Philippines on March 17, 2001, shouldering her own
air fare.
On July 27, 2001, respondent filed with the National Labor Relations
Commission (NLRC) a complaint2 for illegal dismissal against
petitioner ATCI as the local recruitment agency, represented by
petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign
principal.
By Decision3 of November 29, 2002, the Labor Arbiter, finding that
petitioners neither showed that there was just cause to warrant
respondent’s dismissal nor that she failed to qualify as a regular
employee, held that respondent was illegally dismissed and
accordingly ordered petitioners to pay her US$3,600.00, representing
her salary for the three months unexpired portion of her contract.
On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the
Labor Arbiter’s decision by Resolution4 of January 26, 2004.
Petitioners’ motion for reconsideration having been denied by
Resolution5 of April 22, 2004, they appealed to the Court of Appeals,
contending that their principal, the Ministry, being a foreign
government agency, is immune from suit and, as such, the immunity
extended to them; and that respondent was validly dismissed for her
failure to meet the performance rating within the one-year period as
required under Kuwait’s Civil Service Laws. Petitioners further
contended that Ikdal should not be liable as an officer of petitioner
ATCI.
By Decision6 of March 30, 2007, the appellate court affirmed the
NLRC Resolution.
In brushing aside petitioners’ contention that they only acted as agent
of the Ministry and that they cannot be held jointly and solidarily
liable with it, the appellate court noted that under the law, a private
employment agency shall assume all responsibilities for the
implementation of the contract of employment of an overseas worker,
hence, it can be sued jointly and severally with the foreign principal
for any violation of the recruitment agreement or contract of
employment.
As to Ikdal’s liability, the appellate court held that under Sec. 10 of
Republic Act No. 8042, the "Migrant and Overseas Filipinos’ Act of
1995," corporate officers, directors and partners of a recruitment
141
agency may themselves be jointly and solidarily liable with the
recruitment agency for money claims and damages awarded to
overseas workers.
Petitioners’ motion for reconsideration having been denied by the
appellate court by Resolution7 of June 27, 2007, the present petition
for review on certiorari was filed.
Petitioners maintain that they should not be held liable because
respondent’s employment contract specifically stipulates that her
employment shall be governed by the Civil Service Law and
Regulations of Kuwait. They thus conclude that it was patent error
for the labor tribunals and the appellate court to apply the Labor
Code provisions governing probationary employment in deciding the
present case.
Further, petitioners argue that even the Philippine Overseas
Employment Act (POEA) Rules relative to master employment
contracts (Part III, Sec. 2 of the POEA Rules and Regulations)
accord respect to the "customs, practices, company policies and labor
laws and legislation of the host country."
Finally, petitioners posit that assuming arguendo that Philippine
labor laws are applicable, given that the foreign principal is a
government agency which is immune from suit, as in fact it did not
sign any document agreeing to be held jointly and solidarily liable,
petitioner ATCI cannot likewise be held liable, more so since the
Ministry’s liability had not been judicially determined as jurisdiction
was not acquired over it.
The petition fails.
Petitioner ATCI, as a private recruitment agency, cannot evade
responsibility for the money claims of Overseas Filipino workers
(OFWs) which it deploys abroad by the mere expediency of claiming
that its foreign principal is a government agency clothed with
immunity from suit, or that such foreign principal’s liability must
first be established before it, as agent, can be held jointly and
solidarily liable.
In providing for the joint and solidary liability of private recruitment
agencies with their foreign principals, Republic Act No. 8042
precisely affords the OFWs with a recourse and assures them of
immediate and sufficient payment of what is due them. Skippers
United Pacific v. Maguad8 explains:
. . . [T]he obligations covenanted in the recruitment agreement
entered into by and between the local agent and its foreign
principal are not coterminous with the term of such agreement so
that if either or both of the parties decide to end the agreement, the
responsibilities of such parties towards the contracted employees
under the agreement do not at all end, but the same extends up to and
until the expiration of the employment contracts of the employees
recruited and employed pursuant to the said recruitment
agreement. Otherwise, this will render nugatory the very purpose
for which the law governing the employment of workers for
foreign jobs abroad was enacted. (emphasis supplied)
The imposition of joint and solidary liability is in line with the policy
of the state to protect and alleviate the plight of the working
class.9 Verily, to allow petitioners to simply invoke the immunity
from suit of its foreign principal or to wait for the judicial
determination of the foreign principal’s liability before petitioner can
be held liable renders the law on joint and solidary liability inutile.
As to petitioners’ contentions that Philippine labor laws on
probationary employment are not applicable since it was expressly
provided in respondent’s employment contract, which she voluntarily
entered into, that the terms of her engagement shall be governed by
prevailing Kuwaiti Civil Service Laws and Regulations as in fact

POEA Rules accord respect to such rules, customs and practices of
the host country, the same was not substantiated.
Indeed, a contract freely entered into is considered the law between
the parties who can establish stipulations, clauses, terms and
conditions as they may deem convenient, including the laws which
they wish to govern their respective obligations, as long as they are
not contrary to law, morals, good customs, public order or public
policy.
It is hornbook principle, however, that the party invoking the
application of a foreign law has the burden of proving the law, under
the doctrine of processual presumption which, in this case,
petitioners failed to discharge. The Court’s ruling in
EDI-Staffbuilders Int’l., v. NLRC10 illuminates:
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters not
provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties
(lex loci intentiones) to apply to the contract, Saudi Labor Laws
should govern all matters relating to the termination of the
employment of Gran.
In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the foreign law.
The foreign law is treated as a question of fact to be properly pleaded
and proved as the judge or labor arbiter cannot take judicial notice of
a foreign law. He is presumed to know only domestic or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws
on the matter; thus, the International Law doctrine
of presumed-identity approach or processual presumption comes
into play. Where a foreign law is not pleaded or, even if pleaded, is
not proved, the presumption is that foreign law is the same as ours.
Thus, we apply Philippine labor laws in determining the issues
presented before us. (emphasis and underscoring supplied)
The Philippines does not take judicial notice of foreign laws, hence,
they must not only be alleged; they must be proven. To prove a
foreign law, the party invoking it must present a copy thereof and
comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
Court which reads:
SEC. 24. Proof of official record. — The record of public documents
referred to in paragraph (a) of Section 19, when admissible for any
purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or
by his deputy, and accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the
seal of his office. (emphasis supplied)
SEC. 25. What attestation of copy must state. — Whenever a copy of
a document or record is attested for the purpose of the evidence, the
attestation must state, in substance, that the copy is a correct copy of
the original, or a specific part thereof, as the case may be. The
attestation must be under the official seal of the attesting officer, if
there be any, or if he be the clerk of a court having a seal, under the
seal of such court.
To prove the Kuwaiti law, petitioners submitted the following: MOA
between respondent and the Ministry, as represented by ATCI, which
provides that the employee is subject to a probationary period of one
(1) year and that the host country’s Civil Service Laws and
142
Regulations apply; a translated copy11 (Arabic to English) of the
termination letter to respondent stating that she did not pass the
probation terms, without specifying the grounds therefor, and a
translated copy of the certificate of termination,12 both of which
documents were certified by Mr. Mustapha Alawi, Head of the
Department of Foreign Affairs-Office of Consular Affairs Inslamic
Certification and Translation Unit; and respondent’s letter13 of
reconsideration to the Ministry, wherein she noted that in her first
eight (8) months of employment, she was given a rating of
"Excellent" albeit it changed due to changes in her shift of work
schedule.
These documents, whether taken singly or as a whole, do not
sufficiently prove that respondent was validly terminated as a
probationary employee under Kuwaiti civil service laws. Instead of
submitting a copy of the pertinent Kuwaiti labor laws duly
authenticated and translated by Embassy officials thereat, as
required under the Rules, what petitioners submitted were mere
certifications attesting only to the correctness of the translations
of the MOA and the termination letter which does not prove at
all that Kuwaiti civil service laws differ from Philippine laws and
that under such Kuwaiti laws, respondent was validly
terminated. Thus the subject certifications read:
xxxx
This is to certify that the herein attached translation/s from Arabic to
English/Tagalog and or vice versa was/were presented to this Office
for review and certification and the same was/were found to be in
order. This Office, however, assumes no responsibility as to the
contents of the document/s.
This certification is being issued upon request of the interested party
for whatever legal purpose it may serve. (emphasis
supplied)1avvphi1
Respecting Ikdal’s joint and solidary liability as a corporate officer,
the same is in order too following the express provision of R.A. 8042
on money claims, viz:
SEC. 10. Money Claims.—Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor Relations
Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after
the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas deployment including claims
for actual moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement
agency for any and all claims under this section shall be joint and
several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its
approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be
answerable for all money claims or damages that may be awarded to
the workers. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case
may be, shall themselves be jointly and solidarily liable with the
corporation or partnership for the aforesaid claims and damages.
(emphasis and underscoring supplied)
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. L-42538 May 21, 1935
WILLAMETTE IRON & STEEL WORKS, plaintiff-appellee,
vs.
A.H. MUZZAL, defendant-appellant.
Sidney C. Schwarzkopf and Eduardo D. Enriquez for appellant.
John R. McFie, Jr., for appellee.
GODDARD, J.:
This is an appeal from a decision of the Court of First Instance of
Zamboanga, the dispositive part of which reads:
In view of the considerations above stated, judgment is hereby
entered in favor of the plaintiff, ordering the defendant, for the first
cause of action, to pay to plaintiff the sum of P2,837.34, with interest
thereon at the rate of 6 per cent per annum from March 11, 1929,
until paid, and to pay also the amount of P1,590.63, for the second
cause of action, with interest thereon at 7 per cent per annum from
April 8, 1929, until paid. The defendant is further ordered to pay the
amount of P500 as reasonable attorney's fees in prosecuting this
action, and to pay the costs of these proceedings.
This case involves the liability of the defendant, a former resident of
the State of California, now residing in the Philippine Islands, for
obligations contracted by a California corporation of which he was a
stockholder at the time said obligations were contracted with the
plaintiff-appellee in this case.
The section of the Civil Code of California under which the plaintiff
seeks to recover reads:
SEC. 322. Each stockholder of a corporation is individually and
personally liable for such proportion of all its debts and liabilities
contracted or incurred during the time he was a stockholder as the
amount of stock or shares owned by him bears to the whole of the
subscribed capital stock or shares of the corporation. Any creditor of
the corporation may institute joint or several actions against any of
its stockholders, for the proportion of his claim payable by each, and
in such action the court must (1) ascertain the proportion of the claim
or debt for which each defendant is liable, and (2) a several judgment
must be rendered against each, in conformity therewith. If any
stockholder pays his proportion of any debt due from the corporation,
incurred while he was such stockholder, he is relieved from any
further personal liability for such debt, and if an action has been
brought against him upon such debt, it must be dismissed, as to him,
upon his paying the costs, or such proportion thereof as may be
properly chargeable against him. The liability of each stockholder is
determined by the amount of stock or shares owned by him at the
time the debt or liability was incurred; and such liability is not
released by any subsequent transfer of stock.
The defendant-appellant makes the following assignments of error:
I. The lower court erred in holding that the defendant was the holder
of 1,432 shares of the capital stock of the Meyer-Muzzal Company.
II. The lower court erred in finding that plaintiff has proven the
existence of the foreign law involved in this action.
III. The lower court erred in enforcing the law of California.
IV. The lower court erred in rendering judgment against the
defendant.
As to the first assignment of error the witness Stanley H. Hermann, a
certified public accountant, testified that he knows that the
Meyer-Muzzal Company is a corporation and further testified as
follows:
143
I became acquainted with the corporation by reason of being
employed by it in October, November and December of 1929 as a
certified public accountant and auditor to personally examine the
company's books of account, stock and other records of the company
for the purpose of certifying, if possible, to the correctness of a
statement of the financial condition of the company on March 31,
1929.
xxx xxx xxx
8. Please state, if you know, whether or not one A.H. Muzzal was a
stockholder of Meyer-Muzzal Company on November 5, 1928 and
December 22, 1928, and if he was, please state the number and value
of the shares of capital stock of Meyer-Muzzal Company subscribed
and owned by said A.H. Muzzal on November 5, 1928 and
December 22, 1928?
A. Yes, Mr. A.H. Muzzal was a stockholder of the Meyer-Muzzal
Company on the dates specified. Fourteen hundred thirty-three shares
of the capital stock of Meyer-Muzzal Company of the par value of
$10 each were subscribed and owned by said A.H. Muzzal on
November 5th, 1928 and on December 22nd, 1928, and said shares
were issued to and standing in the name of A. H. Muzzal on the
books of said company at said times.
9. If, by reason of the loss, destruction and/or disappearance of the
stock and other corporate records of the Meyer-Muzzal Company
since the time you had occasion to examine them, you have been
unable to make reference thereto in answering the questions asked of
you in this deposition, please answer each and all of said questions
by reference to any documents or working sheets which you may be
prepared upon the occasion of your examining and/or auditing the
books of account, stock and other records of the Meyer-Muzzal
Company.
A. By reference to my working papers which I made at the time I
examined the books of account and stock records of Meyer-Muzzal
Company in October, November, December, 1929, and which
working papers are in my possession, I find and can state accordingly
that these working papers show what the stock and other records of
said Meyer-Muzzal Company recorded in regard to the matters
contained in questions No. 6, No. 7 and No. 8 and I can state
accordingly from my examination of said records and by reference to
my working papers that I know who the stockholders of
Meyer-Muzzal company were; that the amount of the subscribed
capital stock of said Meyer-Muzzal Company on said dates was
5,000 shares of the par value of $10 each, and that A.H. Muzzal was
a stockholder of the Meyer-Muzzal Company on the dates specified
and that fourteen hundred thirty-three shares of the capital stock of
Meyer-Muzzal Company of the par value of $10 each were
subscribed and owned by A.H. Muzzal on November 5, 1928 and on
December 22nd, 1928 and said shares were issued to and standing in
the name of A.H. Muzzal on the books of said company at said times.
The above sufficiently establishes the fact that the defendant was the
owner of 1,433 shares of stock of the corporation Meyer-Muzzal
Company when it contracted the obligations alleged in the complaint.
As to the second assignment of error Mr. Arthur W. Bolton, an
attorney-at-law of San Francisco, California, since the year 1918,
under oath, quoted verbatim section 322 of the California Civil Code
and stated that said section was in force at the time the obligations of
the defendant to the plaintiff were incurred, i. e., on November 5,
1928 and December 22, 1928. This evidence sufficiently established
the fact that the section in question was the law of the State of
California on the above dates. A reading of sections 300 and 301 of
our Code of Civil Procedure will convince one that these sections do
not exclude the presentation of other competent evidence to prove the
existence of a foreign law.
 144

"The foreign law is a matter of fact ... You ask the witness what the
law is; he may from his recollection, or on producing and referring to
books, say what it is." (Lord Campbell concurring in an opinion of
Lord Chief Justice Denman in a well known English case where a
witness was called upon to prove the Roman laws of marriage and
was permitted to testify, though he referred to a book containing the
decrees of the Council of Trent as controlling, Jones on Evidence,
Second Edition, Volume 4, pages 3148-3152.) Aside from the
testimony of Attorney Bolton Ragland's Annotated Civil Code of
California was presented as evidence. This book contains that State's
Civil Code as adopted March 21, 1872, with the subsequent official
statute amendments to and including the year 1929.

In the third and fourth assignments of error the appellant argues that
since the law of California, as to the liability of stockholders of a
corporation, is different from and inconsistent with the Philippine
Corporation Law the courts here should not impose liability provided
in that law upon a resident of these Islands who is a stockholder of a
California corporation. The herein defendant is chargeable with
notice of the law of California as to the liability of stockholders for
debt of a corporation proportionate to their stock holdings, in view of
the fact that he was one of the incorporators of the Meyer-Muzzal
Company in the year 1924 and was still a stockholder in that
company in the year 1928. Exhibit 10 of the plaintiff is a certified
company of the articles of incorporation of Meyer-Muzzal Company
in which it appears that that company was incorporated on August 22,
1924, and that the incorporators were A.H. Muzzal, Leo W. Meyer
and James Rolph, Jr., "all of whom are residents and citizens of the
State of California." The defendant cannot now escape liability by
alleging that the California law is unjust and different from the
inconsistent with the Philippine Corporation Law.

The judgment of the trial court is affirmed with costs in both

instances against the defendant-appellant.

G.R. No. L-11622 January 28, 1961
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
DOUGLAS FISHER AND BETTINA FISHER, and the COURT
OF TAX APPEALS, respondents.
x---------------------------------------------------------x
G.R. No. L-11668 January 28, 1961.
DOUGLAS FISHER AND BETTINA FISHER, petitioner,
vs.
THE COLLECTOR OF INTERNAL REVENUE, and the
COURT OF TAX APPEALS, respondents.
BARRERA, J.:
This case relates to the determination and settlement of the hereditary
estate left by the deceased Walter G. Stevenson, and the laws
applicable thereto. Walter G. Stevenson (born in the Philippines on
August 9, 1874 of British parents and married in the City of Manila
on January 23, 1909 to Beatrice Mauricia Stevenson another British
subject) died on February 22, 1951 in San Francisco, California,
U.S.A. whereto he and his wife moved and established their
permanent residence since May 10, 1945. In his will executed in San
Francisco on May 22, 1947, and which was duly probated in the
Superior Court of California on April 11, 1951, Stevenson instituted
his wife Beatrice as his sole heiress to the following real and personal
properties acquired by the spouses while residing in the Philippines,
described and preliminary assessed as follows:
Gross Estate
Real Property — 2 parcels of land in Baguio, covered
by T.C.T. Nos. 378 and 379
Personal Property
(1) 177 shares of stock of Canacao Estate at P10.00
each
(2) 210,000 shares of stock of Mindanao Mother Lode
Mines, Inc. at P0.38 per share
(3) Cash credit with Canacao Estate Inc.
(4) Cash, with the Chartered Bank of India, Australia &
China
Total Gross Assets
On May 22, 1951, ancillary administration proceedings were
instituted in the Court of First Instance of Manila for the settlement
of the estate in the Philippines. In due time Stevenson's will was duly
admitted to probate by our court and Ian Murray Statt was appointed
ancillary administrator of the estate, who on July 11, 1951, filed a
preliminary estate and inheritance tax return with the reservation of
having the properties declared therein finally appraised at their
values six months after the death of Stevenson. Preliminary return
was made by the ancillary administrator in order to secure the waiver
of the Collector of Internal Revenue on the inheritance tax due on the
210,000 shares of stock in the Mindanao Mother Lode Mines Inc.
which the estate then desired to dispose in the United States. Acting
upon said return, the Collector of Internal Revenue accepted the
valuation of the personal properties declared therein, but increased
the appraisal of the two parcels of land located in Baguio City by
fixing their fair market value in the amount of P52.200.00, instead of
145
P43,500.00. After allowing the deductions claimed by the ancillary
administrator for funeral expenses in the amount of P2,000.00 and
for judicial and administration expenses in the sum of P5,500.00, the
Collector assessed the state the amount of P5,147.98 for estate tax
and P10,875,26 or inheritance tax, or a total of P16,023.23. Both of
these assessments were paid by the estate on June 6, 1952.
On September 27, 1952, the ancillary administrator filed in amended
estate and inheritance tax return in pursuance f his reservation made
at the time of filing of the preliminary return and for the purpose of
availing of the right granted by section 91 of the National Internal
Revenue Code.
In this amended return the valuation of the 210,000 shares of stock in
the Mindanao Mother Lode Mines, Inc. was reduced from 0.38 per
share, as originally declared, to P0.20 per share, or from a total
valuation of P79,800.00 to P42,000.00. This change in price per
share of stock was based by the ancillary administrator on the market
notation of the stock obtaining at the San Francisco California) Stock
Exchange six months from the death of Stevenson, that is, As of
August 22, 1931. In addition, the ancillary administrator made claim
for the following deductions:
Funeral expenses ($1,04326)
Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and Administration expenses as of
August 9, 1952 1,400.05
P43,500.00
Real Estate Tax for 1951 on Baguio real
properties (O.R. No. B-1 686836)
1,770.00
Claims against the estate:
($5,000.00) P10,000.00 P10,000.00
79,800.00
Plus: 4% int. p.a. from Feb. 2 to 22, 1951 22.47
4,870.88
Sub-Total
In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson
851.97
assigned all her rights and interests in the estate to the spouses,
Douglas and Bettina Fisher, respondents herein.
P130,792.85
On September 7, 1953, the ancillary administrator filed a second
amended estate and inheritance tax return (Exh. "M-N"). This return
declared the same assets of the estate stated in the amended return of
September 22, 1952, except that it contained new claims for
additional exemption and deduction to wit: (1) deduction in the
amount of P4,000.00 from the gross estate of the decedent as
provided for in Section 861 (4) of the U.S. Federal Internal Revenue
Code which the ancillary administrator averred was allowable by
way of the reciprocity granted by Section 122 of the National
Internal Revenue Code, as then held by the Board of Tax Appeals in
case No. 71 entitled "Housman vs. Collector," August 14, 1952; and
(2) exemption from the imposition of estate and inheritance taxes on
the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc.
also pursuant to the reciprocity proviso of Section 122 of the
National Internal Revenue Code. In this last return, the estate claimed
that it was liable only for the amount of P525.34 for estate tax and
P238.06 for inheritance tax and that, as a consequence, it had

overpaid the government. The refund of the amount of P15,259.83,
allegedly overpaid, was accordingly requested by the estate. The
Collector denied the claim. For this reason, action was commenced in
the Court of First Instance of Manila by respondents, as assignees of
Beatrice Mauricia Stevenson, for the recovery of said amount.
Pursuant to Republic Act No. 1125, the case was forwarded to the
Court of Tax Appeals which court, after hearing, rendered decision
the dispositive portion of which reads as follows:
In fine, we are of the opinion and so hold that: (a) the one-half (½)
share of the surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such property
should be deducted from the net estate of the deceased Walter G.
Stevenson, pursuant to Section 89-C of the National Internal
Revenue Code; (b) the intangible personal property belonging to the
estate of said Stevenson is exempt from inheritance tax, pursuant to
the provision of section 122 of the National Internal Revenue Code
in relation to the California Inheritance Tax Law but decedent's
estate is not entitled to an exemption of P4,000.00 in the computation
of the estate tax; (c) for purposes of estate and inheritance taxation
the Baguio real estate of the spouses should be valued at P52,200.00,
and 210,000 shares of stock in the Mindanao Mother Lode Mines,
Inc. should be appraised at P0.38 per share; and (d) the estate shall be
entitled to a deduction of P2,000.00 for funeral expenses and judicial
expenses of P8,604.39.
From this decision, both parties appealed.
The Collector of Internal Revenue, hereinafter called petitioner
assigned four errors allegedly committed by the trial court, while the
assignees, Douglas and Bettina Fisher hereinafter called respondents,
made six assignments of error. Together, the assigned errors raise the
following main issues for resolution by this Court:
(1) Whether or not, in determining the taxable net estate of the
decedent, one-half (½) of the net estate should be deducted therefrom
as the share of tile surviving spouse in accordance with our law on
conjugal partnership and in relation to section 89 (c) of the National
Internal revenue Code;
(2) Whether or not the estate can avail itself of the reciprocity
proviso embodied in Section 122 of the National Internal Revenue
Code granting exemption from the payment of estate and inheritance
taxes on the 210,000 shares of stock in the Mindanao Mother Lode
Mines Inc.;
(3) Whether or not the estate is entitled to the deduction of P4,000.00
allowed by Section 861, U.S. Internal Revenue Code in relation to
section 122 of the National Internal Revenue Code;
(4) Whether or not the real estate properties of the decedent located
in Baguio City and the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc., were correctly appraised by the lower
court;
(5) Whether or not the estate is entitled to the following deductions:
P8,604.39 for judicial and administration expenses; P2,086.52 for
funeral expenses; P652.50 for real estate taxes; and P10,0,22.47
representing the amount of indebtedness allegedly incurred by the
decedent during his lifetime; and
(6) Whether or not the estate is entitled to the payment of interest on
the amount it claims to have overpaid the government and to be
refundable to it.
In deciding the first issue, the lower court applied a well-known
doctrine in our civil law that in the absence of any ante-nuptial
agreement, the contracting parties are presumed to have adopted the
system of conjugal partnership as to the properties acquired during
their marriage. The application of this doctrine to the instant case is
146
being disputed, however, by petitioner Collector of Internal Revenue,
who contends that pursuant to Article 124 of the New Civil Code, the
property relation of the spouses Stevensons ought not to be
determined by the Philippine law, but by the national law of the
decedent husband, in this case, the law of England. It is alleged by
petitioner that English laws do not recognize legal partnership
between spouses, and that what obtains in that jurisdiction is another
regime of property relation, wherein all properties acquired during
the marriage pertain and belong Exclusively to the husband. In
further support of his stand, petitioner cites Article 16 of the New
Civil Code (Art. 10 of the old) to the effect that in testate and
intestate proceedings, the amount of successional rights, among
others, is to be determined by the national law of the decedent.
In this connection, let it be noted that since the mariage of the
Stevensons in the Philippines took place in 1909, the applicable law
is Article 1325 of the old Civil Code and not Article 124 of the New
Civil Code which became effective only in 1950. It is true that both
articles adhere to the so-called nationality theory of determining the
property relation of spouses where one of them is a foreigner and
they have made no prior agreement as to the administration
disposition, and ownership of their conjugal properties. In such a
case, the national law of the husband becomes the dominant law in
determining the property relation of the spouses. There is, however, a
difference between the two articles in that Article 1241 of the new
Civil Code expressly provides that it shall be applicable regardless of
whether the marriage was celebrated in the Philippines or abroad
while Article 13252 of the old Civil Code is limited to marriages
contracted in a foreign land.
It must be noted, however, that what has just been said refers to
mixed marriages between a Filipino citizen and a foreigner. In the
instant case, both spouses are foreigners who married in the
Philippines. Manresa,3 in his Commentaries, has this to say on this
point:
La regla establecida en el art. 1.315, se refiere a las capitulaciones
otorgadas en Espana y entre espanoles. El 1.325, a las celebradas en
el extranjero cuando alguno de los conyuges es espanol. En cuanto a
la regla procedente cuando dos extranjeros se casan en Espana, o dos
espanoles en el extranjero hay que atender en el primer caso a la
legislacion de pais a que aquellos pertenezean, y en el segundo, a las
reglas generales consignadas en los articulos 9 y 10 de nuestro
Codigo. (Emphasis supplied.)
If we adopt the view of Manresa, the law determinative of the
property relation of the Stevensons, married in 1909, would be the
English law even if the marriage was celebrated in the Philippines,
both of them being foreigners. But, as correctly observed by the Tax
Court, the pertinent English law that allegedly vests in the decedent
husband full ownership of the properties acquired during the
marriage has not been proven by petitioner. Except for a mere
allegation in his answer, which is not sufficient, the record is bereft
of any evidence as to what English law says on the matter. In the
absence of proof, the Court is justified, therefore, in indulging in
what Wharton calls "processual presumption," in presuming that the
law of England on this matter is the same as our law.4
Nor do we believe petitioner can make use of Article 16 of the New
Civil Code (art. 10, old Civil Code) to bolster his stand. A reading of
Article 10 of the old Civil Code, which incidentally is the one
applicable, shows that it does not encompass or contemplate to
govern the question of property relation between spouses. Said article
distinctly speaks of amount of successional rights and this term, in
speaks in our opinion, properly refers to the extent or amount of
property that each heir is legally entitled to inherit from the estate
available for distribution. It needs to be pointed out that the property
relation of spouses, as distinguished from their successional rights,

is governed differently by the specific and express provisions of Title
VI, Chapter I of our new Civil Code (Title III, Chapter I of the old
Civil Code.) We, therefore, find that the lower court correctly
deducted the half of the conjugal property in determining the
hereditary estate left by the deceased Stevenson.
On the second issue, petitioner disputes the action of the Tax Court
in the exempting the respondents from paying inheritance tax on the
210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. in
virtue of the reciprocity proviso of Section 122 of the National
Internal Revenue Code, in relation to Section 13851 of the California
Revenue and Taxation Code, on the ground that: (1) the said proviso
of the California Revenue and Taxation Code has not been duly
proven by the respondents; (2) the reciprocity exemptions granted by
section 122 of the National Internal Revenue Code can only be
availed of by residents of foreign countries and not of residents of a
state in the United States; and (3) there is no "total" reciprocity
between the Philippines and the state of California in that while the
former exempts payment of both estate and inheritance taxes on
intangible personal properties, the latter only exempts the payment of
inheritance tax..
To prove the pertinent California law, Attorney Allison Gibbs,
counsel for herein respondents, testified that as an active member of
the California Bar since 1931, he is familiar with the revenue and
taxation laws of the State of California. When asked by the lower
court to state the pertinent California law as regards exemption of
intangible personal properties, the witness cited article 4, section
13851 (a) and (b) of the California Internal and Revenue Code as
published in Derring's California Code, a publication of the
Bancroft-Whitney Company inc. And as part of his testimony, a full
quotation of the cited section was offered in evidence as Exhibits
"V-2" by the respondents.
It is well-settled that foreign laws do not prove themselves in our
jurisdiction and our courts are not authorized to take judicial notice
of them.5 Like any other fact, they must be alleged and proved.6
Section 41, Rule 123 of our Rules of Court prescribes the manner of
proving foreign laws before our tribunals. However, although we
believe it desirable that these laws be proved in accordance with said
rule, we held in the case of Willamette Iron and Steel Works v.
Muzzal, 61 Phil. 471, that "a reading of sections 300 and 301 of our
Code of Civil Procedure (now section 41, Rule 123) will convince
one that these sections do not exclude the presentation of other
competent evidence to prove the existence of a foreign law." In that
case, we considered the testimony of an attorney-at-law of San
Francisco, California who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the
existence of said law. In line with this view, we find no error,
therefore, on the part of the Tax Court in considering the pertinent
California law as proved by respondents' witness.
We now take up the question of reciprocity in exemption from
transfer or death taxes, between the State of California and the
Philippines.F
Section 122 of our National Internal Revenue Code, in pertinent part,
provides:
... And, provided, further, That no tax shall be collected under this
Title in respect of intangible personal property (a) if the decedent at
the time of his death was a resident of a foreign country which at the
time of his death did not impose a transfer of tax or death tax of any
character in respect of intangible personal property of citizens of the
Philippines not residing in that foreign country, or (b) if the laws of
the foreign country of which the decedent was a resident at the time
of his death allow a similar exemption from transfer taxes or death
147
taxes of every character in respect of intangible personal property
owned by citizens of the Philippines not residing in that foreign
country." (Emphasis supplied).
On the other hand, Section 13851 of the California Inheritance Tax
Law, insofar as pertinent, reads:.
"SEC. 13851, Intangibles of nonresident: Conditions. Intangible
personal property is exempt from the tax imposed by this part if the
decedent at the time of his death was a resident of a territory or
another State of the United States or of a foreign state or country
which then imposed a legacy, succession, or death tax in respect to
intangible personal property of its own residents, but either:.
(a) Did not impose a legacy, succession, or death tax of any character
in respect to intangible personal property of residents of this State, or
(b) Had in its laws a reciprocal provision under which intangible
personal property of a non-resident was exempt from legacy,
succession, or death taxes of every character if the Territory or other
State of the United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect to
intangible personal property of residents of the Territory or State of
the United States or foreign state or country of residence of the
decedent." (Id.)
It is clear from both these quoted provisions that the reciprocity must
be total, that is, with respect to transfer or death taxes of any and
every character, in the case of the Philippine law, and to legacy,
succession, or death taxes of any and every character, in the case of
the California law. Therefore, if any of the two states collects or
imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. This is
the underlying principle of the reciprocity clauses in both laws.
In the Philippines, upon the death of any citizen or resident, or
non-resident with properties therein, there are imposed upon his
estate and its settlement, both an estate and an inheritance tax. Under
the laws of California, only inheritance tax is imposed. On the other
hand, the Federal Internal Revenue Code imposes an estate tax on
non-residents not citizens of the United States,7 but does not provide
for any exemption on the basis of reciprocity. Applying these laws in
the manner the Court of Tax Appeals did in the instant case, we will
have a situation where a Californian, who is non-resident in the
Philippines but has intangible personal properties here, will the
subject to the payment of an estate tax, although exempt from the
payment of the inheritance tax. This being the case, will a Filipino,
non-resident of California, but with intangible personal properties
there, be entitled to the exemption clause of the California law, since
the Californian has not been exempted from every character of
legacy, succession, or death tax because he is, under our law, under
obligation to pay an estate tax? Upon the other hand, if we exempt
the Californian from paying the estate tax, we do not thereby entitle a
Filipino to be exempt from a similar estate tax in California because
under the Federal Law, which is equally enforceable in California he
is bound to pay the same, there being no reciprocity recognized in
respect thereto. In both instances, the Filipino citizen is always at a
disadvantage. We do not believe that our legislature has intended
such an unfair situation to the detriment of our own government and
people. We, therefore, find and declare that the lower court erred in
exempting the estate in question from payment of the inheritance tax.
We are not unaware of our ruling in the case of Collector of Internal
Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6,
1958, 54 O.G. 2881) exempting the estate of the deceased Hugo H.
Miller from payment of the inheritance tax imposed by the Collector
of Internal Revenue. It will be noted, however, that the issue of
reciprocity between the pertinent provisions of our tax law and that
of the State of California was not there squarely raised, and the ruling

therein cannot control the determination of the case at bar. Be that as
it may, we now declare that in view of the express provisions of both
the Philippine and California laws that the exemption would apply
only if the law of the other grants an exemption from legacy,
succession, or death taxes of every character, there could not be
partial reciprocity. It would have to be total or none at all.
With respect to the question of deduction or reduction in the amount
of P4,000.00 based on the U.S. Federal Estate Tax Law which is also
being claimed by respondents, we uphold and adhere to our ruling in
the Lara case (supra) that the amount of $2,000.00 allowed under the
Federal Estate Tax Law is in the nature of a deduction and not of an
exemption regarding which reciprocity cannot be claimed under the
provision of Section 122 of our National Internal Revenue Code. Nor
is reciprocity authorized under the Federal Law. .
On the issue of the correctness of the appraisal of the two parcels of
land situated in Baguio City, it is contended that their assessed values,
as appearing in the tax rolls 6 months after the death of Stevenson,
ought to have been considered by petitioner as their fair market value,
pursuant to section 91 of the National Internal Revenue Code. It
should be pointed out, however, that in accordance with said proviso
the properties are required to be appraised at their fair market value
and the assessed value thereof shall be considered as the fair market
value only when evidence to the contrary has not been shown. After
all review of the record, we are satisfied that such evidence exists to
justify the valuation made by petitioner which was sustained by the
tax court, for as the tax court aptly observed:
"The two parcels of land containing 36,264 square meters were
valued by the administrator of the estate in the Estate and Inheritance
tax returns filed by him at P43,500.00 which is the assessed value of
said properties. On the other hand, defendant appraised the same at
P52,200.00. It is of common knowledge, and this Court can take
judicial notice of it, that assessments for real estate taxation purposes
are very much lower than the true and fair market value of the
properties at a given time and place. In fact one year after decedent's
death or in 1952 the said properties were sold for a price of
P72,000.00 and there is no showing that special or extraordinary
circumstances caused the sudden increase from the price of
P43,500.00, if we were to accept this value as a fair and reasonable
one as of 1951. Even more, the counsel for plaintiffs himself
admitted in open court that he was willing to purchase the said
properties at P2.00 per square meter. In the light of these facts we
believe and therefore hold that the valuation of P52,200.00 of the real
estate in Baguio made by defendant is fair, reasonable and justified in
the premises." (Decision, p. 19).
In respect to the valuation of the 210,000 shares of stock in the
Mindanao Mother Lode Mines, Inc., (a domestic corporation),
respondents contend that their value should be fixed on the basis of
the market quotation obtaining at the San Francisco (California)
Stock Exchange, on the theory that the certificates of stocks were
then held in that place and registered with the said stock exchange.
We cannot agree with respondents' argument. The situs of the shares
of stock, for purposes of taxation, being located here in the
Philippines, as respondents themselves concede and considering that
they are sought to be taxed in this jurisdiction, consistent with the
exercise of our government's taxing authority, their fair market value
should be taxed on the basis of the price prevailing in our country.
Upon the other hand, we find merit in respondents' other contention
that the said shares of stock commanded a lesser value at the Manila
Stock Exchange six months after the death of Stevenson. Through
Atty. Allison Gibbs, respondents have shown that at that time a share
of said stock was bid for at only P.325 (p. 103, t.s.n.). Significantly,
the testimony of Atty. Gibbs in this respect has never been
questioned nor refuted by petitioner either before this court or in the
148
court below. In the absence of evidence to the contrary, we are,
therefore, constrained to reverse the Tax Court on this point and to
hold that the value of a share in the said mining company on August
22, 1951 in the Philippine market was P.325 as claimed by
respondents..
It should be noted that the petitioner and the Tax Court valued each
share of stock of P.38 on the basis of the declaration made by the
estate in its preliminary return. Patently, this should not have been
the case, in view of the fact that the ancillary administrator had
reserved and availed of his legal right to have the properties of the
estate declared at their fair market value as of six months from the
time the decedent died..
On the fifth issue, we shall consider the various deductions, from the
allowance or disallowance of which by the Tax Court, both petitioner
and respondents have appealed..
Petitioner, in this regard, contends that no evidence of record exists
to support the allowance of the sum of P8,604.39 for the following
expenses:.
1) Administrator's fee P1,204.
2) Attorney's fee 6,000.0
3) Judicial and Administrative expenses 2,052
Total Deductions P8,604.
An examination of the record discloses, however, that the foregoing
items were considered deductible by the Tax Court on the basis of
their approval by the probate court to which said expenses, we may
presume, had also been presented for consideration. It is to be
supposed that the probate court would not have approved said items
were they not supported by evidence presented by the estate. In
allowing the items in question, the Tax Court had before it the
pertinent order of the probate court which was submitted in evidence
by respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said,
it found no basis for departing from the findings of the probate court,
as it must have been satisfied that those expenses were actually
incurred. Under the circumstances, we see no ground to reverse this
finding of fact which, under Republic Act of California National
Association, which it would appear, that while still living, Walter G.
Stevenson obtained we are not inclined to pass upon the claim of
respondents in respect to the additional amount of P86.52 for funeral
expenses which was disapproved by the court a quo for lack of
evidence.
In connection with the deduction of P652.50 representing the amount
of realty taxes paid in 1951 on the decedent's two parcels of land in
Baguio City, which respondents claim was disallowed by the Tax
Court, we find that this claim has in fact been allowed. What
happened here, which a careful review of the record will reveal, was
that the Tax Court, in itemizing the liabilities of the estate, viz:
1) Administrator's fee
2) Attorney's fee
3) Judicial and Administration expenses as of August 9, 1952
Total
added the P652.50 for realty taxes as a liability of the estate, to the
P1,400.05 for judicial and administration expenses approved by the
court, making a total of P2,052.55, exactly the same figure which

was arrived at by the Tax Court for judicial and administration
expenses. Hence, the difference between the total of P9,256.98
allowed by the Tax Court as deductions, and the P8,604.39 as found
by the probate court, which is P652.50, the same amount allowed for
realty taxes. An evident oversight has involuntarily been made in
omitting the P2,000.00 for funeral expenses in the final computation.
This amount has been expressly allowed by the lower court and there
is no reason why it should not be. .
We come now to the other claim of respondents that pursuant to
section 89(b) (1) in relation to section 89(a) (1) (E) and section 89(d),
National Internal Revenue Code, the amount of P10,022.47 should
have been allowed the estate as a deduction, because it represented
an indebtedness of the decedent incurred during his lifetime. In
support thereof, they offered in evidence a duly certified claim,
presented to the probate court in California by the Bank of California
National Association, which it would appear, that while still living,
Walter G. Stevenson obtained a loan of $5,000.00 secured by pledge
on 140,000 of his shares of stock in the Mindanao Mother Lode
Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court
disallowed this item on the ground that the local probate court had
not approved the same as a valid claim against the estate and because
it constituted an indebtedness in respect to intangible personal
property which the Tax Court held to be exempt from inheritance tax.
For two reasons, we uphold the action of the lower court in
disallowing the deduction.
Firstly, we believe that the approval of the Philippine probate court
of this particular indebtedness of the decedent is necessary. This is so
although the same, it is averred has been already admitted and
approved by the corresponding probate court in California, situs of
the principal or domiciliary administration. It is true that we have
here in the Philippines only an ancillary administration in this case,
but, it has been held, the distinction between domiciliary or principal
administration and ancillary administration serves only to distinguish
one administration from the other, for the two proceedings are
separate and independent.8 The reason for the ancillary
administration is that, a grant of administration does not ex proprio
vigore, have any effect beyond the limits of the country in which it
was granted. Hence, we have the requirement that before a will duly
probated outside of the Philippines can have effect here, it must first
be proved and allowed before our courts, in much the same manner
as wills originally presented for allowance therein.9 And the estate
shall be administered under letters testamentary, or letters of
administration granted by the court, and disposed of according to the
will as probated, after payment of just debts and expenses of
administration.10 In other words, there is a regular administration
under the control of the court, where claims must be presented and
approved, and expenses of administration allowed before deductions
from the estate can be authorized. Otherwise, we would have the
actuations of our own probate court, in the settlement and
distribution of the estate situated here, subject to the proceedings
before the foreign court over which our courts have no control. We
do not believe such a procedure is countenanced or contemplated in
the Rules of Court.
Another reason for the disallowance of this indebtedness as a
deduction, springs from the provisions of Section 89, letter (d),
number (1), of the National Internal Revenue Code which reads:
(d) Miscellaneous provisions — (1) No deductions shall be allowed
in the case of a non-resident not a citizen of the Philippines unless
the executor, administrator or anyone of the heirs, as the case may be,
includes in the return required to be filed under section ninety-three
the value at the time of his death of that part of the gross estate of the
non-resident not situated in the Philippines."
149
In the case at bar, no such statement of the gross estate of the
non-resident Stevenson not situated in the Philippines appears in the
three returns submitted to the court or to the office of the petitioner
Collector of Internal Revenue. The purpose of this requirement is to
enable the revenue officer to determine how much of the
indebtedness may be allowed to be deducted, pursuant to (b), number
(1) of the same section 89 of the Internal Revenue Code which
provides:
(b) Deductions allowed to non-resident estates. — In the case of a
non-resident not a citizen of the Philippines, by deducting from the
value of that part of his gross estate which at the time of his death is
situated in the Philippines —
(1) Expenses, losses, indebtedness, and taxes. — That proportion of
the deductions specified in paragraph (1) of subjection (a) of this
section11 which the value of such part bears the value of his entire
gross estate wherever situated;"
In other words, the allowable deduction is only to the extent of
the portion of the indebtedness which is equivalent to the proportion
that the estate in the Philippines bears to the total estate wherever
situated. Stated differently, if the properties in the Philippines
constitute but 1/5 of the entire assets wherever situated, then only 1/5
of the indebtedness may be deducted. But since, as heretofore
adverted to, there is no statement of the value of the estate situated
outside the Philippines, no part of the indebtedness can be allowed to
be deducted, pursuant to Section 89, letter (d), number (1) of the
Internal Revenue Code.
For the reasons thus stated, we affirm the ruling of the lower court
disallowing the deduction of the alleged indebtedness in the sum of
P10,022.47.
In recapitulation, we hold and declare that:
(a) only the one-half (1/2) share of the decedent Stevenson in the
conjugal partnership property constitutes his hereditary estate subject
to the estate and inheritance taxes;
(b) the intangible personal property is not exempt from inheritance
tax, there existing no complete total reciprocity as required in section
122 of the National Internal Revenue Code, nor is the decedent's
estate entitled to an exemption of P4,000.00 in the computation of
the estate tax;
(c) for the purpose of the estate and inheritance taxes, the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc. are to be
appraised at P0.325 per share; and
(d) the P2,000.00 for funeral expenses should be deducted in the
determination of the net asset of the deceased Stevenson.
In all other respects, the decision of the Court of Tax Appeals is
affirmed.
Respondent's claim for interest on the amount allegedly overpaid, if
any actually results after a recomputation on the basis of this decision
is hereby denied in line with our recent decision in Collector of
Internal Revenue v. St. Paul's Hospital (G.R. No. L-12127, May 29,
1959) wherein we held that, "in the absence of a statutory provision
clearly or expressly directing or authorizing such payment, and none
has been cited by respondents, the National Government cannot be
required to pay interest."
WHEREFORE, as modified in the manner heretofore indicated, the
judgment of the lower court is hereby affirmed in all other respects
not inconsistent herewith. No costs. So ordered.

G.R. Nos. L-27860 and L-27896 March 29, 1974
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK,
Administrator of the Testate Estate of Charles Newton Hodges
(Sp. Proc. No. 1672 of the Court of First Instance of
Iloilo), petitioner,
vs.
THE HONORABLE VENICIO ESCOLIN, Presiding Judge of
the Court of First Instance of Iloilo, Branch II, and AVELINA A.
MAGNO, respondents.
G.R. Nos. L-27936 & L-27937 March 29, 1974
TESTATE ESTATE OF THE LATE LINNIE JANE HODGES
(Sp. Proc. No. 1307). TESTATE ESTATE OF THE LATE
CHARLES NEWTON HODGES (Sp. Proc. No. 1672).
PHILIPPINE COMMERCIAL AND INDUSTRIAL
BANK, administrator-appellant,
vs.
LORENZO CARLES, JOSE PABLICO, ALFREDO
CATEDRAL, SALVADOR GUZMAN, BELCESAR CAUSING,
FLORENIA BARRIDO, PURIFICACION CORONADO,
GRACIANO LUCERO, ARITEO THOMAS JAMIR,
MELQUIADES BATISANAN, PEPITO IYULORES,
ESPERIDION PARTISALA, WINIFREDO ESPADA,
ROSARIO ALINGASA, ADELFA PREMAYLON, SANTIAGO
PACAONSIS, and AVELINA A. MAGNO, the last as
Administratrix in Sp. Proc. No. 1307, appellees, WESTERN
INSTITUTE OF TECHNOLOGY, INC., movant-appellee.
San Juan, Africa, Gonzales and San Agustin for Philippine
Commercial and Industrial Bank.
Manglapus Law Office, Antonio Law Office and Rizal R. Quimpo for
private respondents and appellees Avelina A. Magno, etc., et al.
BARREDO, J.:p
Certiorari and prohibition with preliminary injunction; certiorari to
"declare all acts of the respondent court in the Testate Estate of
Linnie Jane Hodges (Sp. Proc. No. 1307 of the Court of First
Instance of Iloilo) subsequent to the order of December 14, 1957 as
null and void for having been issued without jurisdiction";
prohibition to enjoin the respondent court from allowing, tolerating,
sanctioning, or abetting private respondent Avelina A. Magno to
perform or do any acts of administration, such as those enumerated in
the petition, and from exercising any authority or power as Regular
Administratrix of above-named Testate Estate, by entertaining
manifestations, motion and pleadings filed by her and acting on them,
and also to enjoin said court from allowing said private respondent to
interfere, meddle or take part in any manner in the administration of
the Testate Estate of Charles Newton Hodges (Sp. Proc. No. 1672 of
the same court and branch); with prayer for preliminary injunction,
which was issued by this Court on August 8, 1967 upon a bond of
P5,000; the petition being particularly directed against the orders of
the respondent court of October 12, 1966 denying petitioner's motion
of April 22, 1966 and its order of July 18, 1967 denying the motion
for reconsideration of said order.
Related to and involving basically the same main issue as the
foregoing petition, thirty-three (33) appeals from different orders of
the same respondent court approving or otherwise sanctioning the
acts of administration of the respondent Magno on behalf of the
testate Estate of Mrs. Hodges.
THE FACTS
150
On May 23, 1957, Linnie Jane Hodges died in Iloilo City leaving a
will executed on November 22, 1952 pertinently providing as
follows:
FIRST: I direct that all my just debts and funeral expenses be first
paid out of my estate.
SECOND: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated, or
located, to my beloved husband, Charles Newton Hodges, to have
and to hold unto him, my said husband, during his natural lifetime.
THIRD: I desire, direct and provide that my husband, Charles
Newton Hodges, shall have the right to manage, control, use and
enjoy said estate during his lifetime, and he is hereby given the right
to make any changes in the physical properties of said estate, by sale
or any part thereof which he may think best, and the purchase of any
other or additional property as he may think best; to execute
conveyances with or without general or special warranty, conveying
in fee simple or for any other term or time, any property which he
may deem proper to dispose of; to lease any of the real property for
oil, gas and/or other minerals, and all such deeds or leases shall pass
the absolute fee simple title to the interest so conveyed in such
property as he may elect to sell. All rents, emoluments and income
from said estate shall belong to him, and he is further authorized to
use any part of the principal of said estate as he may need or desire. It
is provided herein, however, that he shall not sell or otherwise
dispose of any of the improved property now owned by us located at,
in or near the City of Lubbock, Texas, but he shall have the full right
to lease, manage and enjoy the same during his lifetime, above
provided. He shall have the right to subdivide any farm land and sell
lots therein. and may sell unimproved town lots.
FOURTH: At the death of my said husband, Charles Newton Hodges,
I give, devise and bequeath all of the rest, residue and remainder of
my estate, both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share alike,
namely:
Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Saddie
Rascoe, Era Roman and Nimroy Higdon.
FIFTH: In case of the death of any of my brothers and/or sisters
named in item Fourth, above, prior to the death of my husband,
Charles Newton Hodges, then it is my will and bequest that the heirs
of such deceased brother or sister shall take jointly the share which
would have gone to such brother or sister had she or he survived.
SIXTH: I nominate and appoint my said husband, Charles Newton
Hodges, to be executor of this, my last will and testament, and direct
that no bond or other security be required of him as such executor.
SEVENTH: It is my will and bequest that no action be had in the
probate court, in the administration of my estate, other than that
necessary to prove and record this will and to return an inventory and
appraisement of my estate and list of claims. (Pp. 2-4, Petition.)
This will was subsequently probated in aforementioned Special
Proceedings No. 1307 of respondent court on June 28, 1957, with the
widower Charles Newton Hodges being appointed as Executor,
pursuant to the provisions thereof.
Previously, on May 27, 1957, the said widower (hereafter to be
referred to as Hodges) had been appointed Special Administrator, in
which capacity he filed a motion on the same date as follows:
URGENT EX-PARTE MOTION TO ALLOW OR AUTHORIZE
PETITIONER TO CONTINUE THE BUSINESS IN WHICH HE WAS
ENGAGED AND TO PERFORM ACTS WHICH HE HAD BEEN
DOING WHILE DECEASED WAS LIVING

Come petitioner in the above-entitled special proceedings, thru his
undersigned attorneys, to the Hon. Court, most respectfully states:
1. — That Linnie Jane Hodges died leaving her last will and
testament, a copy of which is attached to the petition for probate of
the same.
2. — That in said last will and testament herein petitioner Charles
Newton Hodges is directed to have the right to manage, control use
and enjoy the estate of deceased Linnie Jane Hodges, in the same
way, a provision was placed in paragraph two, the following: "I give,
devise and bequeath all of the rest, residue and remainder of my
estate, to my beloved husband, Charles Newton Hodges, to have and
(to) hold unto him, my said husband, during his natural lifetime."
3. — That during the lifetime of Linnie Jane Hodges, herein
petitioner was engaged in the business of buying and selling personal
and real properties, and do such acts which petitioner may think best.
4. — That deceased Linnie Jane Hodges died leaving no descendants
or ascendants, except brothers and sisters and herein petitioner as
executor surviving spouse, to inherit the properties of the decedent.
5. — That the present motion is submitted in order not to paralyze
the business of petitioner and the deceased, especially in the purchase
and sale of properties. That proper accounting will be had also in all
these transactions.
WHEREFORE, it is most respectfully prayed that, petitioner C. N.
Hodges (Charles Newton Hodges) be allowed or authorized to
continue the business in which he was engaged and to perform acts
which he had been doing while deceased Linnie Jane Hodges was
living.
City of Iloilo, May 27, 1957. (Annex "D", Petition.)
which the respondent court immediately granted in the following
order:
It appearing in the urgent ex-parte motion filed by petitioner C. N.
Hodges, that the business in which said petitioner and the deceased
were engaged will be paralyzed, unless and until the Executor is
named and appointed by the Court, the said petitioner is allowed or
authorized to continue the business in which he was engaged and to
perform acts which he had been doing while the deceased was living.
SO ORDERED.
City of Iloilo May 27, 1957. (Annex "E", Petition.)
Under date of December 11, 1957, Hodges filed as such Executor
another motion thus:
MOTION TO APPROVE ALL SALES, CONVEYANCES,
LEASES, MORTGAGES THAT THE EXECUTOR HAD MADE
FURTHER AND SUBSEQUENT TRANSACTIONS WHICH THE
EXECUTOR MAY DO IN ACCORDANCE WITH THE LAST
WISH OF THE DECEASED LINNIE JANE HODGES.
Comes the Executor in the above-entitled proceedings, thru his
undersigned attorney, to the Hon. Court, most respectfully states:
1. — That according to the last will and testament of the deceased
Linnie Jane Hodges, the executor as the surviving spouse and legatee
named in the will of the deceased; has the right to dispose of all the
properties left by the deceased, portion of which is quoted as follows:
Second: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated, or
located, to my beloved husband, Charles Newton Hodges, to have
and to hold unto him, my said husband, during his natural lifetime.
151
Third: I desire, direct and provide that my husband, Charles Newton
Hodges, shall have the right to manage, control, use and enjoy said
estate during his lifetime, and he is hereby given the right to make
any changes in the physical properties of said estate, by sale or any
part thereof which he may think best, and the purchase of any other
or additional property as he may think best; to execute
conveyances with or without general or special warranty, conveying
in fee simple or for any other term or time, any property which he
may deem proper to dispose of; to lease any of the real property for
oil, gas and/or other minerals, and all such deeds or leases shall pass
the absolute fee simple title to the interest so conveyed in such
property as he may elect to sell. All rents, emoluments and income
from said estate shall belong to him, and he is further authorized to
use any part of the principal of said estate as he may need or
desire. ...
2. — That herein Executor, is not only part owner of the properties
left as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges. That during the lifetime of herein
Executor, as Legatee has the right to sell, convey, lease or dispose of
the properties in the Philippines. That inasmuch as C.N. Hodges was
and is engaged in the buy and sell of real and personal properties,
even before the death of Linnie Jane Hodges, a motion to authorize
said C.N. Hodges was filed in Court, to allow him to continue in the
business of buy and sell, which motion was favorably granted by the
Honorable Court.
3. — That since the death of Linnie Jane Hodges, Mr. C.N. Hodges
had been buying and selling real and personal properties, in
accordance with the wishes of the late Linnie Jane Hodges.
4. — That the Register of Deeds for Iloilo, had required of late the
herein Executor to have all the sales, leases, conveyances or
mortgages made by him, approved by the Hon. Court.
5. — That it is respectfully requested, all the sales, conveyances
leases and mortgages executed by the Executor, be approved by the
Hon. Court. and subsequent sales conveyances, leases and mortgages
in compliances with the wishes of the late Linnie Jane Hodges, and
within the scope of the terms of the last will and testament, also be
approved;
6. — That the Executor is under obligation to submit his yearly
accounts, and the properties conveyed can also be accounted for,
especially the amounts received.
WHEREFORE, it is most respectfully prayed that, all the sales,
conveyances, leases, and mortgages executed by the Executor, be
approved by the Hon. Court, and also the subsequent sales,
conveyances, leases, and mortgages in consonance with the wishes of
the deceased contained in her last will and testament, be with
authorization and approval of the Hon. Court.
City of Iloilo, December 11, 1967.
(Annex "G", Petition.)
which again was promptly granted by the respondent court on
December 14, 1957 as follows:
ORDER
As prayed for by Attorney Gellada, counsel for the Executor for the
reasons stated in his motion dated December 11, 1957, which the
Court considers well taken all the sales, conveyances, leases and
mortgages of all properties left by the deceased Linnie Jane Hodges
executed by the Executor Charles N. Hodges are hereby
APPROVED. The said Executor is further authorized to execute
subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in

consonance with the wishes conveyed in the last will and testament
of the latter.
So ordered.
Iloilo City. December 14, 1957.
(Annex "H", Petition.)
On April 14, 1959, in submitting his first statement of account as
Executor for approval, Hodges alleged:
Pursuant to the provisions of the Rules of Court, herein executor of
the deceased, renders the following account of his administration
covering the period from January 1, 1958 to December 31, 1958,
which account may be found in detail in the individual income tax
return filed for the estate of deceased Linnie Jane Hodges, to wit:
That a certified public accountant has examined the statement of net
worth of the estate of Linnie Jane Hodges, the assets and liabilities,
as well as the income and expenses, copy of which is hereto attached
and made integral part of this statement of account as Annex "A".
IN VIEW OF THE FOREGOING, it is most respectfully prayed that,
the statement of net worth of the estate of Linnie Jane Hodges, the
assets and liabilities, income and expenses as shown in the individual
income tax return for the estate of the deceased and marked as Annex
"A", be approved by the Honorable Court, as substantial compliance
with the requirements of the Rules of Court.
That no person interested in the Philippines of the time and place of
examining the herein accounts be given notice, as herein executor is
the only devisee or legatee of the deceased, in accordance with the
last will and testament already probated by the Honorable court.
City of Iloilo April 14, 1959.
(Annex "I", Petition.)
The respondent court approved this statement of account on April 21,
1959 in its order worded thus:
Upon petition of Atty. Gellada, in representation of the Executor, the
statement of net worth of the estate of Linnie Jane Hodges, assets and
liabilities, income and expenses as shown in the individual income
tax return for the estate of the deceased and marked as Annex "A" is
approved.
SO ORDERED.
City of Iloilo April 21, 1959.
(Annex "J", Petition.)
His accounts for the periods January 1, 1959 to December 31, 1959
and January 1, 1960 to December 31, 1960 were submitted likewise
accompanied by allegations identical mutatis mutandis to those of
April 14, 1959, quoted above; and the respective orders approving
the same, dated July 30, 1960 and May 2, 1961, were substantially
identical to the above-quoted order of April 21, 1959. In connection
with the statements of account just mentioned, the following
assertions related thereto made by respondent-appellee Magno in her
brief do not appear from all indications discernible in the record to be
disputable:
Under date of April 14, 1959, C.N. Hodges filed his first "Account
by the Executor" of the estate of Linnie Jane Hodges. In the
"Statement of Networth of Mr. C.N. Hodges and the Estate of Linnie
Jane Hodges" as of December 31, 1958 annexed thereto, C.N.
Hodges reported that the combined conjugal estate earned a net
income of P328,402.62, divided evenly between him and the estate
of Linnie Jane Hodges. Pursuant to this, he filed an "individual
152
income tax return" for calendar year 1958 on the estate of Linnie
Jane Hodges reporting, under oath, the said estate as having earned
income of P164,201.31, exactly one-half of the net income of his
combined personal assets and that of the estate of Linnie Jane
Hodges. (p. 91, Appellee's Brief.)
xxx xxx xxx
Under date of July 21, 1960, C.N. Hodges filed his second "Annual
Statement of Account by the Executor" of the estate of Linnie Jane
Hodges. In the "Statement of Networth of Mr. C.N. Hodges and the
Estate of Linnie Jane Hodges" as of December 31, 1959 annexed
thereto, C.N. Hodges reported that the combined conjugal estate
earned a net income of P270,623.32, divided evenly between him
and the estate of Linnie Jane Hodges. Pursuant to this, he filed an
"individual income tax return" for calendar year 1959 on the estate of
Linnie Jane Hodges reporting, under oath, the said estate as having
earned income of P135,311.66, exactly one-half of the net income of
his combined personal assets and that of the estate of Linnie Jane
Hodges. (pp. 91-92. Appellee's Brief.)
xxx xxx xxx
Under date of April 20, 1961, C.N. Hodges filed his third "Annual
Statement of Account by the Executor for the Year 1960" of the
estate of Linnie Jane Hodges. In the "Statement of Net Worth of Mr.
C.N. Hodges and the Estate of Linnie Jane Hodges" as of December
31, 1960 annexed thereto, C.N. Hodges reported that the combined
conjugal estate earned a net income of P314,857.94, divided evenly
between him and the estate of Linnie Jane Hodges. Pursuant to this,
he filed an "individual income tax return" for calendar year 1960 on
the estate of Linnie Jane Hodges reporting, under oath, the said estate
as having earned income of P157,428.97, exactly one-half of the net
income of his combined personal assets and that of the estate of
Linnie Jane Hodges. (Pp. 92-93, Appellee's Brief.)
Likewise the following:
In the petition for probate that he (Hodges) filed, he listed the seven
brothers and sisters of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the will to probate
unfortunately omitted one of the heirs, Roy Higdon (see p. 14, Green
ROA). Immediately, C.N. Hodges filed a verified motion to have
Roy Higdon's name included as an heir, stating that he wanted to
straighten the records "in order the heirs of deceased Roy Higdon
may not think or believe they were omitted, and that they were really
and are interested in the estate of deceased Linnie Jane Hodges. .
As an executor, he was bound to file tax returns for the estate he was
administering under American law. He did file such as estate tax
return on August 8, 1958. In Schedule "M" of such return, he
answered "Yes" to the question as to whether he was contemplating
"renouncing the will". On the question as to what property interests
passed to him as the surviving spouse, he answered:
"None, except for purposes of administering the Estate, paying debts,
taxes and other legal charges. It is the intention of the surviving
husband of deceased to distribute the remaining property and
interests of the deceased in their Community estate to the devisees
and legatees named in the will when the debts, liabilities, taxes and
expenses of administration are finally determined and paid."
Again, on August 9, 1962, barely four months before his death, he
executed an "affidavit" wherein he ratified and confirmed all that he
stated in Schedule "M" of his estate tax returns as to his having
renounced what was given him by his wife's will.1
As appointed executor, C.N. Hodges filed an "Inventory" dated May
12, 1958. He listed all the assets of his conjugal partnership with
Linnie Jane Hodges on a separate balance sheet and then stated

expressly that her estate which has come into his possession as
executor was "one-half of all the items" listed in said balance sheet.
(Pp. 89-90, Appellee's Brief.)
Parenthetically, it may be stated, at this juncture, that We are taking
pains to quote wholly or at least, extensively from some of the
pleadings and orders whenever We feel that it is necessary to do so
for a more comprehensive and clearer view of the important and
decisive issues raised by the parties and a more accurate appraisal of
their respective positions in regard thereto.
The records of these cases do not show that anything else was done
in the above-mentioned Special Proceedings No. 1307 until
December 26, 1962, when on account of the death of Hodges the day
before, the same lawyer, Atty. Leon P. Gellada, who had been
previously acting as counsel for Hodges in his capacity as Executor
of his wife's estate, and as such had filed the aforequoted motions
and manifestations, filed the following:
URGENT EX-PARTE MOTION FOR THE APPOINTMENT OF A
SPECIAL ADMINISTRATRIX
COMES the undersigned attorney for the Executor in the
above-entitled proceedings, to the Honorable Court, most
respectfully states:
1. That in accordance with the Last Will and Testament of Linnie
Jane Hodges (deceased), her husband, Charles Newton Hodges was
to act as Executor, and in fact, in an order issued by this Hon. Court
dated June 28, 1957, the said Charles Newton Hodges was appointed
Executor and had performed the duties as such.
2. That last December 22, 1962, the said Charles Newton Hodges
was stricken ill, and brought to the Iloilo Mission Hospital for
treatment, but unfortunately, he died on December 25, 1962, as
shown by a copy of the death certificate hereto attached and marked
as Annex "A".
3. That in accordance with the provisions of the last will and
testament of Linnie Jane Hodges, whatever real and personal
properties that may remain at the death of her husband Charles
Newton Hodges, the said properties shall be equally divided among
their heirs. That there are real and personal properties left by Charles
Newton Hodges, which need to be administered and taken care of.
4. That the estate of deceased Linnie Jane Hodges, as well as that of
Charles Newton Hodges, have not as yet been determined or
ascertained, and there is necessity for the appointment of a general
administrator to liquidate and distribute the residue of the estate to
the heirs and legatees of both spouses. That in accordance with the
provisions of Section 2 of Rule 75 of the Rules of Court, the conjugal
partnership of Linnie Jane Hodges and Charles Newton Hodges shall
be liquidated in the testate proceedings of the wife.
5. That the undersigned counsel, has perfect personal knowledge of
the existence of the last will and testament of Charles Newton
Hodges, with similar provisions as that contained in the last will and
testament of Linnie Jane Hodges. However, said last will and
testament of Charles Newton Hodges is kept inside the vault or iron
safe in his office, and will be presented in due time before this
honorable Court.
6. That in the meantime, it is imperative and indispensable that, an
Administratrix be appointed for the estate of Linnie Jane Hodges and
a Special Administratrix for the estate of Charles Newton Hodges, to
perform the duties required by law, to administer, collect, and take
charge of the goods, chattels, rights, credits, and estate of both
spouses, Charles Newton Hodges and Linnie Jane Hodges, as
provided for in Section 1 and 2, Rule 81 of the Rules of Court.
153
7. That there is delay in granting letters testamentary or of
administration, because the last will and testament of deceased,
Charles Newton Hodges, is still kept in his safe or vault, and in the
meantime, unless an administratrix (and,) at the same time, a Special
Administratrix is appointed, the estate of both spouses are in danger
of being lost, damaged or go to waste.
8. That the most trusted employee of both spouses Linnie Jane
Hodges and C.N. Hodges, who had been employed for around thirty
(30) years, in the person of Miss Avelina Magno, (should) be
appointed Administratrix of the estate of Linnie Jane Hodges and at
the same time Special Administratrix of the estate of Charles Newton
Hodges. That the said Miss Avelina Magno is of legal age, a resident
of the Philippines, the most fit, competent, trustworthy and
well-qualified person to serve the duties of Administratrix and
Special Administratrix and is willing to act as such.
9. That Miss Avelina Magno is also willing to file bond in such sum
which the Hon. Court believes reasonable.
WHEREFORE, in view of all the foregoing, it is most respectfully
prayed that, Miss AVELINA A. MAGNO be immediately appointed
Administratrix of the estate of Linnie Jane Hodges and as Special
Administratrix of the estate of Charles Newton Hodges, with powers
and duties provided for by law. That the Honorable Court fix the
reasonable bond of P1,000.00 to be filed by Avelina A. Magno.
(Annex "O", Petition.)
which respondent court readily acted on in its order of even date
thus: .
For the reasons alleged in the Urgent Ex-parte Motion filed by
counsel for the Executor dated December 25, 1962, which the Court
finds meritorious, Miss AVELINA A. MAGNO, is hereby appointed
Administratrix of the estate of Linnie Jane Hodges and as Special
Administratrix of the estate of Charles Newton Hodges, in the latter
case, because the last will of said Charles Newton Hodges is still
kept in his vault or iron safe and that the real and personal properties
of both spouses may be lost, damaged or go to waste, unless a
Special Administratrix is appointed.
Miss Avelina A. Magno is required to file bond in the sum of FIVE
THOUSAND PESOS (P5,000.00), and after having done so, let
letters of Administration be issued to her." (Annex "P", Petition.)
On December 29, 1962, however, upon urgent ex-parte petition of
respondent Magno herself, thru Atty. Gellada, Harold, R. Davies, "a
representative of the heirs of deceased Charles Newton Hodges (who
had) arrived from the United States of America to help in the
administration of the estate of said deceased" was appointed as
Co-Special Administrator of the estate of Hodges, (pp. 29-33, Yellow
- Record on Appeal) only to be replaced as such co-special
administrator on January 22, 1963 by Joe Hodges, who, according to
the motion of the same attorney, is "the nephew of the deceased (who
had) arrived from the United States with instructions from the other
heirs of the deceased to administer the properties or estate of Charles
Newton Hodges in the Philippines, (Pp. 47-50, id.)
Meanwhile, under date of January 9, 1963, the same Atty. Gellada
filed in Special Proceedings 1672 a petition for the probate of the
will of Hodges,2 with a prayer for the issuance of letters of
administration to the same Joe Hodges, albeit the motion was
followed on February 22, 1963 by a separate one asking that Atty.
Fernando Mirasol be appointed as his co-administrator. On the same
date this latter motion was filed, the court issued the corresponding
order of probate and letters of administration to Joe Hodges and Atty.
Mirasol, as prayed for.

At this juncture, again, it may also be explained that just as, in her
will, Mrs. Hodges bequeathed her whole estate to her husband "to
have and to hold unto him, my said husband, during his natural
lifetime", she, at the same time or in like manner, provided that "at
the death of my said husband — I give devise and bequeath all of the
rest, residue and remainder of my estate, both real and personal,
wherever situated or located, to be equally divided among my
brothers and sisters, share and share alike —". Accordingly, it
became incumbent upon Hodges, as executor of his wife's will, to
duly liquidate the conjugal partnership, half of which constituted her
estate, in order that upon the eventuality of his death, "the rest,
residue and remainder" thereof could be determined and
correspondingly distributed or divided among her brothers and sisters.
And it was precisely because no such liquidation was done,
furthermore, there is the issue of whether the distribution of her
estate should be governed by the laws of the Philippines or those of
Texas, of which State she was a national, and, what is more, as
already stated, Hodges made official and sworn statements or
manifestations indicating that as far as he was concerned no
"property interests passed to him as surviving spouse — "except for
purposes of administering the estate, paying debts, taxes and other
legal charges" and it was the intention of the surviving husband of
the deceased to distribute the remaining property and interests of the
deceased in their Community Estate to the devisees and legatees
named in the will when the debts, liabilities, taxes and expenses of
administration are finally determined and paid", that the incidents
and controversies now before Us for resolution arose. As may be
observed, the situation that ensued upon the death of Hodges became
rather unusual and so, quite understandably, the lower court's
actuations presently under review are apparently wanting in
consistency and seemingly lack proper orientation.
Thus, We cannot discern clearly from the record before Us the
precise perspective from which the trial court proceeded in issuing its
questioned orders. And, regretably, none of the lengthy briefs
submitted by the parties is of valuable assistance in clearing up the
matter.
To begin with, We gather from the two records on appeal filed by
petitioner, as appellant in the appealed cases, one with green cover
and the other with a yellow cover, that at the outset, a sort of modus
operandi had been agreed upon by the parties under which the
respective administrators of the two estates were supposed to act
conjointly, but since no copy of the said agreement can be found in
the record before Us, We have no way of knowing when exactly such
agreement was entered into and under what specific terms. And
while reference is made to said modus operandi in the order of
September 11, 1964, on pages 205-206 of the Green Record on
Appeal, reading thus:
The present incident is to hear the side of administratrix, Miss
Avelina A. Magno, in answer to the charges contained in the motion
filed by Atty. Cesar Tirol on September 3, 1964. In answer to the
said charges, Miss Avelina A. Magno, through her counsel, Atty.
Rizal Quimpo, filed a written manifestation.
After reading the manifestation here of Atty. Quimpo, for and in
behalf of the administratrix, Miss Avelina A. Magno, the Court finds
that everything that happened before September 3, 1964, which was
resolved on September 8, 1964, to the satisfaction of parties, was
simply due to a misunderstanding between the representative of the
Philippine Commercial and Industrial Bank and Miss Magno and in
order to restore the harmonious relations between the parties, the
Court ordered the parties to remain in status quo as to their modus
operandi before September 1, 1964, until after the Court can have a
meeting with all the parties and their counsels on October 3, as
formerly agreed upon between counsels, Attys. Ozaeta, Gibbs and
Ozaeta, Attys. Tirol and Tirol and Atty. Rizal Quimpo.
154
In the meantime, the prayers of Atty. Quimpo as stated in his
manifestation shall not be resolved by this Court until October 3,
1964.
SO ORDERED.
there is nothing in the record indicating whatever happened to it
afterwards, except that again, reference thereto was made in the
appealed order of October 27, 1965, on pages 292-295 of the Green
Record on Appeal, as follows:
On record is an urgent motion to allow PCIB to open all doors and
locks in the Hodges Office at 206-208 Guanco Street, Iloilo City, to
take immediate and exclusive possession thereof and to place its own
locks and keys for security purposes of the PCIB dated October 27,
1965 thru Atty. Cesar Tirol. It is alleged in said urgent motion that
Administratrix Magno of the testate estate of Linnie Jane Hodges
refused to open the Hodges Office at 206-208 Guanco Street, Iloilo
City where PCIB holds office and therefore PCIB is suffering great
moral damage and prejudice as a result of said act. It is prayed that
an order be issued authorizing it (PCIB) to open all doors and locks
in the said office, to take immediate and exclusive possession thereof
and place thereon its own locks and keys for security purposes;
instructing the clerk of court or any available deputy to witness and
supervise the opening of all doors and locks and taking possession of
the PCIB.
A written opposition has been filed by Administratrix Magno of even
date (Oct. 27) thru counsel Rizal Quimpo stating therein that she was
compelled to close the office for the reason that the PCIB failed to
comply with the order of this Court signed by Judge Anacleto I.
Bellosillo dated September 11, 1964 to the effect that both estates
should remain in status quo to their modus operandi as of September
1, 1964.
To arrive at a happy solution of the dispute and in order not to
interrupt the operation of the office of both estates, the Court aside
from the reasons stated in the urgent motion and opposition heard the
verbal arguments of Atty. Cesar Tirol for the PCIB and Atty. Rizal
Quimpo for Administratix Magno.
After due consideration, the Court hereby orders Magno to open all
doors and locks in the Hodges Office at 206-208 Guanco Street,
Iloilo City in the presence of the PCIB or its duly authorized
representative and deputy clerk of court Albis of this branch not later
than 7:30 tomorrow morning October 28, 1965 in order that the
office of said estates could operate for business.
Pursuant to the order of this Court thru Judge Bellosillo dated
September 11, 1964, it is hereby ordered:
(a) That all cash collections should be deposited in the joint account
of the estates of Linnie Jane Hodges and estates of C.N. Hodges;
(b) That whatever cash collections that had been deposited in the
account of either of the estates should be withdrawn and since then
deposited in the joint account of the estate of Linnie Jane Hodges and
the estate of C.N. Hodges;
(c) That the PCIB should countersign the check in the amount of
P250 in favor of Administratrix Avelina A. Magno as her
compensation as administratrix of the Linnie Jane Hodges estate
chargeable to the testate estate of Linnie Jane Hodges only;
(d) That Administratrix Magno is hereby directed to allow the PCIB
to inspect whatever records, documents and papers she may have in
her possession in the same manner that Administrator PCIB is also
directed to allow Administratrix Magno to inspect whatever records,
documents and papers it may have in its possession;

(e) That the accountant of the estate of Linnie Jane Hodges shall have
access to all records of the transactions of both estates for the
protection of the estate of Linnie Jane Hodges; and in like manner the
accountant or any authorized representative of the estate of C.N.
Hodges shall have access to the records of transactions of the Linnie
Jane Hodges estate for the protection of the estate of C.N. Hodges.
Once the estates' office shall have been opened by Administratrix
Magno in the presence of the PCIB or its duly authorized
representative and deputy clerk Albis or his duly authorized
representative, both estates or any of the estates should not close it
without previous consent and authority from this court.
SO ORDERED.
As may be noted, in this order, the respondent court required that all
collections from the properties in the name of Hodges should be
deposited in a joint account of the two estates, which indicates that
seemingly the so-called modus operandi was no longer operative, but
again there is nothing to show when this situation started.
Likewise, in paragraph 3 of the petitioner's motion of September 14,
1964, on pages 188-201 of the Green Record on Appeal, (also found
on pp. 83-91 of the Yellow Record on Appeal) it is alleged that:
3. On January 24, 1964 virtually all of the heirs of C.N. Hodges, Joe
Hodges and Fernando P. Mirasol acting as the two co-administrators
of the estate of C.N. Hodges, Avelina A. Magno acting as the
administratrix of the estate of Linnie Jane Hodges and Messrs.
William Brown and Ardell Young acting for all of the Higdon family
who claim to be the sole beneficiaries of the estate of Linnie Jane
Hodges and various legal counsel representing the aforementioned
parties entered into an amicable agreement, which was approved by
this Honorable Court, wherein the parties thereto agreed that certain
sums of money were to be paid in settlement of different claims
against the two estates and that the assets (to the extent they existed)
of both estates would be administered jointly by the PCIB as
administrator of the estate of C.N. Hodges and Avelina A. Magno as
administratrix of the estate of Linnie Jane Hodges, subject, however,
to the aforesaid October 5, 1963 Motion, namely, the PCIB's claim to
exclusive possession and ownership of one hundred percent (100%)
(or, in the alternative, seventy-five percent (75%) of all assets owned
by C.N. Hodges or Linnie Jane Hodges situated in the Philippines.
On February 1, 1964 (pp. 934-935, CFI Rec., S.P. No. 1672) this
Honorable Court amended its order of January 24, 1964 but in no
way changed its recognition of the afore-described basic demand by
the PCIB as administrator of the estate of C.N. Hodges to one
hundred percent (100%) of the assets claimed by both estates.
but no copy of the mentioned agreement of joint administration of
the two estates exists in the record, and so, We are not informed as to
what exactly are the terms of the same which could be relevant in the
resolution of the issues herein.
On the other hand, the appealed order of November 3, 1965, on
pages 313-320 of the Green Record on Appeal, authorized payment
by respondent Magno of, inter alia, her own fees as administratrix,
the attorney's fees of her lawyers, etc., as follows:
Administratrix Magno thru Attys. Raul S. Manglapus and Rizal. R.
Quimpo filed a Manifestation and Urgent Motion dated June 10,
1964 asking for the approval of the Agreement dated June 6, 1964
which Agreement is for the purpose of retaining their services to
protect and defend the interest of the said Administratrix in these
proceedings and the same has been signed by and bears the express
conformity of the attorney-in-fact of the late Linnie Jane Hodges, Mr.
James L. Sullivan. It is further prayed that the Administratrix of the
Testate Estate of Linnie Jane Hodges be directed to pay the retailers
fee of said lawyers, said fees made chargeable as expenses for the
155
administration of the estate of Linnie Jane Hodges (pp. 1641-1642,
Vol. V, Sp. 1307).
An opposition has been filed by the Administrator PCIB thru Atty.
Herminio Ozaeta dated July 11, 1964, on the ground that payment of
the retainers fee of Attys. Manglapus and Quimpo as prayed for in
said Manifestation and Urgent Motion is prejudicial to the 100%
claim of the estate of C. N. Hodges; employment of Attys.
Manglapus and Quimpo is premature and/or unnecessary; Attys.
Quimpo and Manglapus are representing conflicting interests and the
estate of Linnie Jane Hodges should be closed and terminated (pp.
1679-1684, Vol, V, Sp. 1307).
Atty. Leon P. Gellada filed a memorandum dated July 28, 1964
asking that the Manifestation and Urgent Motion filed by Attys.
Manglapus and Quimpo be denied because no evidence has been
presented in support thereof. Atty. Manglapus filed a reply to the
opposition of counsel for the Administrator of the C. N. Hodges
estate wherein it is claimed that expenses of administration include
reasonable counsel or attorney's fees for services to the executor or
administrator. As a matter of fact the fee agreement dated February
27, 1964 between the PCIB and the law firm of Ozaeta, Gibbs &
Ozaeta as its counsel (Pp. 1280-1284, Vol. V, Sp. 1307) which
stipulates the fees for said law firm has been approved by the Court
in its order dated March 31, 1964. If payment of the fees of the
lawyers for the administratrix of the estate of Linnie Jane Hodges
will cause prejudice to the estate of C. N. Hodges, in like manner the
very agreement which provides for the payment of attorney's fees to
the counsel for the PCIB will also be prejudicial to the estate of
Linnie Jane Hodges (pp. 1801-1814, Vol. V, Sp. 1307).
Atty. Herminio Ozaeta filed a rejoinder dated August 10, 1964 to the
reply to the opposition to the Manifestation and Urgent Motion
alleging principally that the estates of Linnie Jane Hodges and C. N.
Hodges are not similarly situated for the reason that C. N. Hodges is
an heir of Linnie Jane Hodges whereas the latter is not an heir of the
former for the reason that Linnie Jane Hodges predeceased C. N.
Hodges (pp. 1839-1848, Vol. V, Sp. 1307); that Attys. Manglapus
and Quimpo formally entered their appearance in behalf of
Administratrix of the estate of Linnie Jane Hodges on June 10, 1964
(pp. 1639-1640, Vol. V, Sp. 1307).
Atty. Manglapus filed a manifestation dated December 18, 1964
stating therein that Judge Bellosillo issued an order requiring the
parties to submit memorandum in support of their respective
contentions. It is prayed in this manifestation that the Manifestation
and Urgent Motion dated June 10, 1964 be resolved (pp. 6435-6439,
Vol. VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a counter- manifestation
dated January 5, 1965 asking that after the consideration by the court
of all allegations and arguments and pleadings of the PCIB in
connection therewith (1) said manifestation and urgent motion of
Attys. Manglapus and Quimpo be denied (pp. 6442-6453, Vol. VII,
Sp. 1307). Judge Querubin issued an order dated January 4, 1965
approving the motion dated June 10, 1964 of the attorneys for the
administratrix of the estate of Linnie Jane Hodges and agreement
annexed to said motion. The said order further states: "The
Administratrix of the estate of Linnie Jane Hodges is authorized to
issue or sign whatever check or checks may be necessary for the
above purpose and the administrator of the estate of C. N. Hodges is
ordered to countersign the same. (pp. 6518-6523, Vol VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a manifestation and
motion dated January 13, 1965 asking that the order of January 4,
1965 which was issued by Judge Querubin be declared null and void
and to enjoin the clerk of court and the administratrix and
administrator in these special proceedings from all proceedings and

action to enforce or comply with the provision of the aforesaid order
of January 4, 1965. In support of said manifestation and motion it is
alleged that the order of January 4, 1965 is null and void because the
said order was never delivered to the deputy clerk Albis of Branch V
(the sala of Judge Querubin) and the alleged order was found in the
drawer of the late Judge Querubin in his office when said drawer was
opened on January 13, 1965 after the death of Judge Querubin by
Perfecto Querubin, Jr., the son of the judge and in the presence of
Executive Judge Rovira and deputy clerk Albis (Sec. 1, Rule 36,
New Civil Code) (Pp. 6600-6606, Vol. VIII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a motion for
reconsideration dated February 23, 1965 asking that the order dated
January 4, 1964 be reversed on the ground that:
1. Attorneys retained must render services to the estate not to the
personal heir;
2. If services are rendered to both, fees should be pro-rated between
them;
3. Attorneys retained should not represent conflicting interests; to the
prejudice of the other heirs not represented by said attorneys;
4. Fees must be commensurate to the actual services rendered to the
estate;
5. There must be assets in the estate to pay for said fees (Pp.
6625-6636, Vol. VIII, Sp. 1307).
Atty. Quimpo for Administratrix Magno of the estate of Linnie Jane
Hodges filed a motion to submit dated July 15, 1965 asking that the
manifestation and urgent motion dated June 10, 1964 filed by Attys.
Manglapus and Quimpo and other incidents directly appertaining
thereto be considered submitted for consideration and approval (pp.
6759-6765, Vol. VIII, Sp. 1307).
Considering the arguments and reasons in support to the pleadings of
both the Administratrix and the PCIB, and of Atty. Gellada,
hereinbefore mentioned, the Court believes that the order of January
4, 1965 is null and void for the reason that the said order has not been
filed with deputy clerk Albis of this court (Branch V) during the
lifetime of Judge Querubin who signed the said order. However, the
said manifestation and urgent motion dated June 10, 1964 is being
treated and considered in this instant order. It is worthy to note that in
the motion dated January 24, 1964 (Pp. 1149- 1163, Vol. V, Sp. 1307)
which has been filed by Atty. Gellada and his associates and Atty.
Gibbs and other lawyers in addition to the stipulated fees for actual
services rendered. However, the fee agreement dated February 27,
1964, between the Administrator of the estate of C. N. Hodges and
Atty. Gibbs which provides for retainer fee of P4,000 monthly in
addition to specific fees for actual appearances, reimbursement for
expenditures and contingent fees has also been approved by the
Court and said lawyers have already been paid. (pp. 1273-1279, Vol.
V, Sp. Proc. 1307 pp. 1372-1373, Vol. V, Sp. Proc. 1307).
WHEREFORE, the order dated January 4, 1965 is hereby declared
null and void.
The manifestation and motion dated June 10, 1964 which was filed
by the attorneys for the administratrix of the testate estate of Linnie
Jane Hodges is granted and the agreement annexed thereto is hereby
approved.
The administratrix of the estate of Linnie Jane Hodges is hereby
directed to be needed to implement the approval of the agreement
annexed to the motion and the administrator of the estate of C. N.
Hodges is directed to countersign the said check or checks as the case
may be.
156
SO ORDERED.
thereby implying somehow that the court assumed the existence of
independent but simultaneous administrations.
Be that as it may, again, it appears that on August 6, 1965, the court,
acting on a motion of petitioner for the approval of deeds of sale
executed by it as administrator of the estate of Hodges, issued the
following order, also on appeal herein:
Acting upon the motion for approval of deeds of sale for registered
land of the PCIB, Administrator of the Testate Estate of C. N.
Hodges in Sp. Proc. 1672 (Vol. VII, pp. 2244-2245), dated July 16,
1965, filed by Atty. Cesar T. Tirol in representation of the law firms
of Ozaeta, Gibbs and Ozaeta and Tirol and Tirol and the opposition
thereto of Atty. Rizal R. Quimpo (Vol. VIII, pp. 6811-6813) dated
July 22, 1965 and considering the allegations and reasons therein
stated, the court believes that the deeds of sale should be signed
jointly by the PCIB, Administrator of the Testate Estate of C. N.
Hodges and Avelina A. Magno, Administratrix of the Testate Estate
of Linnie Jane Hodges and to this effect the PCIB should take the
necessary steps so that Administratrix Avelina A. Magno could sign
the deeds of sale.
SO ORDERED. (p. 248, Green Record on Appeal.)
Notably this order required that even the deeds executed by petitioner,
as administrator of the Estate of Hodges, involving properties
registered in his name, should be co-signed by respondent
Magno.3 And this was not an isolated instance.
In her brief as appellee, respondent Magno states:
After the lower court had authorized appellee Avelina A. Magno to
execute final deeds of sale pursuant to contracts to sell executed by C.
N. Hodges on February 20, 1963 (pp. 45-46, Green ROA), motions
for the approval of final deeds of sale (signed by appellee Avelina A.
Magno and the administrator of the estate of C. N. Hodges, first Joe
Hodges, then Atty. Fernando Mirasol and later the appellant) were
approved by the lower court upon petition of appellee Magno's
counsel, Atty. Leon P. Gellada, on the basis of section 8 of Rule 89
of the Revised Rules of Court. Subsequently, the appellant, after it
had taken over the bulk of the assets of the two estates, started
presenting these motions itself. The first such attempt was a "Motion
for Approval of Deeds of Sale for Registered Land and Cancellations
of Mortgages" dated July 21, 1964 filed by Atty. Cesar T. Tirol,
counsel for the appellant, thereto annexing two (2) final deeds of sale
and two (2) cancellations of mortgages signed by appellee Avelina A.
Magno and D. R. Paulino, Assistant Vice-President and Manager of
the appellant (CFI Record, Sp. Proc. No. 1307, Vol. V, pp.
1694-1701). This motion was approved by the lower court on July 27,
1964. It was followed by another motion dated August 4, 1964 for
the approval of one final deed of sale again signed by appellee
Avelina A. Magno and D. R. Paulino (CFI Record, Sp. Proc. No.
1307. Vol. V, pp. 1825-1828), which was again approved by the
lower court on August 7, 1964. The gates having been opened, a
flood ensued: the appellant subsequently filed similar motions for the
approval of a multitude of deeds of sales and cancellations of
mortgages signed by both the appellee Avelina A. Magno and the
appellant.
A random check of the records of Special Proceeding No. 1307 alone
will show Atty. Cesar T. Tirol as having presented for court approval
deeds of sale of real properties signed by both appellee Avelina A.
Magno and D. R. Paulino in the following numbers: (a) motion dated
September 21, 1964 — 6 deeds of sale; (b) motion dated November 4,
1964 — 1 deed of sale; (c) motion dated December 1, 1964 — 4
deeds of sale; (d) motion dated February 3, 1965 — 8 deeds of sale;
(f) motion dated May 7, 1965 — 9 deeds of sale. In view of the very

extensive landholdings of the Hodges spouses and the many motions
filed concerning deeds of sale of real properties executed by C. N.
Hodges the lower court has had to constitute special separate
expedientes in Special Proceedings Nos. 1307 and 1672 to include
mere motions for the approval of deeds of sale of the conjugal
properties of the Hodges spouses.
As an example, from among the very many, under date of February 3,
1965, Atty. Cesar T. Tirol, as counsel for the appellant, filed "Motion
for Approval of Deeds of Sale for Registered Land and Cancellations
of Mortgages" (CFI Record, Sp. Proc. No. 1307, Vol. VIII, pp.
6570-6596) the allegations of which read:
"1. In his lifetime, the late C. N. Hodges executed "Contracts to Sell"
real property, and the prospective buyers under said contracts have
already paid the price and complied with the terms and conditions
thereof;
"2. In the course of administration of both estates, mortgage debtors
have already paid their debts secured by chattel mortgages in favor of
the late C. N. Hodges, and are now entitled to release therefrom;
"3. There are attached hereto documents executed jointly by the
Administratrix in Sp. Proc. No. 1307 and the Administrator in Sp.
Proc. No. 1672, consisting of deeds of sale in favor —
Fernando Cano, Bacolod City, Occ. Negros
Fe Magbanua, Iloilo City
Policarpio M. Pareno, La Paz, Iloilo City
Rosario T. Libre, Jaro, Iloilo City
Federico B. Torres, Iloilo City
Reynaldo T. Lataquin, La Paz, Iloilo City
Anatolio T. Viray, Iloilo City
Benjamin Rolando, Jaro, Iloilo City
and cancellations of mortgages in favor of —
Pablo Manzano, Oton, Iloilo
Ricardo M. Diana, Dao, San Jose, Antique
Simplicio Tingson, Iloilo City
Amado Magbanua, Pototan, Iloilo
Roselia M. Baes, Bolo, Roxas City
William Bayani, Rizal Estanzuela, Iloilo City
Elpidio Villarete, Molo, Iloilo City
Norma T. Ruiz, Jaro, Iloilo City
"4. That the approval of the aforesaid documents will not reduce the
assets of the estates so as to prevent any creditor from receiving his
full debt or diminish his dividend."
And the prayer of this motion is indeed very revealing:
"WHEREFORE, it is respectfully prayed that, under Rule 89, Section
8 of the Rules of Court, this honorable court approve the aforesaid
deeds of sale and cancellations of mortgages." (Pp. 113-117,
Appellee's Brief.)
None of these assertions is denied in Petitioner's reply brief.
Further indicating lack of concrete perspective or orientation on the
part of the respondent court and its hesitancy to clear up matters
promptly, in its other appealed order of November 23, 1965, on
pages 334-335 of the Green Record on Appeal, said respondent court
allowed the movant Ricardo Salas, President of appellee Western
Institute of Technology (successor of Panay Educational Institutions,
Inc.), one of the parties with whom Hodges had contracts that are in
question in the appeals herein, to pay petitioner, as Administrator of
the estate of Hodges and/or respondent Magno, as Administrator of
the estate of Mrs. Hodges, thus:
157
Considering that in both cases there is as yet no judicial declaration
of heirs nor distribution of properties to whomsoever are entitled
thereto, the Court believes that payment to both the administrator of
the testate estate of C. N. Hodges and the administratrix of the testate
estate of Linnie Jane Hodges or to either one of the two estates is
proper and legal.
WHEREFORE, movant Ricardo T. Salas can pay to both estates or
either of them.
SO ORDERED.
(Pp. 334-335, Green Record on Appeal.)
On the other hand, as stated earlier, there were instances when
respondent Magno was given authority to act alone. For instance, in
the other appealed order of December 19, 1964, on page 221 of the
Green Record on Appeal, the respondent court approved payments
made by her of overtime pay to some employees of the court who
had helped in gathering and preparing copies of parts of the records
in both estates as follows:
Considering that the expenses subject of the motion to approve
payment of overtime pay dated December 10, 1964, are reasonable
and are believed by this Court to be a proper charge of administration
chargeable to the testate estate of the late Linnie Jane Hodges, the
said expenses are hereby APPROVED and to be charged against the
testate estate of the late Linnie Jane Hodges. The administrator of the
testate estate of the late Charles Newton Hodges is hereby ordered to
countersign the check or checks necessary to pay the said overtime
pay as shown by the bills marked Annex "A", "B" and "C" of the
motion.
SO ORDERED.
(Pp. 221-222, Green Record on Appeal.)
Likewise, the respondent court approved deeds of sale executed by
respondent Magno alone, as Administratrix of the estate of Mrs.
Hodges, covering properties in the name of Hodges, pursuant to
"contracts to sell" executed by Hodges, irrespective of whether they
were executed by him before or after the death of his wife. The
orders of this nature which are also on appeal herein are the
following:
1. Order of March 30, 1966, on p. 137 of the Green Record on
Appeal, approving the deed of sale executed by respondent Magno in
favor of appellee Lorenzo Carles on February 24, 1966, pursuant to a
"contract to sell" signed by Hodges on June 17, 1958, after the death
of his wife, which contract petitioner claims was cancelled by it for
failure of Carles to pay the installments due on January 7, 1965.
2. Order of April 5, 1966, on pp. 139-140, id., approving the deed of
sale executed by respondent Magno in favor of appellee Salvador
Guzman on February 28, 1966 pursuant to a "contract to sell" signed
by Hodges on September 13, 1960, after the death of his wife, which
contract petitioner claims it cancelled on March 3, 1965 in view of
failure of said appellee to pay the installments on time.
3. Order of April 20, 1966, on pp. 167-168, id., approving the deed of
sale executed by respondent Magno in favor of appellee Purificacion
Coronado on March 28, 1966 pursuant to a "contract to sell" signed
by Hodges on August 14, 1961, after the death of his wife.
4. Order of April 20, 1966, on pp. 168-169, id., approving the deed of
sale executed by respondent Magno in favor of appellee Florenia
Barrido on March 28, 1966, pursuant to a "contract to sell" signed by
Hodges on February 21, 1958, after the death of his wife.

5. Order of June 7, 1966, on pp. 184-185, id., approving the deed of
sale executed by respondent Magno in favor of appellee Belcezar
Causing on May 2, 1966, pursuant to a "contract to sell" signed by
Hodges on February 10, 1959, after the death of his wife.
6. Order of June 21, 1966, on pp. 211-212, id., approving the deed of
sale executed by respondent Magno in favor of appellee Artheo
Thomas Jamir on June 3, 1966, pursuant to a "contract to sell" signed
by Hodges on May 26, 1961, after the death of his wife.
7. Order of June 21, 1966, on pp. 212-213, id., approving the deed of
sale executed by respondent Magno in favor of appellees Graciano
Lucero and Melquiades Batisanan on June 6 and June 3, 1966,
respectively, pursuant to "contracts to sell" signed by Hodges on
June 9, 1959 and November 27, 1961, respectively, after the death of
his wife.
8. Order of December 2, 1966, on pp. 303-304, id., approving the
deed of sale executed by respondent Magno in favor of appellees
Espiridion Partisala, Winifredo Espada and Rosario Alingasa on
September 6, 1966, August 17, 1966 and August 3, 1966,
respectively, pursuant to "contracts to sell" signed by Hodges on
April 20, 1960, April 18, 1960 and August 25, 1958, respectively,
that is, after the death of his wife.
9. Order of April 5, 1966, on pp. 137-138, id., approving the deed of
sale executed by respondent Magno in favor of appellee Alfredo
Catedral on March 2, 1966, pursuant to a "contract to sell" signed by
Hodges on May 29, 1954, before the death of his wife, which
contract petitioner claims it had cancelled on February 16, 1966 for
failure of appellee Catedral to pay the installments due on time.
10. Order of April 5, 1966, on pp. 138-139, id., approving the deed of
sale executed by respondent Magno in favor of appellee Jose Pablico
on March 7, 1966, pursuant to a "contract to sell" signed by Hodges
on March 7, 1950, after the death of his wife, which contract
petitioner claims it had cancelled on June 29, 1960, for failure of
appellee Pablico to pay the installments due on time.
11. Order of December 2, 1966, on pp. 303-304, id., insofar as it
approved the deed of sale executed by respondent Magno in favor of
appellee Pepito Iyulores on September 6, 1966, pursuant to a
"contract to sell" signed by Hodges on February 5, 1951, before the
death of his wife.
12. Order of January 3, 1967, on pp. 335-336, id., approving three
deeds of sale executed by respondent Magno, one in favor of
appellees Santiago Pacaonsis and two in favor of appellee Adelfa
Premaylon on December 5, 1966 and November 3, 1966,
respectively, pursuant to separate "promises to sell" signed
respectively by Hodges on May 26, 1955 and January 30, 1954,
before the death of his wife, and October 31, 1959, after her death.
In like manner, there were also instances when respondent court
approved deeds of sale executed by petitioner alone and without the
concurrence of respondent Magno, and such approvals have not been
the subject of any appeal. No less than petitioner points this out on
pages 149-150 of its brief as appellant thus:
The points of fact and law pertaining to the two abovecited
assignments of error have already been discussed previously. In the
first abovecited error, the order alluded to was general, and as
already explained before, it was, as admitted by the lower court itself,
superseded by the particular orders approving specific final deeds of
sale executed by the appellee, Avelina A. Magno, which are subject
of this appeal, as well as the particular orders approving specific final
deeds of sale executed by the appellant, Philippine Commercial and
Industrial Bank, which were never appealed by the appellee, Avelina
158
A. Magno, nor by any party for that matter, and which are now
therefore final.
Now, simultaneously with the foregoing incidents, others of more
fundamental and all embracing significance developed. On October 5,
1963, over the signature of Atty. Allison J. Gibbs in representation of
the law firm of Ozaeta, Gibbs & Ozaeta, as counsel for the
co-administrators Joe Hodges and Fernando P. Mirasol, the following
self-explanatory motion was filed:
URGENT MOTION FOR AN ACCOUNTING AND DELIVERY TO
ADMINISTRATION OF THE ESTATE OF C. N. HODGES OF ALL
OF THE ASSETS OF THE CONJUGAL PARTNERSHIP OF THE
DECEASED LINNIE JANE HODGES AND C N. HODGES
EXISTING AS OF MAY 23, 1957 PLUS ALL THE RENTS,
EMOLUMENTS AND INCOME THEREFROM.
COMES NOW the co-administrator of the estate of C. N. Hodges,
Joe Hodges, through his undersigned attorneys in the above-entitled
proceedings, and to this Honorable Court respectfully alleges:
(1) On May 23, 1957 Linnie Jane Hodges died in Iloilo City.
(2) On June 28, 1957 this Honorable Court admitted to probate the
Last Will and Testament of the deceased Linnie Jane Hodges
executed November 22, 1952 and appointed C. N. Hodges as
Executor of the estate of Linnie Jane Hodges (pp. 24-25, Rec. Sp.
Proc. 1307).
(3) On July 1, 1957 this Honorable Court issued Letters
Testamentary to C. N. Hodges in the Estate of Linnie Jane Hodges (p.
30, Rec. Sp. Proc. 1307).
(4) On December 14, 1957 this Honorable Court, on the basis of the
following allegations in a Motion dated December 11, 1957 filed by
Leon P. Gellada as attorney for the executor C. N. Hodges:
"That herein Executor, (is) not only part owner of the properties left
as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges."
(p. 44, Rec. Sp. Proc. 1307; emphasis supplied.)
issued the following order:
"As prayed for by Attorney Gellada, counsel for the Executory, for
the reasons stated in his motion dated December 11, 1957 which the
court considers well taken, all the sales, conveyances, leases and
mortgages of all properties left by the deceased Linnie Jane Hodges
are hereby APPROVED. The said executor is further authorized to
execute subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes contained in the last will and testament
of the latter."
(p. 46, Rec. Sp. Proc. 1307; emphasis supplied.)
(5) On April 21, 1959 this Honorable Court approved the inventory
and accounting submitted by C. N. Hodges through his counsel Leon
P. Gellada on April 14, 1959 wherein he alleged among other things
"That no person interested in the Philippines of the time and place of
examining the herein account, be given notice, as herein executor is
the only devisee or legatee of the deceased, in accordance with the
last will and testament already probated by the Honorable Court."
(pp. 77-78, Rec. Sp. Proc. 1307; emphasis supplied.).
(6) On July 30, 1960 this Honorable Court approved the "Annual
Statement of Account" submitted by C. N. Hodges through his

counsel Leon P. Gellada on July 21, 1960 wherein he alleged among
other things:
"That no person interested in the Philippines of the time and place of
examining the herein account, be given notice as herein executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament of the deceased, already
probated by this Honorable Court."
(pp. 81-82. Rec. Sp. Proc. 1307; emphasis supplied.)
(7) On May 2, 1961 this Honorable court approved the "Annual
Statement of Account By The Executor for the Year 1960" submitted
through Leon P. Gellada on April 20, 1961 wherein he alleged:
That no person interested in the Philippines be given notice, of the
time and place of examining the herein account, as herein Executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament of the deceased, already
probated by this Honorable Court.
(pp. 90-91. Rec. Sp. Proc. 1307; emphasis supplied.)
(8) On December 25, 1962, C.N. Hodges died.
(9) On December 25, 1962, on the Urgent Ex-parte Motion of Leon P.
Gellada filed only in Special Proceeding No. 1307, this Honorable
Court appointed Avelina A. Magno
"Administratrix of the estate of Linnie Jane Hodges and as Special
Administratrix of the estate of Charles Newton Hodges, in the latter
case, because the last will of said Charles Newton Hodges is still
kept in his vault or iron safe and that the real and personal properties
of both spouses may be lost, damaged or go to waste, unless a
Special Administratrix is appointed."
(p. 100. Rec. Sp. Proc. 1307)
(10) On December 26, 1962 Letters of Administration were issued to
Avelina Magno pursuant to this Honorable Court's aforesaid Order of
December 25, 1962
"With full authority to take possession of all the property of said
deceased in any province or provinces in which it may be situated
and to perform all other acts necessary for the preservation of said
property, said Administratrix and/or Special Administratrix having
filed a bond satisfactory to the Court."
(p. 102, Rec. Sp. Proc. 1307)
(11) On January 22, 1963 this Honorable Court on petition of Leon P.
Gellada of January 21, 1963 issued Letters of Administration to:
(a) Avelina A. Magno as Administratrix of the estate of Linnie Jane
Hodges;
(b) Avelina A. Magno as Special Administratrix of the Estate of
Charles Newton Hodges; and
(c) Joe Hodges as Co-Special Administrator of the Estate of Charles
Newton Hodges.
(p. 43, Rec. Sp. Proc. 1307)
(12) On February 20, 1963 this Honorable Court on the basis of a
motion filed by Leon P. Gellada as legal counsel on February 16,
1963 for Avelina A. Magno acting as Administratrix of the Estate of
Charles Newton Hodges (pp. 114-116, Sp. Proc. 1307) issued the
following order:
"... se autoriza a aquella (Avelina A. Magno) a firmar escrituras de
venta definitiva de propiedades cubiertas por contratos para vender,
159
firmados, en vida, por el finado Charles Newton Hodges, cada vez
que el precio estipulado en cada contrato este totalmente pagado. Se
autoriza igualmente a la misma a firmar escrituras de cancelacion de
hipoteca tanto de bienes reales como personales cada vez que la
consideracion de cada hipoteca este totalmente pagada.
"Cada una de dichas escrituras que se otorguen debe ser sometida
para la aprobacion de este Juzgado."
(p. 117, Sp. Proc. 1307).
[Par 1 (c), Reply to Motion For Removal of Joe Hodges]
(13) On September l6, 1963 Leon P. Gellada, acting as attorney for
Avelina A. Magno as Administratrix of the estate of Linnie Jane
Hodges, alleges:
3. — That since January, 1963, both estates of Linnie Jane Hodges
and Charles Newton Hodges have been receiving in full, payments
for those "contracts to sell" entered into by C. N. Hodges during his
lifetime, and the purchasers have been demanding the execution of
definite deeds of sale in their favor.
4. — That hereto attached are thirteen (13) copies deeds of sale
executed by the Administratrix and by the co-administrator
(Fernando P. Mirasol) of the estate of Linnie Jane Hodges and
Charles Newton Hodges respectively, in compliance with the terms
and conditions of the respective "contracts to sell" executed by the
parties thereto."
(14) The properties involved in the aforesaid motion of September 16,
1963 are all registered in the name of the deceased C. N. Hodges.
(15) Avelina A. Magno, it is alleged on information and belief, has
been advertising in the newspaper in Iloilo thusly:
For Sale
Testate Estate of Linnie Jane Hodges and Charles Newton Hodges.
All Real Estate or Personal Property will be sold on First Come First
Served Basis.
Avelina A. Magno
Administratrix
(16) Avelina A. Magno, it is alleged on information and belief, has
paid and still is paying sums of money to sundry persons.
(17) Joe Hodges through the undersigned attorneys manifested
during the hearings before this Honorable Court on September 5 and
6, 1963 that the estate of C. N. Hodges was claiming all of the assets
belonging to the deceased spouses Linnie Jane Hodges and C. N.
Hodges situated in Philippines because of the aforesaid election by C.
N. Hodges wherein he claimed and took possession as sole owner of
all of said assets during the administration of the estate of Linnie
Jane Hodges on the ground that he was the sole devisee and legatee
under her Last Will and Testament.
(18) Avelina A. Magno has submitted no inventory and accounting
of her administration as Administratrix of the estate of Linnie Jane
Hodges and Special Administratrix of the estate of C. N. Hodges.
However, from manifestations made by Avelina A. Magno and her
legal counsel, Leon P. Gellada, there is no question she will claim
that at least fifty per cent (50%) of the conjugal assets of the
deceased spouses and the rents, emoluments and income therefrom
belong to the Higdon family who are named in paragraphs Fourth
and Fifth of the Will of Linnie Jane Hodges (p. 5, Rec. Sp. Proc.
1307).

WHEREFORE, premises considered, movant respectfully prays that
this Honorable Court, after due hearing, order:
(1) Avelina A. Magno to submit an inventory and accounting of all
of the funds, properties and assets of any character belonging to the
deceased Linnie Jane Hodges and C. N. Hodges which have come
into her possession, with full details of what she has done with them;
(2) Avelina A. Magno to turn over and deliver to the Administrator
of the estate of C. N. Hodges all of the funds, properties and assets of
any character remaining in her possession;
(3) Pending this Honorable Court's adjudication of the aforesaid
issues, Avelina A. Magno to stop, unless she first secures the
conformity of Joe Hodges (or his duly authorized representative,
such as the undersigned attorneys) as the Co-administrator and
attorney-in-fact of a majority of the beneficiaries of the estate of C. N.
Hodges:
(a) Advertising the sale and the sale of the properties of the estates:
(b) Employing personnel and paying them any compensation.
(4) Such other relief as this Honorable Court may deem just and
equitable in the premises. (Annex "T", Petition.)
Almost a year thereafter, or on September 14, 1964, after the
co-administrators Joe Hodges and Fernando P. Mirasol were replaced
by herein petitioner Philippine Commercial and Industrial Bank as
sole administrator, pursuant to an agreement of all the heirs of
Hodges approved by the court, and because the above motion of
October 5, 1963 had not yet been heard due to the absence from the
country of Atty. Gibbs, petitioner filed the following:
MANIFESTATION AND MOTION, INCLUDING MOTION TO SET
FOR HEARING AND RESOLVE "URGENT MOTION FOR AN
ACCOUNTING AND DELIVERY TO ADMINISTRATORS OF THE
ESTATE OF C. N. HODGES OF ALL THE ASSETS OF THE
CONJUGAL PARTNERSHIP OF THE DECEASED LINNIE JANE
HODGES AND C. N. HODGES EXISTING AS OF MAY 23, 1957
PLUS ALL OF THE RENTS, EMOLUMENTS AND INCOME
THEREFROM OF OCTOBER 5, 1963.
COMES NOW Philippine Commercial and Industrial Bank
(hereinafter referred to as PCIB), the administrator of the estate of C.
N. Hodges, deceased, in Special Proceedings No. 1672, through its
undersigned counsel, and to this Honorable Court respectfully alleges
that:
1. On October 5, 1963, Joe Hodges acting as the co-administrator of
the estate of C. N. Hodges filed, through the undersigned attorneys,
an "Urgent Motion For An Accounting and Delivery To
Administrator of the Estate of C. N. Hodges of all Of The Assets Of
The Conjugal Partnership of The Deceased Linnie Jane Hodges and
C. N. Hodges Existing as Of May, 23, 1957 Plus All Of The Rents,
Emoluments and Income Therefrom" (pp. 536-542, CFI Rec. S. P.
No. 1672).
2. On January 24, 1964 this Honorable Court, on the basis of an
amicable agreement entered into on January 23, 1964 by the two
co-administrators of the estate of C. N. Hodges and virtually all of
the heirs of C. N. Hodges (p. 912, CFI Rec., S. P. No. 1672),
resolved the dispute over who should act as administrator of the
estate of C. N. Hodges by appointing the PCIB as administrator of
the estate of C. N. Hodges (pp. 905-906, CFI Rec. S. P. No. 1672)
and issuing letters of administration to the PCIB.
3. On January 24, 1964 virtually all of the heirs of C. N. Hodges, Joe
Hodges and Fernando P. Mirasol acting as the two co-administrators
of the estate of C. N. Hodges, Avelina A. Magno acting as the
160
administratrix of the estate of Linnie Jane Hodges, and Messrs.
William Brown and Ardel Young Acting for all of the Higdon family
who claim to be the sole beneficiaries of the estate of Linnie Jane
Hodges and various legal counsel representing the aforenamed
parties entered into an amicable agreement, which was approved by
this Honorable Court, wherein the parties thereto agreed that certain
sums of money were to be paid in settlement of different claims
against the two estates and that the assets (to the extent they
existed)of both estates would be administrated jointly by the PCIB as
administrator of the estate of C. N. Hodges and Avelina A. Magno as
administratrix of the estate of Linnie Jane Hodges, subject, however,
to the aforesaid October 5, 1963 Motion, namely, the PCIB's claim to
exclusive possession and ownership of one-hundred percent (10017,)
(or, in the alternative, seventy-five percent [75%] of all assets owned
by C. N. Hodges or Linnie Jane Hodges situated in the Philippines.
On February 1, 1964 (pp. 934-935, CFI Rec., S. P. No. 1672) this
Honorable Court amended its order of January 24, 1964 but in no
way changes its recognition of the aforedescribed basic demand by
the PCIB as administrator of the estate of C. N. Hodges to one
hundred percent (100%) of the assets claimed by both estates.
4. On February 15, 1964 the PCIB filed a "Motion to Resolve" the
aforesaid Motion of October 5, 1963. This Honorable Court set for
hearing on June 11, 1964 the Motion of October 5, 1963.
5. On June 11, 1964, because the undersigned Allison J. Gibbs was
absent in the United States, this Honorable Court ordered the
indefinite postponement of the hearing of the Motion of October 5,
1963.
6. Since its appointment as administrator of the estate of C. N.
Hodges the PCIB has not been able to properly carry out its duties
and obligations as administrator of the estate of C. N. Hodges
because of the following acts, among others, of Avelina A. Magno
and those who claim to act for her as administratrix of the estate of
Linnie Jane Hodges:
(a) Avelina A. Magno illegally acts as if she is in exclusive control of
all of the assets in the Philippines of both estates including those
claimed by the estate of C. N. Hodges as evidenced in part by her
locking the premises at 206-208 Guanco Street, Iloilo City on August
31, 1964 and refusing to reopen same until ordered to do so by this
Honorable Court on September 7, 1964.
(b) Avelina A. Magno illegally acts as though she alone may decide
how the assets of the estate of C.N. Hodges should be administered,
who the PCIB shall employ and how much they may be paid as
evidenced in party by her refusal to sign checks issued by the PCIB
payable to the undersigned counsel pursuant to their fee agreement
approved by this Honorable Court in its order dated March 31, 1964.
(c) Avelina A. Magno illegally gives access to and turns over
possession of the records and assets of the estate of C.N. Hodges to
the attorney-in-fact of the Higdon Family, Mr. James L. Sullivan, as
evidenced in part by the cashing of his personal checks.
(d) Avelina A. Magno illegally refuses to execute checks prepared by
the PCIB drawn to pay expenses of the estate of C. N. Hodges as
evidenced in part by the check drawn to reimburse the PCIB's
advance of P48,445.50 to pay the 1964 income taxes reported due
and payable by the estate of C.N. Hodges.
7. Under and pursuant to the orders of this Honorable Court,
particularly those of January 24 and February 1, 1964, and the
mandate contained in its Letters of Administration issued on January
24, 1964 to the PCIB, it has
"full authority to take possession of all the property of the deceased
C. N. Hodges

"and to perform all other acts necessary for the preservation of said
property." (p. 914, CFI Rec., S.P. No. 1672.)
8. As administrator of the estate of C. N. Hodges, the PCIB claims
the right to the immediate exclusive possession and control of all of
the properties, accounts receivables, court cases, bank accounts and
other assets, including the documentary records evidencing same,
which existed in the Philippines on the date of C. N. Hodges' death,
December 25, 1962, and were in his possession and registered in his
name alone. The PCIB knows of no assets in the Philippines
registered in the name of Linnie Jane Hodges, the estate of Linnie
Jane Hodges, or, C. N. Hodges, Executor of the Estate of Linnie Jane
Hodges on December 25, 1962. All of the assets of which the PCIB
has knowledge are either registered in the name of C. N. Hodges,
alone or were derived therefrom since his death on December 25,
1962.
9. The PCIB as the current administrator of the estate of C. N.
Hodges, deceased, succeeded to all of the rights of the previously
duly appointed administrators of the estate of C. N. Hodges, to wit:
(a) On December 25, 1962, date of C. N. Hodges' death, this
Honorable Court appointed Miss Avelina A. Magno simultaneously
as:
(i) Administratrix of the estate of Linnie Jane Hodges (p. 102, CFI
Rec., S.P. No. 1307) to replace the deceased C. N. Hodges who on
May 28, 1957 was appointed Special Administrator (p. 13. CFI Rec.
S.P. No. 1307) and on July 1, 1957 Executor of the estate of Linnie
Jane Hodges (p. 30, CFI Rec., S. P. No. 1307).
(ii) Special Administratrix of the estate of C. N. Hodges (p. 102, CFI
Rec., S.P. No. 1307).
(b) On December 29, 1962 this Honorable Court appointed Harold K.
Davies as co-special administrator of the estate of C.N. Hodges along
with Avelina A. Magno (pp. 108-111, CFI Rec., S. P. No. 1307).
(c) On January 22, 1963, with the conformity of Avelina A. Magno,
Harold K. Davies resigned in favor of Joe Hodges (pp. 35-36, CFI
Rec., S.P. No. 1672) who thereupon was appointed on January 22,
1963 by this Honorable Court as special co-administrator of the
estate of C.N. Hodges (pp. 38-40 & 43, CFI Rec. S.P. No. 1672)
along with Miss Magno who at that time was still acting as special
co-administratrix of the estate of C. N. Hodges.
(d) On February 22, 1963, without objection on the part of Avelina A.
Magno, this Honorable Court appointed Joe Hodges and Fernando P.
Mirasol as co-administrators of the estate of C.N. Hodges (pp. 76-78,
81 & 85, CFI Rec., S.P. No. 1672).
10. Miss Avelina A. Magno, pursuant to the orders of this Honorable
Court of December 25, 1962, took possession of all Philippine Assets
now claimed by the two estates. Legally, Miss Magno could take
possession of the assets registered in the name of C. N. Hodges alone
only in her capacity as Special Administratrix of the Estate of C.N.
Hodges. With the appointment by this Honorable Court on February
22, 1963 of Joe Hodges and Fernando P. Mirasol as the
co-administrators of the estate of C.N. Hodges, they legally were
entitled to take over from Miss Magno the full and exclusive
possession of all of the assets of the estate of C.N. Hodges. With the
appointment on January 24, 1964 of the PCIB as the sole
administrator of the estate of C.N. Hodges in substitution of Joe
Hodges and Fernando P. Mirasol, the PCIB legally became the only
party entitled to the sole and exclusive possession of all of the assets
of the estate of C. N. Hodges.
11. The PCIB's predecessors submitted their accounting and this
Honorable Court approved same, to wit:
161
(a) The accounting of Harold K. Davies dated January 18, 1963 (pp.
16-33, CFI Rec. S.P. No. 1672); which shows or its face the:
(i) Conformity of Avelina A. Magno acting as "Administratrix of the
Estate of Linnie Jane Hodges and Special Administratrix of the
Estate of C. N. Hodges";
(ii) Conformity of Leslie Echols, a Texas lawyer acting for the heirs
of C.N. Hodges; and
(iii) Conformity of William Brown, a Texas lawyer acting for the
Higdon family who claim to be the only heirs of Linnie Jane Hodges
(pp. 18, 25-33, CFI Rec., S. P. No. 1672).
Note: This accounting was approved by this Honorable Court on
January 22, 1963 (p. 34, CFI Rec., S. P. No. 1672).
(b) The accounting of Joe Hodges and Fernando P. Mirasol as of
January 23, 1964, filed February 24, 1964 (pp. 990-1000, CFI Rec.
S.P. No. 1672 and pp. 1806-1848, CFI Rec. S.P. No. 1307).
Note: This accounting was approved by this Honorable Court on
March 3, 1964.
(c) The PCIB and its undersigned lawyers are aware of no report or
accounting submitted by Avelina A. Magno of her acts as
administratrix of the estate of Linnie Jane Hodges or special
administratrix of the estate of C.N. Hodges, unless it is the
accounting of Harold K. Davies as special co-administrator of the
estate of C.N. Hodges dated January 18, 1963 to which Miss Magno
manifested her conformity (supra).
12. In the aforesaid agreement of January 24, 1964, Miss Avelina A.
Magno agreed to receive P10,000.00
"for her services as administratrix of the estate of Linnie Jane
Hodges"
and in addition she agreed to be employed, starting February 1, 1964,
at
"a monthly salary of P500.00 for her services as an employee of both
estates."
24 ems.
13. Under the aforesaid agreement of January 24, 1964 and the
orders of this Honorable Court of same date, the PCIB as
administrator of the estate of C. N. Hodges is entitled to the exclusive
possession of all records, properties and assets in the name of C. N.
Hodges as of the date of his death on December 25, 1962 which were
in the possession of the deceased C. N. Hodges on that date and
which then passed to the possession of Miss Magno in her capacity
as Special Co-Administratrix of the estate of C. N. Hodges or the
possession of Joe Hodges or Fernando P. Mirasol as
co-administrators of the estate of C. N. Hodges.
14. Because of Miss Magno's refusal to comply with the reasonable
request of PCIB concerning the assets of the estate of C. N. Hodges,
the PCIB dismissed Miss Magno as an employee of the estate of C. N.
Hodges effective August 31, 1964. On September 1, 1964 Miss
Magno locked the premises at 206-208 Guanco Street and denied the
PCIB access thereto. Upon the Urgent Motion of the PCIB dated
September 3, 1964, this Honorable Court on September 7, 1964
ordered Miss Magno to reopen the aforesaid premises at 206-208
Guanco Street and permit the PCIB access thereto no later than
September 8, 1964.
15. The PCIB pursuant to the aforesaid orders of this Honorable
Court is again in physical possession of all of the assets of the estate
of C. N. Hodges. However, the PCIB is not in exclusive control of

the aforesaid records, properties and assets because Miss Magno
continues to assert the claims hereinabove outlined in paragraph 6,
continues to use her own locks to the doors of the aforesaid premises
at 206-208 Guanco Street, Iloilo City and continues to deny the PCIB
its right to know the combinations to the doors of the vault and safes
situated within the premises at 206-208 Guanco Street despite the
fact that said combinations were known to only C. N. Hodges during
his lifetime.
16. The Philippine estate and inheritance taxes assessed the estate of
Linnie Jane Hodges were assessed and paid on the basis that C. N.
Hodges is the sole beneficiary of the assets of the estate of Linnie
Jane Hodges situated in the Philippines. Avelina A. Magno and her
legal counsel at no time have questioned the validity of the aforesaid
assessment and the payment of the corresponding Philippine death
taxes.
17. Nothing further remains to be done in the estate of Linnie Jane
Hodges except to resolve the aforesaid Motion of October 5, 1963
and grant the PCIB the exclusive possession and control of all of the
records, properties and assets of the estate of C. N. Hodges.
18. Such assets as may have existed of the estate of Linnie Jane
Hodges were ordered by this Honorable Court in special Proceedings
No. 1307 to be turned over and delivered to C. N. Hodges alone. He
in fact took possession of them before his death and asserted and
exercised the right of exclusive ownership over the said assets as the
sole beneficiary of the estate of Linnie Jane Hodges.
WHEREFORE, premises considered, the PCIB respectfully petitions
that this Honorable court:
(1) Set the Motion of October 5, 1963 for hearing at the earliest
possible date with notice to all interested parties;
(2) Order Avelina A. Magno to submit an inventory and accounting
as Administratrix of the Estate of Linnie Jane Hodges and
Co-Administratrix of the Estate of C. N. Hodges of all of the funds,
properties and assets of any character belonging to the deceased
Linnie Jane Hodges and C. N. Hodges which have come into her
possession, with full details of what she has done with them;
(3) Order Avelina A. Magno to turn over and deliver to the PCIB as
administrator of the estate of C. N. Hodges all of the funds,
properties and assets of any character remaining in her possession;
(4) Pending this Honorable Court's adjudication of the aforesaid
issues, order Avelina A. Magno and her representatives to stop
interferring with the administration of the estate of C. N. Hodges by
the PCIB and its duly authorized representatives;
(5) Enjoin Avelina A. Magno from working in the premises at
206-208 Guanco Street, Iloilo City as an employee of the estate of C.
N. Hodges and approve her dismissal as such by the PCIB effective
August 31, 1964;
(6) Enjoin James L. Sullivan, Attorneys Manglapus and Quimpo and
others allegedly representing Miss Magno from entering the premises
at 206-208 Guanco Street, Iloilo City or any other properties of C. N.
Hodges without the express permission of the PCIB;
(7) Order such other relief as this Honorable Court finds just and
equitable in the premises. (Annex "U" Petition.)
On January 8, 1965, petitioner also filed a motion for "Official
Declaration of Heirs of Linnie Jane Hodges Estate" alleging:
COMES NOW Philippine Commercial and Industrial Bank
(hereinafter referred to as PCIB), as administrator of the estate of the
162
late C. N. Hodges, through the undersigned counsel, and to this
Honorable Court respectfully alleges that:
1. During their marriage, spouses Charles Newton Hodges and
Linnie Jane Hodges, American citizens originally from the State of
Texas, U.S.A., acquired and accumulated considerable assets and
properties in the Philippines and in the States of Texas and
Oklahoma, United States of America. All said properties constituted
their conjugal estate.
2. Although Texas was the domicile of origin of the Hodges spouses,
this Honorable Court, in its orders dated March 31 and December 12,
1964 (CFI Record, Sp. Proc. No. 1307, pp. ----; Sp. Proc. No. 1672, p.
----), conclusively found and categorically ruled that said spouses had
lived and worked for more than 50 years in Iloilo City and had,
therefore, acquired a domicile of choice in said city, which they
retained until the time of their respective deaths.
3. On November 22, 1952, Linnie Jane Hodges executed in the City
of Iloilo her Last Will and Testament, a copy of which is hereto
attached as Annex "A". The bequests in said will pertinent to the
present issue are the second, third, and fourth provisions, which we
quote in full hereunder.
SECOND: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated, or
located, to my husband, Charles Newton Hodges, to have and to hold
unto him, my said husband during his natural lifetime.
THIRD: I desire, direct and provide that my husband, Charles
Newton Hodges, shall have the right to manage, control, use and
enjoy said estate during his lifetime, and he is hereby given the right
to make any changes in the physical properties of said estate by sale
of any part thereof which he think best, and the purchase of any other
or additional property as he may think best; to execute conveyances
with or without general or special warranty, conveying in fee simple
or for any other term or time, any property which he may deem
proper to dispose of; to lease any of the real property for oil, gas
and/or other minerals, and all such deeds or leases shall pass the
absolute fee simple title to the interest so conveyed in such property
as he may elect to sell. All rents, emoluments and income from said
estate shall belong to him, and he is further authorized to use any part
of the principal of said estate as he may need or desire. It is provided
herein, however, that he shall not sell or otherwise dispose of any of
the improved property now owned by us located at, in or near the
City of Lubbock, Texas, but he shall have the full right to lease,
manage and enjoy the same during his lifetime, as above provided.
He shall have the right to sub-divide any farmland and sell lots
therein, and may sell unimproved town lots.
FOURTH: At the death of my said husband, Charles Newton Hodges,
I give, devise and bequeath all of the rest, residue and remainder of
my estate both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share alike,
namely:
"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie
Rascoe, Era Boman and Nimray Higdon."
4. On November 14, 1953, C. N. Hodges executed in the City of
Iloilo his Last Will and Testament, a copy of which is hereto attached
as Annex "B ". In said Will, C. N. Hodges designated his wife, Linnie
Jane Hodges, as his beneficiary using the identical language she used
in the second and third provisos of her Will, supra.
5. On May 23, 1957 Linnie Jane Hodges died in Iloilo City,
predeceasing her husband by more than five (5) years. At the time of
her death, she had no forced or compulsory heir, except her husband,
C. N. Hodges. She was survived also by various brothers and sisters

mentioned in her Will (supra), which, for convenience, we shall refer
to as the HIGDONS.
6. On June 28, 1957, this Honorable Court admitted to probate the
Last Will and Testament of the deceased Linnie Jane Hodges (Annex
"A"), and appointed C. N. Hodges as executor of her estate without
bond. (CFI Record, Sp. Proc. No. 1307, pp. 24-25). On July 1, 1957,
this Honorable Court issued letters testamentary to C. N. Hodges in
the estate of Linnie Jane Hodges. (CFI Record, Sp. Proc. No. 1307, p.
30.)
7. The Will of Linnie Jane Hodges, with respect to the order of
succession, the amount of successional rights, and the intrinsic of its
testamentary provisions, should be governed by Philippine laws
because:
(a) The testatrix, Linnie Jane Hodges, intended Philippine laws to
govern her Will;
(b) Article 16 of the Civil Code provides that "the national law of the
person whose succession is under consideration, whatever may be the
nature of the property and regardless of the country wherein said
property may be found", shall prevail. However, the Conflict of Law
of Texas, which is the "national law" of the testatrix, Linnie Jane
Hodges, provide that the domiciliary law (Philippine law — see
paragraph 2, supra) should govern the testamentary dispositions and
successional rights over movables (personal properties), and the law
of the situs of the property (also Philippine law as to properties
located in the Philippines) with regards immovable (real properties).
Thus applying the "Renvoi Doctrine", as approved and applied by
our Supreme Court in the case of "In The Matter Of The Testate
Estate of Eduard E. Christensen", G.R. No.
L-16749, promulgated January 31, 1963, Philippine law should apply
to the Will of Linnie Jane Hodges and to the successional rights to
her estate insofar as her movable and immovable assets in the
Philippines are concerned. We shall not, at this stage, discuss what
law should govern the assets of Linnie Jane Hodges located in
Oklahoma and Texas, because the only assets in issue in this motion
are those within the jurisdiction of this motion Court in the two
above-captioned Special Proceedings.
8. Under Philippine and Texas law, the conjugal or community estate
of spouses shall, upon dissolution, be divided equally between them.
Thus, upon the death of Linnie Jane Hodges on May 23, 1957,
one-half (1/2) of the entirety of the assets of the Hodges spouses
constituting their conjugal estate pertained automatically to Charles
Newton Hodges, not by way of inheritance, but in his own right as
partner in the conjugal partnership. The other one-half (1/2) portion
of the conjugal estate constituted the estate of Linnie Jane
Hodges. This is the only portion of the conjugal estate capable of
inheritance by her heirs.
9. This one-half (1/2) portion of the conjugal assets pertaining to
Linnie Jane Hodges cannot, under a clear and specific provision of
her Will, be enhanced or increased by income, earnings, rents, or
emoluments accruing after her death on May 23, 1957. Linnie Jane
Hodges' Will provides that "all rents, emoluments and income from
said estate shall belong to him (C. N. Hodges) and he is further
authorized to use any part of the principal of said estate as he may
need or desire." (Paragraph 3, Annex "A".) Thus, by specific
provision of Linnie Jane Hodges' Will, "all rents, emoluments and
income" must be credited to the one-half (1/2) portion of the conjugal
estate pertaining to C. N. Hodges. Clearly, therefore, the estate of
Linnie Jane Hodges, capable of inheritance by her heirs, consisted
exclusively of no more than one-half (1/2) of the conjugal estate,
computed as of the time of her death on May 23, 1957.
10. Articles 900, 995 and 1001 of the New Civil Code provide that
the surviving spouse of a deceased leaving no ascendants or
163
descendants is entitled, as a matter of right and by way of irrevocable
legitime, to at least one-half (1/2) of the estate of the deceased, and
no testamentary disposition by the deceased can legally and validly
affect this right of the surviving spouse. In fact, her husband is
entitled to said one-half (1/2) portion of her estate by way of legitime.
(Article 886, Civil Code.) Clearly, therefore, immediately upon the
death of Linnie Jane Hodges, C. N. Hodges was the owner of at least
three-fourths (3/4) or seventy-five (75%) percent of all of the
conjugal assets of the spouses, (1/2 or 50% by way of conjugal
partnership share and 1/4 or 25% by way of inheritance and legitime)
plus all "rents, emoluments and income" accruing to said conjugal
estate from the moment of Linnie Jane Hodges' death (see paragraph
9, supra).
11. The late Linnie Jane Hodges designated her husband C.N.
Hodges as her sole and exclusive heir with full authority to do what
he pleased, as exclusive heir and owner of all the assets constituting
her estate, except only with regards certain properties "owned by us,
located at, in or near the City of Lubbock, Texas". Thus, even
without relying on our laws of succession and legitime, which we
have cited above, C. N. Hodges, by specific testamentary designation
of his wife, was entitled to the entirely to his wife's estate in the
Philippines.
12. Article 777 of the New Civil Code provides that "the rights of the
successor are transmitted from the death of the decedent". Thus, title
to the estate of Linnie Jane Hodges was transmitted to C. N. Hodges
immediately upon her death on May 23, 1957. For the convenience
of this Honorable Court, we attached hereto as Annex "C" a graph of
how the conjugal estate of the spouses Hodges should be divided in
accordance with Philippine law and the Will of Linnie Jane Hodges.
13. In his capacity as sole heir and successor to the estate of Linnie
Jane Hodges as above-stated, C. N. Hodges, shortly after the death of
Linnie Jane Hodges, appropriated to himself the entirety of her estate.
He operated all the assets, engaged in business and performed all acts
in connection with the entirety of the conjugal estate, in his own
name alone, just as he had been operating, engaging and doing while
the late Linnie Jane Hodges was still alive. Upon his death on
December 25, 1962, therefore, all said conjugal assets were in his
sole possession and control, and registered in his name alone, not as
executor, but as exclusive owner of all said assets.
14. All these acts of C. N. Hodges were authorized and sanctioned
expressly and impliedly by various orders of this Honorable Court, as
follows:
(a) In an Order dated May 27, 1957, this Honorable Court ruled that
C. N. Hodges "is allowed or authorized to continue the business in
which he was engaged, and to perform acts which he had been doing
while the deceased was living." (CFI Record, Sp. Proc. No. 1307, p.
11.)
(b) On December 14, 1957, this Honorable Court, on the basis of the
following fact, alleged in the verified Motion dated December 11,
1957 filed by Leon P. Gellada as attorney for the executor C. N.
Hodges:
That herein Executor, (is) not only part owner of the properties left as
conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges.' (CFI Record, Sp. Proc. No. 1307, p.
44; emphasis supplied.)
issued the following order:
"As prayed for by Attorney Gellada, counsel for the Executor, for the
reasons stated in his motion dated December 11, 1957, which the
Court considers well taken, all the sales, conveyances, leases and
mortgages of all the properties left by the deceased Linnie Jane

Hodges executed by the Executor, Charles Newton Hodges are
hereby APPROVED. The said Executor is further authorized to
execute subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes contained in the last will and testament
of the latter." (CFI Record. Sp. Proc. No. 1307, p. 46; emphasis
supplied.)
24 ems
(c) On April 21, 1959, this Honorable Court approved the verified
inventory and accounting submitted by C. N. Hodges through his
counsel Leon P. Gellada on April 14, 1959 wherein he alleged
among other things,
"That no person interested in the Philippines of the time and place of
examining the herein account, be given notice, as herein executor is
the only devisee or legatee of the deceased, in accordance with the
last will and testament already probated by the Honorable Court."
(CFI Record, Sp. Proc. No. 1307, pp. 77-78; emphasis supplied.)
(d) On July 20, 1960, this Honorable Court approved the verified
"Annual Statement of Account" submitted by C. N. Hodges through
his counsel Leon P. Gellada on July 21, 1960 wherein he alleged,
among other things.
"That no person interested in the Philippines of the time and place of
examining the herein account, be given notice as herein executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament ofthe deceased, already
probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307,
pp. 81-82; emphasis supplied.)
(e) On May 2, 1961, this Honorable Court approved the verified
"Annual Statement of Account By The Executor For the Year 1960"
submitted through Leon P. Gellada on April 20, 1961 wherein he
alleged:
"That no person interested in the Philippines be given notice, ofthe
time and place of examining the herein account, as herein executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament ofthe deceased, already
probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307,
pp. 90-91; emphasis supplied.)
15. Since C. N. Hodges was the sole and exclusive heir of Linnie
Jane Hodges, not only by law, but in accordance with the
dispositions of her will, there was, in fact, no need to liquidate the
conjugal estate of the spouses. The entirely of said conjugal estate
pertained to him exclusively, therefore this Honorable Court
sanctioned and authorized, as above-stated, C. N. Hodges to manage,
operate and control all the conjugal assets as owner.
16. By expressly authorizing C. N. Hodges to act as he did in
connection with the estate of his wife, this Honorable Court has (1)
declared C. N. Hodges as the sole heir of the estate of Linnie Jane
Hodges, and (2) delivered and distributed her estate to C. N. Hodges
as sole heir in accordance with the terms and conditions of her Will.
Thus, although the "estate of Linnie Jane Hodges" still exists as a
legal and juridical personality, it had no assets or properties located
in the Philippines registered in its name whatsoever at the time of the
death of C. N. Hodges on December 25, 1962.
17. The Will of Linnie Jane Hodges (Annex "A"), fourth paragraph,
provides as follows:
"At the death of my said husband, Charles Newton Hodges, I give,
devise and bequeath all of the rest, residue and remainder of my
estate both real and personal, wherever situated or located, to be
164
equally divided among my brothers and sisters, share and share alike,
namely:
"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie
Rascoe, Era Boman and Nimray Higdon."
Because of the facts hereinabove set out there is no "rest, residue and
remainder", at least to the extent of the Philippine assets, which
remains to vest in the HIGDONS, assuming this proviso in Linnie
Jane Hodges' Will is valid and binding against the estate of C. N.
Hodges.
18. Any claims by the HIGDONS under the above-quoted provision
of Linnie Jane Hodges' Will is without merit because said provision
is void and invalid at least as to the Philippine assets. It should not, in
anyway, affect the rights of the estate of C. N. Hodges or his heirs to
the properties, which C. N. Hodges acquired by way of inheritance
from his wife Linnie Jane Hodges upon her death.
(a) In spite of the above-mentioned provision in the Will of Linnie
Jane Hodges, C. N. Hodges acquired, not merely a usufructuary right,
but absolute title and ownership to her estate. In a recent case
involving a very similar testamentary provision, the Supreme Court
held that the heir first designated acquired full ownership of the
property bequeathed by the will, not mere usufructuary rights.
(Consolacion Florentino de Crisologo, et al., vs. Manuel Singson, G.
R. No. L-13876, February 28, 1962.)
(b) Article 864, 872 and 886 of the New Civil Code clearly provide
that no charge, condition or substitution whatsoever upon the
legitime can be imposed by a testator. Thus, under the provisions of
Articles 900, 995 and 1001 of the New Civil Code, the legitime of a
surviving spouse is 1/2 of the estate of the deceased spouse.
Consequently, the above-mentioned provision in the Will of Linnie
Jane Hodges is clearly invalid insofar as the legitime of C. N. Hodges
was concerned, which consisted of 1/2 of the 1/2 portion of the
conjugal estate, or 1/4 of the entire conjugal estate of the deceased.
(c) There are generally only two kinds of substitution provided for
and authorized by our Civil Code (Articles 857-870), namely,
(1) simple or common substitution, sometimes referred to
as vulgar substitution (Article 859), and (2) fideicommissary
substitution (Article 863). All other substitutions are merely
variations of these. The substitution provided for by paragraph four
of the Will of Linnie Jane Hodges is not fideicommissary substitution,
because there is clearly no obligation on the part of C. N. Hodges as
the first heir designated, to preserve the properties for the substitute
heirs. (Consolacion Florentino de Crisologo et al. vs. Manuel
Singson, G. R. No.
L-13876.) At most, it is a vulgar or simple substitution. However, in
order that a vulgar or simple substitution can be valid, three
alternative conditions must be present, namely, that the first
designated heir (1) should die before the testator; or (2) should not
wish to accept the inheritance; or (3) should be incapacitated to do so.
None of these conditions apply to C. N. Hodges, and, therefore, the
substitution provided for by the above-quoted provision of the Will is
not authorized by the Code, and, therefore, it is void. Manresa,
commenting on these kisses of substitution, meaningfully stated that:
"... cuando el testador instituyeun primer heredero, y por
fallecimiento de este nombra otro u otros, ha de entenderse que estas
segundas designaciones solo han de llegar a tener efectividad en el
caso de que el primer instituido muera antes que el testador, fuera o
no esta su verdadera intencion. ...". (6 Manresa, 7 a ed., pag. 175.) In
other words, when another heir is designated to inherit upon the
death of a first heir, the second designation can have effect only in
case the first instituted heir dies before the testator, whether or not
that was the true intention of said testator. Since C. N. Hodges did

not die before Linnie Jane Hodges, the provision for substitution
contained in Linnie Jane Hodges' Willis void.
(d) In view of the invalidity of the provision for substitution in the
Will, C. N. Hodges' inheritance to the entirety of the Linnie Jane
Hodges estate is irrevocable and final.
19. Be that as it may, at the time of C. N. Hodges' death, the entirety
of the conjugal estate appeared and was registered in him exclusively
as owner. Thus, the presumption is that all said assets constituted his
estate. Therefore —
(a) If the HIGDONS wish to enforce their dubious rights as
substituted heirs to 1/4 of the conjugal estate (the other 1/4 is covered
by the legitime of C. N. Hodges which can not be affected by any
testamentary disposition), their remedy, if any, is to file their claim
against the estate of C. N. Hodges, which should be entitled at the
present time to full custody and control of all the conjugal estate of
the spouses.
(b) The present proceedings, in which two estates exist under
separate administration, where the administratrix of the Linnie Jane
Hodges estate exercises an officious right to object and intervene in
matters affecting exclusively the C. N. Hodges estate, is anomalous.
WHEREFORE, it is most respectfully prayed that after trial and
reception of evidence, this Honorable Court declare:
1. That the estate of Linnie Jane Hodges was and is composed
exclusively of one-half (1/2) share in the conjugal estate of the
spouses Hodges, computed as of the date of her death on May 23,
1957;
2. That the other half of the conjugal estate pertained exclusively to
C. N. Hodges as his share as partner in the conjugal partnership;
3. That all "rents, emoluments and income" of the conjugal estate
accruing after Linnie Jane Hodges' death pertains to C. N. Hodges;
4. That C. N. Hodges was the sole and exclusive heir of the estate of
Linnie Jane Hodges;
5. That, therefore, the entire conjugal estate of the spouses located in
the Philippines, plus all the "rents, emoluments and income"
above-mentioned, now constitutes the estate of C. N. Hodges,
capable of distribution to his heirs upon termination of Special
Proceedings No. 1672;
6. That PCIB, as administrator of the estate of C. N. Hodges, is
entitled to full and exclusive custody, control and management of all
said properties; and
7. That Avelina A. Magno, as administratrix of the estate of Linnie
Jane Hodges, as well as the HIGDONS, has no right to intervene or
participate in the administration of the C. N. Hodges estate.
PCIB further prays for such and other relief as may be deemed just
and equitable in the premises."
(Record, pp. 265-277)
Before all of these motions of petitioner could be resolved, however,
on December 21, 1965, private respondent Magno filed her own
"Motion for the Official Declaration of Heirs of the Estate of Linnie
Jane Hodges" as follows:
COMES NOW the Administratrix of the Estate of Linnie Jane
Hodges and, through undersigned counsel, unto this Honorable Court
most respectfully states and manifests:
165
1. That the spouses Charles Newton Hodges and Linnie Jane Hodges
were American citizens who died at the City of Iloilo after having
amassed and accumulated extensive properties in the Philippines;
2. That on November 22, 1952, Linnie Jane Hodges executed a last
will and testament (the original of this will now forms part of the
records of these proceedings as Exhibit "C" and appears as Sp. Proc.
No. 1307, Folio I, pp. 17-18);
3. That on May 23, 1957, Linnie Jane Hodges died at the City of
Iloilo at the time survived by her husband, Charles Newton Hodges,
and several relatives named in her last will and testament;
4. That on June 28, 1957, a petition therefor having been priorly filed
and duly heard, this Honorable Court issued an order admitting to
probate the last will and testament of Linnie Jane Hodges (Sp. Proc.
No. 1307, Folio I, pp. 24-25, 26-28);
5. That the required notice to creditors and to all others who may
have any claims against the decedent, Linnie Jane Hodges has
already been printed, published and posted (Sp. Proc. No. 1307,
Folio I. pp. 34-40) and the reglamentary period for filing such claims
has long ago lapsed and expired without any claims having been
asserted against the estate of Linnie Jane Hodges, approved by the
Administrator/Administratrix of the said estate, nor ratified by this
Honorable Court;
6. That the last will and testament of Linnie Jane Hodges already
admitted to probate contains an institution of heirs in the following
words:
"SECOND: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated or
located, to my beloved husband, Charles Newton Hodges to have and
to hold unto him, my said husband, during his natural lifetime.
THIRD: I desire, direct and provide that my husband, Charles
Newton Hodges, shall have the right to manage, control, use and
enjoy said estate during his lifetime, and, he is hereby given the right
to make any changes in the physical properties of said estate, by sale
of any part thereof which he may think best, and the purchase of any
other or additional property as he may think best; to execute
conveyances with or without general or special warranty, conveying
in fee simple or for any other term or time, any property which he
may deem proper to dispose of; to lease any of the real property for
oil, gas and/or other minerals, and all such deeds or leases shall pass
the absolute fee simple title to the interest so conveyed in such
property as he elect to sell. All rents, emoluments and income from
said estate shall belong to him, and he is further authorized to use any
part of the principal of said estate as he may need or desire. It is
provided herein, however, that he shall not sell or otherwise dispose
of any of the improved property now owned by us located at, in or
near the City of Lubbock Texas, but he shall have the full right to
lease, manage and enjoy the same during his lifetime, above provided.
He shall have the right to subdivide any farm land and sell lots
therein, and may sell unimproved town lots.
FOURTH: At the death of my said husband, Charles Newton Hodges,
I give, devise and bequeath all of the rest, residue and remainder of
my estate, both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share alike,
namely:
Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie
Rascoe, Era Boman and Nimroy Higdon.
FIFTH: In case of the death of any of my brothers and/or sisters
named in item Fourth, above, prior to the death of my husband,
Charles Newton Hodges, then it is my will and bequest that the heirs

of such deceased brother or sister shall take jointly the share which
would have gone to such brother or sister had she or he survived."
7. That under the provisions of the last will and testament already
above-quoted, Linnie Jane Hodges gave a life-estate or a usufruct
over all her estate to her husband, Charles Newton Hodges, and a
vested remainder-estate or the naked title over the same estate to her
relatives named therein;
8. That after the death of Linnie Jane Hodges and after the admission
to probate of her last will and testament, but during the lifetime of
Charles Newton Hodges, the said Charles Newton Hodges with full
and complete knowledge of the life-estate or usufruct conferred upon
him by the will since he was then acting as Administrator of the
estate and later as Executor of the will of Linnie Jane Hodges,
unequivocably and clearly through oral and written declarations and
sworn public statements, renounced, disclaimed and repudiated his
life-estate and usufruct over the estate of Linnie Jane Hodges;
9. That, accordingly, the only heirs left to receive the estate of Linnie
Jane Hodges pursuant to her last will and testament, are her named
brothers and sisters, or their heirs, to wit: Esta Higdon, Emma
Howell, Leonard Higdon, Aline Higdon and David Higdon, the latter
two being the wife and son respectively of the deceased Roy Higdon,
Sadie Rascoe Era Boman and Nimroy Higdon, all of legal ages,
American citizens, with residence at the State of Texas, United States
of America;
10. That at the time of the death of Linnie Jane Hodges on May 23,
1957, she was the co-owner (together with her husband Charles
Newton Hodges) of an undivided one-half interest in their conjugal
properties existing as of that date, May 23, 1957, which properties
are now being administered sometimes jointly and sometimes
separately by the Administratrix of the estate of Linnie Jane Hodges
and/or the Administrator of the estate of C. N. Hodges but all of
which are under the control and supervision of this Honorable Court;
11. That because there was no separation or segregation of the
interests of husband and wife in the combined conjugal estate, as
there has been no such separation or segregation up to the present,
both interests have continually earned exactly the same amount of
"rents, emoluments and income", the entire estate having been
continually devoted to the business of the spouses as if they were
alive;
12. That the one-half interest of Linnie Jane Hodges in the combined
conjugal estate was earning "rents, emoluments and income" until
her death on May 23, 1957, when it ceased to be saddled with any
more charges or expenditures which are purely personal to her in
nature, and her estate kept on earning such "rents, emoluments and
income" by virtue of their having been expressly renounced,
disclaimed and repudiated by Charles Newton Hodges to whom they
were bequeathed for life under the last will and testament of Linnie
Jane Hodges;
13. That, on the other hand, the one-half interest of Charles Newton
Hodges in the combined conjugal estate existing as of May 23, 1957,
while it may have earned exactly the same amount of "rents,
emoluments and income" as that of the share pertaining to Linnie
Jane Hodges, continued to be burdened by charges, expenditures, and
other dispositions which are purely personal to him in nature, until
the death of Charles Newton Hodges himself on December 25, 1962;
14. That of all the assets of the combined conjugal estate of Linnie
Jane Hodges and Charles Newton Hodges as they exist today, the
estate of Linnie Jane Hodges is clearly entitled to a portion more than
fifty percent (50%) as compared to the portion to which the estate of
Charles Newton Hodges may be entitled, which portions can be
exactly determined by the following manner:
166
a. An inventory must be made of the assets of the combined conjugal
estate as they existed on the death of Linnie Jane Hodges on May 23,
1957 — one-half of these assets belong to the estate of Linnie Jane
Hodges;
b. An accounting must be made of the "rents, emoluments and
income" of all these assets — again one-half of these belong to the
estate of Linnie Jane Hodges;
c. Adjustments must be made, after making a deduction of charges,
disbursements and other dispositions made by Charles Newton
Hodges personally and for his own personal account from May 23,
1957 up to December 25, 1962, as well as other charges,
disbursements and other dispositions made for him and in his behalf
since December 25, 1962 up to the present;
15. That there remains no other matter for disposition now insofar as
the estate of Linnie Jane Hodges is concerned but to complete the
liquidation of her estate, segregate them from the conjugal estate, and
distribute them to her heirs pursuant to her last will and testament.
WHEREFORE, premises considered, it is most respectfully moved
and prayed that this Honorable Court, after a hearing on the factual
matters raised by this motion, issue an order:
a. Declaring the following persons, to wit: Esta Higdon, Emma
Howell, Leonard Higdon, Aline Higdon, David Higdon, Sadie
Rascoe, Era Boman and Nimroy Higdon, as the sole heirs under the
last will and testament of Linnie Jane Hodges and as the only persons
entitled to her estate;
b. Determining the exact value of the estate of Linnie Jane Hodges in
accordance with the system enunciated in paragraph 14 of this
motion;
c. After such determination ordering its segregation from the
combined conjugal estate and its delivery to the Administratrix of the
estate of Linnie Jane Hodges for distribution to the heirs to whom
they properly belong and appertain.
(Green Record on Appeal, pp. 382-391)
whereupon, instead of further pressing on its motion of January 8,
1965 aforequoted, as it had been doing before, petitioner withdrew
the said motion and in addition to opposing the above motion of
respondent Magno, filed a motion on April 22, 1966 alleging in part
that:
1. That it has received from the counsel for the administratrix of the
supposed estate of Linnie Jane Hodges a notice to set her "Motion for
Official Declaration of Heirs of the Estate of Linnie Jane Hodges";
2. That before the aforesaid motion could be heard, there are matters
pending before this Honorable Court, such as:
a. The examination already ordered by this Honorable Court of
documents relating to the allegation of Avelina Magno that Charles
Newton Hodges "through ... written declarations and sworn public
statements, renounced, disclaimed and repudiated life-estate and
usufruct over the estate of Linnie Jane Hodges';
b. That "Urgent Motion for An Accounting and Delivery to the
Estate of C. N. Hodges of All the Assets of the Conjugal Partnership
of the Deceased Linnie Jane Hodges and C. N. Hodges Existing as of
May 23, 1957 Plus All the Rents, Emoluments and Income
Therefrom";
c. Various motions to resolve the aforesaid motion;

d. Manifestation of September 14, 1964, detailing acts of interference
of Avelina Magno under color of title as administratrix of the Estate
of Linnie Jane Hodges;
which are all prejudicial, and which involve no issues of fact, all
facts involved therein being matters of record, and therefore require
only the resolution of questions of law;
3. That whatever claims any alleged heirs or other persons may have
could be very easily threshed out in the Testate Estate of Charles
Newton Hodges;
4. That the maintenance of two separate estate proceedings and two
administrators only results in confusion and is unduly burdensome
upon the Testate Estate of Charles Newton Hodges, particularly
because the bond filed by Avelina Magno is grossly insufficient to
answer for the funds and property which she has inofficiously
collected and held, as well as those which she continues to
inofficiously collect and hold;
5. That it is a matter of record that such state of affairs affects and
inconveniences not only the estate but also third-parties dealing with
it;" (Annex "V", Petition.)
and then, after further reminding the court, by quoting them, of the
relevant allegations of its earlier motion of September 14, 1964,
Annex U, prayed that:
1. Immediately order Avelina Magno to account for and deliver to
the administrator of the Estate of C. N. Hodges all the assets of the
conjugal partnership of the deceased Linnie Jane Hodges and C. N.
Hodges, plus all the rents, emoluments and income therefrom;
2. Pending the consideration of this motion, immediately order
Avelina Magno to turn over all her collections to the administrator
Philippine Commercial & Industrial Bank;
3. Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc. No.
1307) closed;
4. Defer the hearing and consideration of the motion for declaration
of heirs in the Testate Estate of Linnie Jane Hodges until the matters
hereinabove set forth are resolved.
(Prayer, Annex "V" of Petition.)
On October 12, 1966, as already indicated at the outset of this
opinion, the respondent court denied the foregoing motion, holding
thus:
ORDER
On record is a motion (Vol. X, Sp. 1672, pp. 4379-4390) dated April
22, 1966 of administrator PCIB praying that (1) Immediately order
Avelina Magno to account for and deliver to the administrator of the
estate of C. N. Hodges all assets of the conjugal partnership of the
deceased Linnie Jane Hodges and C. N. Hodges, plus all the rents,
emoluments and income therefrom; (2) Pending the consideration of
this motion, immediately order Avelina Magno to turn over all her
collections to the administrator PCIB; (3) Declare the Testate Estate
of Linnie Jane Hodges (Sp. Proc. No. 1307) closed; and (4) Defer the
hearing and consideration of the motion for declaration of heirs in the
Testate Estate of Linnie Jane Hodges until the matters hereinabove
set forth are resolved.
This motion is predicated on the fact that there are matters pending
before this court such as (a) the examination already ordered by this
Honorable Court of documents relating to the allegation of Avelina
Magno that Charles Newton Hodges thru written declaration and
sworn public statements renounced, disclaimed and repudiated his
life-estate and usufruct over the estate of Linnie Jane Hodges (b) the
167
urgent motion for accounting and delivery to the estate of C. N.
Hodges of all the assets of the conjugal partnership of the deceased
Linnie Jane Hodges and C. N. Hodges existing as of May 23, 1957
plus all the rents, emoluments and income therefrom; (c) various
motions to resolve the aforesaid motion; and (d) manifestation of
September 14, 1964, detailing acts of interference of Avelina Magno
under color of title as administratrix of the estate of Linnie Jane
Hodges.
These matters, according to the instant motion, are all pre-judicial
involving no issues of facts and only require the resolution of
question of law; that in the motion of October 5, 1963 it is alleged
that in a motion dated December 11, 1957 filed by Atty. Leon
Gellada as attorney for the executor C. N. Hodges, the said executor
C. N. Hodges is not only part owner of the properties left as conjugal
but also the successor to all the properties left by the deceased Linnie
Jane Hodges.
Said motion of December 11, 1957 was approved by the Court in
consonance with the wishes contained in the last will and testament
of Linnie Jane Hodges.
That on April 21, 1959 this Court approved the inventory and
accounting submitted by C. N. Hodges thru counsel Atty. Leon
Gellada in a motion filed on April 14, 1959 stating therein that
executor C. N. Hodges is the only devisee or legatee of Linnie Jane
Hodges in accordance with the last will and testament already
probated by the Court.
That on July 13, 1960 the Court approved the annual statement of
accounts submitted by the executor C. N. Hodges thru his counsel
Atty. Gellada on July 21, 1960 wherein it is stated that the executor,
C. N. Hodges is the only devisee or legatee of the deceased Linnie
Jane Hodges; that on May 2, 1961 the Court approved the annual
statement of accounts submitted by executor, C. N. Hodges for the
year 1960 which was submitted by Atty. Gellada on April 20, 1961
wherein it is stated that executor Hodges is the only devisee or
legatee of the deceased Linnie Jane Hodges;
That during the hearing on September 5 and 6, 1963 the estate of C.
N. Hodges claimed all the assets belonging to the deceased spouses
Linnie Jane Hodges and C. N. Hodges situated in the Philippines;
that administratrix Magno has executed illegal acts to the prejudice
of the testate estate of C. N. Hodges.
An opposition (Sp. 1672, Vol. X, pp. 4415-4421) dated April 27,
1966 of administratrix Magno has been filed asking that the motion
be denied for lack of merit and that the motion for the official
declaration of heirs of the estate of Linnie Jane Hodges be set for
presentation and reception of evidence.
It is alleged in the aforesaid opposition that the examination of
documents which are in the possession of administratrix Magno can
be made prior to the hearing of the motion for the official declaration
of heirs of the estate of Linnie Jane Hodges, during said hearing.
That the matters raised in the PCIB's motion of October 5, 1963 (as
well as the other motion) dated September 14, 1964 have been
consolidated for the purpose of presentation and reception of
evidence with the hearing on the determination of the heirs of the
estate of Linnie Jane Hodges. It is further alleged in the opposition
that the motion for the official declaration of heirs of the estate of
Linnie Jane Hodges is the one that constitutes a prejudicial question
to the motions dated October 5 and September 14, 1964 because if
said motion is found meritorious and granted by the Court, the
PCIB's motions of October 5, 1963 and September 14, 1964 will
become moot and academic since they are premised on the
assumption and claim that the only heir of Linnie Jane Hodges was C.
N. Hodges.

That the PCIB and counsel are estopped from further questioning the
determination of heirs in the estate of Linnie Jane Hodges at this
stage since it was PCIB as early as January 8, 1965 which filed a
motion for official declaration of heirs of Linnie Jane Hodges that the
claim of any heirs of Linnie Jane Hodges can be determined only in
the administration proceedings over the estate of Linnie Jane Hodges
and not that of C. N. Hodges, since the heirs of Linnie Jane Hodges
are claiming her estate and not the estate of C. N. Hodges.
A reply (Sp. 1672, Vol. X, pp. 4436-4444) dated May 11, 1966 of the
PCIB has been filed alleging that the motion dated April 22, 1966 of
the PCIB is not to seek deferment of the hearing and consideration of
the motion for official declaration of heirs of Linnie Jane Hodges but
to declare the testate estate of Linnie Jane Hodges closed and for
administratrix Magno to account for and deliver to the PCIB all
assets of the conjugal partnership of the deceased spouses which has
come to her possession plus all rents and income.
A rejoinder (Sp. 1672, Vol. X, pp. 4458-4462) of administratrix
Magno dated May 19, 1966 has been filed alleging that the motion
dated December 11, 1957 only sought the approval of all
conveyances made by C. N. Hodges and requested the Court
authority for all subsequent conveyances that will be executed by C.
N. Hodges; that the order dated December 14, 1957 only approved
the conveyances made by C. N. Hodges; that C. N. Hodges
represented by counsel never made any claim in the estate of Linnie
Jane Hodges and never filed a motion to declare himself as the heir
of the said Linnie Jane Hodges despite the lapse of more than five (5)
years after the death of Linnie Jane Hodges; that it is further alleged
in the rejoinder that there can be no order of adjudication of the
estate unless there has been a prior express declaration of heirs and
so far no declaration of heirs in the estate of Linnie Jane Hodges (Sp.
1307) has been made.
Considering the allegations and arguments in the motion and of the
PCIB as well as those in the opposition and rejoinder of
administratrix Magno, the Court finds the opposition and rejoinder to
be well taken for the reason that so far there has been no official
declaration of heirs in the testate estate of Linnie Jane Hodges and
therefore no disposition of her estate.
WHEREFORE, the motion of the PCIB dated April 22, 1966 is
hereby DENIED.
(Annex "W", Petition)
In its motion dated November 24, 1966 for the reconsideration of this
order, petitioner alleged inter alia that:
It cannot be over-stressed that the motion of December 11, 1957 was
based on the fact that:
a. Under the last will and testament of the deceased, Linnie Jane
Hodges, the late Charles Newton Hodges was the sole heir instituted
insofar as her properties in the Philippines are concerned;
b. Said last will and testament vested upon the said late Charles
Newton Hodges rights over said properties which, in sum, spell
ownership, absolute and in fee simple;
c. Said late Charles Newton Hodges was, therefore, "not only part
owner of the properties left as conjugal, but also, the successor to all
the properties left by the deceased Linnie Jane Hodges.
Likewise, it cannot be over-stressed that the aforesaid motion was
granted by this Honorable Court "for the reasons stated" therein.
Again, the motion of December 11, 1957 prayed that not only "all the
sales, conveyances, leases, and mortgages executed by" the late
Charles Newton Hodges, but also all "the subsequent sales,
conveyances, leases, and mortgages ..." be approved and authorized.
168
This Honorable Court, in its order of December 14, 1957, "for the
reasons stated" in the aforesaid motion, granted the same, and not
only approved all the sales, conveyances, leases and mortgages of all
properties left by the deceased Linnie Jane Hodges executed by the
late Charles Newton Hodges, but also authorized "all subsequent
sales, conveyances, leases and mortgages of the properties left by the
said deceased Linnie Jane Hodges. (Annex "X", Petition)
and reiterated its fundamental pose that the Testate Estate of Linnie
Jane Hodges had already been factually, although not legally, closed
with the virtual declaration of Hodges and adjudication to him, as
sole universal heir of all the properties of the estate of his wife, in the
order of December 14, 1957, Annex G. Still unpersuaded, on July 18,
1967, respondent court denied said motion for reconsideration and
held that "the court believes that there is no justification why the
order of October 12, 1966 should be considered or modified", and,
on July 19, 1967, the motion of respondent Magno "for official
declaration of heirs of the estate of Linnie Jane Hodges", already
referred to above, was set for hearing.
In consequence of all these developments, the present petition was
filed on August 1, 1967 (albeit petitioner had to pay another
docketing fee on August 9, 1967, since the orders in question were
issued in two separate testate estate proceedings, Nos. 1307 and 1672,
in the court below).
Together with such petition, there are now pending before Us for
resolution herein, appeals from the following:
1. The order of December 19, 1964 authorizing payment by
respondent Magno of overtime pay, (pp. 221, Green Record on
Appeal) together with the subsequent orders of January 9, 1965, (pp.
231-232,id.) October 27, 1965, (pp. 227, id.) and February 15, 1966
(pp. 455-456, id.) repeatedly denying motions for reconsideration
thereof.
2. The order of August 6, 1965 (pp. 248, id.) requiring that deeds
executed by petitioner to be co-signed by respondent Magno, as well
as the order of October 27, 1965 (pp. 276-277) denying
reconsideration.
3. The order of October 27, 1965 (pp. 292-295, id.) enjoining the
deposit of all collections in a joint account and the same order of
February 15, 1966 mentioned in No. 1 above which included the
denial of the reconsideration of this order of October 27, 1965.
4. The order of November 3, 1965 (pp. 313-320, id.) directing the
payment of attorney's fees, fees of the respondent administratrix, etc.
and the order of February 16, 1966 denying reconsideration thereof.
5. The order of November 23, 1965 (pp. 334-335, id.) allowing
appellee Western Institute of Technology to make payments to either
one or both of the administrators of the two estates as well as the
order of March 7, 1966 (p. 462, id.) denying reconsideration.
6. The various orders hereinabove earlier enumerated approving
deeds of sale executed by respondent Magno in favor of appellees
Carles, Catedral, Pablito, Guzman, Coronado, Barrido, Causing,
Javier, Lucero and Batisanan, (see pp. 35 to 37 of this opinion),
together with the two separate orders both dated December 2, 1966
(pp. 306-308, and pp. 308-309, Yellow Record on Appeal) denying
reconsideration of said approval.
7. The order of January 3, 1967, on pp. 335-336, Yellow Record on
Appeal, approving similar deeds of sale executed by respondent
Magno, as those in No. 6, in favor of appellees Pacaonsis and
Premaylon, as to which no motion for reconsideration was filed.
8. Lastly, the order of December 2, 1966, on pp. 305-306, Yellow
Record on Appeal, directing petitioner to surrender to appellees

Lucero, Batisanan, Javier, Pablito, Barrido, Catedral, Causing,
Guzman, and Coronado, the certificates of title covering the lands
involved in the approved sales, as to which no motion for
reconsideration was filed either.
Strictly speaking, and considering that the above orders deal with
different matters, just as they affect distinctly different individuals or
persons, as outlined by petitioner in its brief as appellant on pp.
12-20 thereof, there are, therefore, thirty-three (33) appeals before Us,
for which reason, petitioner has to pay also thirty-one (31) more
docket fees.
It is as well perhaps to state here as elsewhere in this opinion that in
connection with these appeals, petitioner has assigned a total of
seventy-eight (LXXVIII) alleged errors, the respective discussions
and arguments under all of them covering also the fundamental
issues raised in respect to the petition for certiorari and prohibition,
thus making it feasible and more practical for the Court to dispose of
all these cases together.4
The assignments of error read thus:
I to IV
THE ORDER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEES, PEPITO G.
IYULORES, ESPIRIDION PARTISALA, WINIFREDO C.
ESPADA AND ROSARIO ALINGASA, EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF
LAND OWNED BY THE DECEASED, CHARLES NEWTON
HODGES, AND THE CONTRACTS TO SELL COVERING
WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
V to VIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF
SALE IN FAVOR OF THE APPELLEES, PEPITO G. IYULORES,
ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND
ROSARIO ALINGASA, COVERING PARCELS OF LAND FOR
WHICH THEY HAVE NEVER PAID IN FULL IN
ACCORDANCE WITH THE ORIGINAL CONTRACTS TO SELL.
IX to XII
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS
OF OWNERSHIP OVER REAL PROPERTY OF THE
APPELLEES, PEPITO G. IYULORES, ESPIRIDION PARTISALA,
WINIFREDO C. ESPADA AND ROSARIO ALINGASA, WHILE
ACTING AS A PROBATE COURT.
XIII to XV
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEES ADELFA
PREMAYLON (LOT NO. 102), SANTIAGO PACAONSIS, AND
ADELFA PREMAYLON (LOT NO. 104), EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF
LAND OWNED BY THE DECEASED, CHARLES NEWTON
HODGES, AND THE CONTRACTS TO SELL COVERING
WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
XVI to XVIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF
SALE IN FAVOR OF THE APPELLEES ADELFA PREMAYLON
(LOT NO. 102), SANTIAGO PACAONSIS, AND ADELFA
PREMAYLON (LOT NO. 104) COVERING PARCELS OF LAND
FOR WHICH THEY HAVE NEVER PAID IN FULL IN
ACCORDANCE WITH THE ORIGINAL CONTRACTS TO SELL.
XIX to XXI
169
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS
OF OWNERSHIP OVER REAL PROPERTY OF THE
APPELLEES ADELFA PREMAYLON (LOT NO. 102),
SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT
NO. 104) WHILE ACTING AS A PROBATE COURT.
XXII to XXV
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEES LORENZO
CARLES, JOSE PABLICO, ALFREDO CATEDRAL AND
SALVADOR S. GUZMAN, EXECUTED BY THE APPELLEE,
AVELINA A. MAGNO, COVERING PARCELS OF LAND
OWNED BY THE DECEASED, CHARLES NEWTON HODGES,
AND THE CONTRACTS TO SELL COVERING WHICH WERE
EXECUTED BY HIM DURING HIS LIFETIME.
XXVI to XXIX
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEED OF SALE EXECUTED IN FAVOR OF THE APPELLEES,
LORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL
AND SALVADOR S. GUZMAN PURSUANT TO CONTRACTS
TO SPELL WHICH WERE CANCELLED AND RESCINDED.
XXX to XXXIV
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS
OF OWNERSHIP OVER REAL PROPERTY OF THE LORENZO
CARLES, JOSE PABLICO, ALFREDO CATEDRAL AND
SALVADOR S. GUZMAN, WHILE ACTING AS A PROBATE
COURT.
XXXV to XXXVI
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEES, FLORENIA
BARRIDO AND PURIFICACION CORONADO, EXECUTED BY
THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS
OF LAND OWNED BY THE DECEASED, CHARLES NEWTON
HODGES, AND THE CONTRACTS TO SELL COVERING
WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
XXXVII to XXXVIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF
SALE IN FAVOR OF THE APPELLEES, FLORENIA BARRIDO
AND PURIFICACION CORONADO, ALTHOUGH THEY WERE
IN ARREARS IN THE PAYMENTS AGREED UPON IN THE
ORIGINAL CONTRACT TO SELL WHICH THEY EXECUTED
WITH THE DECEASED, CHARLES NEWTON HODGES, IN
THE AMOUNT OF P10,680.00 and P4,428.90, RESPECTIVELY.
XXXIX to XL
THE LOWER COURT ERRED IN DEPRIVING THE DECEASED,
CHARLES NEWTON HODGES, OF THE CONTRACTUAL
RIGHT, EXERCISED THROUGH HIS ADMINISTRATOR, THE
INSTANT APPELLANT, TO CANCEL THE CONTRACTS TO
SELL OF THE APPELLEES, FLORENIA BARRIDO AND
PURIFICACION CORONADO.
XLI to XLIII
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEES, GRACIANO
LUCERO, ARITEO THOMAS JAMIR AND MELQUIADES
BATISANAN, EXECUTED BY THE APPELLEE, AVELINA A.
MAGNO, COVERING PARCELS OF LAND OWNED BY THE
DECEASED, CHARLES NEWTON HODGES, AND THE

CONTRACTS TO SELL COVERING WHICH WERE EXECUTED
BY HIM DURING HIS LIFETIME.
XLIV to XLVI
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEED OF SALE IN FAVOR OF THE APPELLEES, GRACIANO
LUCERO, ARITEO THOMAS JAMIR AND MELQUIADES
BATISANAN, PURSUANT TO CONTRACTS TO SELL
EXECUTED BY THEM WITH THE DECEASED, CHARLES
NEWTON HODGES, THE TERMS AND CONDITIONS OF
WHICH THEY HAVE NEVER COMPLIED WITH.
XLVII to XLIX
THE LOWER COURT ERRED IN DEPRIVING THE DECEASED,
CHARLES NEWTON HODGES, OF HIS RIGHT, EXERCISED
THROUGH HIS ADMINISTRATION, THE INSTANT
APPELLANT, TO CANCEL THE CONTRACTS TO SELL OF
THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS
JAMIR AND MELQUIADES BATISANAN, AND IN
DETERMINING THE RIGHTS OF THE SAID APPELLEES
OVER REAL PROPERTY WHILE ACTING AS A PROBATE
COURT.
L
THE LOWER COURT ERRED IN APPROVING THE FINAL
DEEDS OF SALE IN FAVOR OF THE APPELLEE, BELCESAR
CAUSING, EXECUTED BY THE APPELLEE, AVELINA A.
MAGNO, COVERING PARCELS OF LAND OWNED BY THE
DECEASED, CHARLES NEWTON HODGES, AND THE
CONTRACTS TO SELL COVERING WHICH WERE EXECUTED
BY HIM DURING HIS LIFETIME.
LI
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF
SALE IN FAVOR OF THE APPELLEE, BELCESAR CAUSING,
ALTHOUGH HE WAS IN ARREARS IN THE PAYMENTS
AGREED UPON IN THE ORIGINAL CONTRACT TO SELL
WHICH HE EXECUTED WITH THE DECEASED, CHARLES
NEWTON HODGES, IN THE AMOUNT OF P2,337.50.
LII
THE LOWER COURT ERRED IN APPROVING THE DEED OF
SALE IN FAVOR OF THE APPELLEE, BELCESAR CAUSING,
ALTHOUGH THE SAME WAS NOT EXECUTED IN
ACCORDANCE WITH THE RULES OF COURT.
LIII to LXI
THE LOWER COURT ERRED IN ORDERING THE APPELLANT,
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK TO
SURRENDER THE OWNER'S DUPLICATE CERTIFICATES OF
TITLE OVER THE RESPECTIVE LOTS COVERED BY THE
DEEDS OF SALE EXECUTED BY THE APPELLEE, AVELINA
A. MAGNO, IN FAVOR OF THE OTHER APPELLEES, JOSE
PABLICO, ALFREDO CATEDRAL, SALVADOR S. GUZMAN,
FLRENIA BARRIDO, PURIFICACION CORONADO,
BELCESAR CAUSING, ARITEO THOMAS JAMIR, MAXIMA
BATISANAN AND GRACIANO L. LUCERO.
LXII
THE LOWER COURT ERRED IN RESOLVING THE MOTION
OF THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY,
DATED NOVEMBER 3, 1965, WITHOUT ANY COPY THEREOF
HAVING BEEN SERVED UPON THE APPELLANT,
PHILIPPINE COMMERCIAL & INDUSTRIAL BANK.
170
LXIII
THE LOWER COURT ERRED IN HEARING AND
CONSIDERING THE MOTION OF THE APPELLEE, WESTERN
INSTITUTE OF TECHNOLOGY, DATED NOVEMBER 3rd, 1965,
ON NOVEMBER 23, 1965, WHEN THE NOTICE FOR THE
HEARING THEREOF WAS FOR NOVEMBER 20, 1965.
LXIV
THE LOWER COURT ERRED IN GRANTING THE APPELLEE,
WESTERN INSTITUTE OF TECHNOLOGY A RELIEF OTHER
THAN THAT PRAYED FOR IN ITS MOTION, DATED
NOVEMBER 3, 1965, IN THE ABSENCE OF A PRAYER FOR
GENERAL RELIEF CONTAINED THEREIN.
LXV
THE LOWER COURT ERRED IN ALLOWING THE APPELLEE,
WESTERN INSTITUTE OF TECHNOLOGY, TO CONTINUE
PAYMENTS UPON A CONTRACT TO SELL THE TERMS AND
CONDITIONS OF WHICH IT HAS FAILED TO FULFILL.
LXVI
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS
OF THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY
OVER THE REAL PROPERTY SUBJECT MATTER OF THE
CONTRACT TO SELL IT EXECUTED WITH THE DECEASED,
CHARLES NEWTON HODGES, WHILE ACTING AS A
PROBATE COURT.
LXVII
LOWER COURT ERRED IN ALLOWING THE CONTINUATION
OF PAYMENTS BY THE APPELLEE, WESTERN INSTITUTE
OF TECHNOLOGY, UPON A CONTRACT TO SELL
EXECUTED BY IT AND THE DECEASED, CHARLES NEWTON
HODGES, TO A PERSON OTHER THAN HIS LAWFULLY
APPOINTED ADMINISTRATOR.
LXVIII
THE LOWER COURT ERRED IN ORDERING THE PAYMENT
OF RETAINER'S FEES FROM THE SUPPOSED ESTATE OF
THE DECEASED, LINNIE JANE HODGES, WHEN THERE IS
NEITHER SUCH ESTATE NOR ASSETS THEREOF.
LXIX
THE LOWER COURT ERRED IN ORDERING THE PAYMENT
OF RETAINER'S FEES OF LAWYERS OF ALLEGED HEIRS TO
THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES.
LXX
THE LOWER COURT ERRED IN IMPLEMENTING THE
ALLEGED AGREEMENT BETWEEN THE HEIRS OF THE
SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES, AND THEIR LAWYERS.
LXXI
THE LOWER COURT ERRED IN ORDERING THE
PREMATURE DISTRIBUTION OF ESTATE ASSETS TO
ALLEGED HEIRS OR BENEFICIARIES THEREOF, BY WAY OF
RETAINER'S FEES.
LXXII

THE LOWER COURT ERRED IN ORDERING THAT ALL
FINAL DEEDS OF SALE EXECUTED PURSUANT TO
CONTRACTS TO SELL ENTERED INTO BY THE DECEASED,
CHARLES NEWTON HODGES, DURING HIS LIFETIME, BE
SIGNED JOINTLY BY THE APPELLEE, AVELINA A. MAGNO,
AND THE APPELLANT, PHILIPPINE COMMERCIAL AND
INDUSTRIAL BANK, AND NOT BY THE LATTER ONLY AS
THE LAWFULLY APPOINTED ADMINISTRATOR OF HIS
ESTATE.
LXXIII
THE LOWER COURT ERRED IN ORDERING THE PAYMENT
OF LEGAL EXPENSES FROM THE SUPPOSED ESTATE OF
THE DECEASED, LINNIE JANE HODGES, WHEN THERE IS
NEITHER SUCH ESTATE NOR ASSETS THEREOF.
LXXIV
THE LOWER COURT ERRED IN ORDERING THE PAYMENT
OF LEGAL EXPENSES OF LAWYERS OF ALLEGED HEIRS TO
THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES.
LXXV
THE LOWER COURT ERRED IN ORDERING THE
PREMATURE DISTRIBUTION OF ESTATE ASSETS TO
ALLEGED HEIRS OR BENEFICIARIES THEREOF, BY WAY OF
LEGAL EXPENSES.
LXXVI
THE LOWER COURT ERRED IN ORDERING THE PAYMENT
OF COMPENSATION TO THE PURPORTED
ADMINISTRATRIX OF THE SUPPOSED ESTATE OF THE
DECEASED, LINNIE JANE HODGES, THE INSTANT
APPELLEE, AVELINA A. MAGNO, WHEN THERE IS NEITHER
SUCH ESTATE NOR ASSETS THEREOF.
LXXVII
THE LOWER COURT ERRED IN ORDERING THAT THE
FUNDS OF THE TESTATE ESTATE OF THE DECEASED,
CHARLES NEWTON HODGES, BE PLACED IN A JOINT
ACCOUNT OF THE APPELLANT, PHILIPPINE COMMERCIAL
AND INDUSTRIAL BANK, AND THE APPELLEE, AVELINA A.
MAGNO, WHO IS A COMPLETE STRANGER TO THE
AFORESAID ESTATE.
LXXVIII
THE LOWER COURT ERRED IN ORDERING THAT THE
APPELLEE, AVELINA A. MAGNO, BE GIVEN EQUAL ACCESS
TO THE RECORDS OF THE TESTATE ESTATE OF THE
DECEASED, CHARLES NEWTON HODGES, WHEN SHE IS A
COMPLETE STRANGER TO THE AFORESAID ESTATE. (Pp.
73-83, Appellant's Brief.)
To complete this rather elaborate, and unavoidably extended
narration of the factual setting of these cases, it may also be
mentioned that an attempt was made by the heirs of Mrs. Hodges to
have respondent Magno removed as administratrix, with the
proposed appointment of Benito J. Lopez in her place, and that
respondent court did actually order such proposed replacement, but
the Court declared the said order of respondent court violative of its
injunction of August 8, 1967, hence without force and effect (see
Resolution of September 8, 1972 and February 1, 1973).
Subsequently, Atty. Efrain B. Trenas, one of the lawyers of said heirs,
appeared no longer for the proposed administrator Lopez but for the
171
heirs themselves, and in a motion dated October 26, 1972 informed
the Court that a motion had been filed with respondent court for the
removal of petitioner PCIB as administrator of the estate of C. N.
Hodges in Special Proceedings 1672, which removal motion alleged
that 22.968149% of the share of C. N. Hodges had already been
acquired by the heirs of Mrs. Hodges from certain heirs of her
husband. Further, in this connection, in the answer of PCIB to the
motion of respondent Magno to have it declared in contempt for
disregarding the Court's resolution of September 8, 1972 modifying
the injunction of August 8, 1967, said petitioner annexed thereto a
joint manifestation and motion, appearing to have been filed with
respondent court, informing said court that in addition to the fact that
22% of the share of C. N. Hodges had already been bought by the
heirs of Mrs. Hodges, as already stated, certain other heirs of Hodges
representing 17.343750% of his estate were joining cause with the
heirs of Mrs. Hodges as against PCIB, thereby making somewhat
precarious, if not possibly untenable, petitioners' continuation as
administrator of the Hodges estate.
RESOLUTION OF ISSUES IN THE CERTIORARI AND
PROHIBITION CASES
I
As to the Alleged Tardiness
of the Present Appeals
The priority question raised by respondent Magno relates to the
alleged tardiness of all the aforementioned thirty-three appeals of
PCIB. Considering, however, that these appeals revolve around
practically the same main issues and that it is admitted that some of
them have been timely taken, and, moreover, their final results
hereinbelow to be stated and explained make it of no consequence
whether or not the orders concerned have become final by the lapsing
of the respective periods to appeal them, We do not deem it
necessary to pass upon the timeliness of any of said appeals.
II
The Propriety Here of Certiorari and
Prohibition instead of Appeal
The other preliminary point of the same respondent is alleged
impropriety of the special civil action of certiorari and prohibition in
view of the existence of the remedy of appeal which it claims is
proven by the very appeals now before Us. Such contention fails to
take into account that there is a common thread among the basic
issues involved in all these thirty-three appeals which, unless
resolved in one single proceeding, will inevitably cause the
proliferation of more or less similar or closely related incidents and
consequent eventual appeals. If for this consideration alone, and
without taking account anymore of the unnecessary additional effort,
expense and time which would be involved in as many individual
appeals as the number of such incidents, it is logical and proper to
hold, as We do hold, that the remedy of appeal is not adequate in the
present cases. In determining whether or not a special civil action
of certiorari or prohibition may be resorted to in lieu of appeal, in
instances wherein lack or excess of jurisdiction or grave abuse of
discretion is alleged, it is not enough that the remedy of appeal exists
or is possible. It is indispensable that taking all the relevant
circumstances of the given case, appeal would better serve the
interests of justice. Obviously, the longer delay, augmented expense
and trouble and unnecessary repetition of the same work attendant to
the present multiple appeals, which, after all, deal with practically the
same basic issues that can be more expeditiously resolved or
determined in a single special civil action, make the remedies
of certiorari and prohibition, pursued by petitioner, preferable, for
purposes of resolving the common basic issues raised in all of them,
despite the conceded availability of appeal. Besides, the settling of

such common fundamental issues would naturally minimize the areas
of conflict between the parties and render more simple the
determination of the secondary issues in each of them. Accordingly,
respondent Magno's objection to the present remedy of certiorariand
prohibition must be overruled.
We come now to the errors assigned by petitioner-appellant,
Philippine Commercial & Industrial Bank, (PCIB, for short) in the
petition as well as in its main brief as appellant.
III
On Whether or Not There is Still Any Part of the Testate
Estate Mrs. Hodges that may be Adjudicated to her brothers
and sisters as her estate, of which respondent Magno is the
unquestioned Administratrix in special Proceedings 1307.
In the petition, it is the position of PCIB that the respondent court
exceeded its jurisdiction or gravely abused its discretion in further
recognizing after December 14, 1957 the existence of the Testate
Estate of Linnie Jane Hodges and in sanctioning purported acts of
administration therein of respondent Magno. Main ground for such
posture is that by the aforequoted order of respondent court of said
date, Hodges was already allowed to assert and exercise all his rights
as universal heir of his wife pursuant to the provisions of her will,
quoted earlier, hence, nothing else remains to be done in Special
Proceedings 1307 except to formally close it. In other words, the
contention of PCIB is that in view of said order, nothing more than a
formal declaration of Hodges as sole and exclusive heir of his wife
and the consequent formal unqualified adjudication to him of all her
estate remain to be done to completely close Special Proceedings
1307, hence respondent Magno should be considered as having
ceased to be Administratrix of the Testate Estate of Mrs. Hodges
since then.
After carefully going over the record, We feel constrained to hold
that such pose is patently untenable from whatever angle it is
examined.
To start with, We cannot find anywhere in respondent Order of
December 14, 1957 the sense being read into it by PCIB. The tenor
of said order bears no suggestion at all to such effect. The declaration
of heirs and distribution by the probate court of the estate of a
decedent is its most important function, and this Court is not
disposed to encourage judges of probate proceedings to be less than
definite, plain and specific in making orders in such regard, if for no
other reason than that all parties concerned, like the heirs, the
creditors, and most of all the government, the devisees and legatees,
should know with certainty what are and when their respective rights
and obligations ensuing from the inheritance or in relation thereto
would begin or cease, as the case may be, thereby avoiding precisely
the legal complications and consequent litigations similar to those
that have developed unnecessarily in the present cases. While it is
true that in instances wherein all the parties interested in the estate of
a deceased person have already actually distributed among
themselves their respective shares therein to the satisfaction of
everyone concerned and no rights of creditors or third parties are
adversely affected, it would naturally be almost ministerial for the
court to issue the final order of declaration and distribution, still it is
inconceivable that the special proceeding instituted for the purpose
may be considered terminated, the respective rights of all the parties
concerned be deemed definitely settled, and the executor or
administrator thereof be regarded as automatically discharged and
relieved already of all functions and responsibilities without the
corresponding definite orders of the probate court to such effect.
Indeed, the law on the matter is specific, categorical and unequivocal.
Section 1 of Rule 90 provides:
172
SECTION 1. When order for distribution of residue made. — When
the debts, funeral charges, and expenses of administration, the
allowance to the widow and inheritance tax, if any, chargeable to the
estate in accordance with law have been paid, the court, on the
application of the executor or administrator, or of a person interested
in the estate, and after hearing upon notice, shall assign the residue of
the estate to the persons entitled to the same, naming them and the
proportions, or parts, to which each is entitled, and such persons may
demand and recover their respective shares from the executor or
administrator, or any other person having the same in his possession.
If there is a controversy before the court as to who are the lawful
heirs of the deceased person or as to the distributive shares to which
each person is entitled under the law, the controversy shall be heard
and decided as in ordinary cases.
No distribution shall be allowed until the payment of the obligations
above mentioned has been made or provided for, unless the
distributees, or any of them give a bond, in a sum to be fixed by the
court, conditioned for the payment of said obligations within such
time as the court directs.
These provisions cannot mean anything less than that in order that a
proceeding for the settlement of the estate of a deceased may be
deemed ready for final closure, (1) there should have been issued
already an order of distribution or assignment of the estate of the
decedent among or to those entitled thereto by will or by law, but (2)
such order shall not be issued until after it is shown that the "debts,
funeral expenses, expenses of administration, allowances, taxes, etc.
chargeable to the estate" have been paid, which is but logical and
proper. (3) Besides, such an order is usually issued upon proper and
specific application for the purpose of the interested party or parties,
and not of the court.
... it is only after, and not before, the payment of all debts, funeral
charges, expenses of administration, allowance to the widow, and
inheritance tax shall have been effected that the court should make a
declaration of heirs or of such persons as are entitled by law to the
residue. (Moran, Comments on the Rules of Court, 2nd ed., Vol. II, p.
397, citing Capistrano vs. Nadurata, 49 Phil., 726; Lopez vs. Lopez,
37 Off. Gaz., 3091.) (JIMOGA-ON v. BELMONTE, 84 Phil. 545,
548) (p. 86, Appellee's Brief)
xxx xxx xxx
Under Section 753 of the Code of Civil Procedure, (corresponding to
Section 1, Rule 90) what brings an intestate (or testate) proceeding to
a close is the order of distribution directing delivery of the residue to
the persons entitled thereto after paying the indebtedness, if any, left
by the deceased. (Santiesteban vs. Santiesteban, 68 Phil. 367, 370.)
In the cases at bar, We cannot discern from the voluminous and
varied facts, pleadings and orders before Us that the above
indispensable prerequisites for the declaration of heirs and the
adjudication of the estate of Mrs. Hodges had already been complied
with when the order of December 14, 1957 was issued. As already
stated, We are not persuaded that the proceedings leading to the
issuance of said order, constituting barely of the motion of May 27,
1957, Annex D of the petition, the order of even date, Annex E, and
the motion of December 11, 1957, Annex H, all aforequoted, are
what the law contemplates. We cannot see in the order of December
14, 1957, so much relied upon by the petitioner, anything more than
an explicit approval of "all the sales, conveyances, leases and
mortgages of all the properties left by the deceased Linnie Jane
Hodges executed by the Executor Charles N. Hodges" (after the
death of his wife and prior to the date of the motion), plus a general
advance authorization to enable said "Executor — to execute
subsequent sales, conveyances, leases and mortgages of the
properties left the said deceased Linnie Jane Hodges in consonance

with wishes conveyed in the last will and testament of the latter",
which, certainly, cannot amount to the order of adjudication of the
estate of the decedent to Hodges contemplated in the law. In fact, the
motion of December 11, 1957 on which the court predicated the
order in question did not pray for any such adjudication at all. What
is more, although said motion did allege that "herein Executor
(Hodges) is not only part owner of the properties left as conjugal, but
also, the successor to all the properties left by the deceased Linnie
Jane Hodges", it significantly added that "herein Executor, as
Legatee (sic), has the right to sell, convey, lease or dispose of the
properties in the Philippines — during his lifetime", thereby
indicating that what said motion contemplated was nothing more
than either the enjoyment by Hodges of his rights under the particular
portion of the dispositions of his wife's will which were to be
operative only during his lifetime or the use of his own share of the
conjugal estate, pending the termination of the proceedings. In other
words, the authority referred to in said motions and orders is in the
nature of that contemplated either in Section 2 of Rule 109 which
permits, in appropriate cases, advance or partial implementation of
the terms of a duly probated will before final adjudication or
distribution when the rights of third parties would not be adversely
affected thereby or in the established practice of allowing the
surviving spouse to dispose of his own share of he conjugal estate,
pending its final liquidation, when it appears that no creditors of the
conjugal partnership would be prejudiced thereby, (see the Revised
Rules of Court by Francisco, Vol. V-B, 1970 ed. p. 887) albeit, from
the tenor of said motions, We are more inclined to believe that
Hodges meant to refer to the former. In any event, We are fully
persuaded that the quoted allegations of said motions read together
cannot be construed as a repudiation of the rights unequivocally
established in the will in favor of Mrs. Hodges' brothers and sisters to
whatever have not been disposed of by him up to his death.
Indeed, nowhere in the record does it appear that the trial court
subsequently acted upon the premise suggested by petitioner. On the
contrary, on November 23, 1965, when the court resolved the motion
of appellee Western Institute of Technology by its order We have
quoted earlier, it categorically held that as of said date, November 23,
1965, "in both cases (Special Proceedings 1307 and 1672) there is as
yet no judicial declaration of heirs nor distribution of properties to
whomsoever are entitled thereto." In this connection, it may be stated
further against petitioner, by way of some kind of estoppel, that in its
own motion of January 8, 1965, already quoted in full on pages
54-67 of this decision, it prayed inter alia that the court declare that
"C. N. Hodges was the sole and exclusive heir of the estate of Linnie
Jane Hodges", which it would not have done if it were really
convinced that the order of December 14, 1957 was already the order
of adjudication and distribution of her estate. That said motion was
later withdrawn when Magno filed her own motion for determination
and adjudication of what should correspond to the brothers and
sisters of Mrs. Hodges does not alter the indubitable implication of
the prayer of the withdrawn motion.
It must be borne in mind that while it is true that Mrs. Hodges
bequeathed her whole estate to her husband and gave him what
amounts to full powers of dominion over the same during his lifetime,
she imposed at the same time the condition that whatever should
remain thereof upon his death should go to her brothers and sisters.
In effect, therefore, what was absolutely given to Hodges was only so
much of his wife's estate as he might possibly dispose of during his
lifetime; hence, even assuming that by the allegations in his motion,
he did intend to adjudicate the whole estate to himself, as suggested
by petitioner, such unilateral act could not have affected or
diminished in any degree or manner the right of his brothers and
sisters-in-law over what would remain thereof upon his death, for
surely, no one can rightly contend that the testamentary provision in
question allowed him to so adjudicate any part of the estate to
173
himself as to prejudice them. In other words, irrespective of whatever
might have been Hodges' intention in his motions, as Executor, of
May 27, 1957 and December 11, 1957, the trial court's orders
granting said motions, even in the terms in which they have been
worded, could not have had the effect of an absolute and
unconditional adjudication unto Hodges of the whole estate of his
wife. None of them could have deprived his brothers and
sisters-in-law of their rights under said will. And it may be added
here that the fact that no one appeared to oppose the motions in
question may only be attributed, firstly, to the failure of Hodges to
send notices to any of them, as admitted in the motion itself, and,
secondly, to the fact that even if they had been notified, they could
not have taken said motions to be for the final distribution and
adjudication of the estate, but merely for him to be able, pending
such final distribution and adjudication, to either exercise during his
lifetime rights of dominion over his wife's estate in accordance with
the bequest in his favor, which, as already observed, may be allowed
under the broad terms of Section 2 of Rule 109, or make use of his
own share of the conjugal estate. In any event, We do not believe that
the trial court could have acted in the sense pretended by petitioner,
not only because of the clear language of the will but also because
none of the interested parties had been duly notified of the motion
and hearing thereof. Stated differently, if the orders of May 27, 1957
and December 4, 1957 were really intended to be read in the sense
contended by petitioner, We would have no hesitancy in declaring
them null and void.
Petitioner cites the case of Austria vs. Ventenilla, G. R. No. L-10018,
September 19, 1956, (unreported but a partial digest thereof appears
in 99 Phil. 1069) in support of its insistence that with the orders of
May 27 and December 14, 1957, the closure of Mrs. Hodges' estate
has become a mere formality, inasmuch as said orders amounted to
the order of adjudication and distribution ordained by Section 1 of
Rule 90. But the parallel attempted to be drawn between that case
and the present one does not hold. There the trial court had in fact
issued a clear, distinct and express order of adjudication and
distribution more than twenty years before the other heirs of the
deceased filed their motion asking that the administratrix be removed,
etc. As quoted in that decision, the order of the lower court in that
respect read as follows:
En orden a la mocion de la administradora, el juzgado la encuentra
procedente bajo la condicion de que no se hara entrega ni
adjudicacion de los bienes a los herederos antes de que estos presten
la fianza correspondiente y de acuerdo con lo prescrito en el Art. 754
del Codigo de Procedimientos: pues, en autos no aparece que hayan
sido nombrados comisionados de avaluo y reclamaciones. Dicha
fianza podra ser por un valor igual al de los bienes que correspondan
a cada heredero segun el testamento. Creo que no es obice para la
terminacion del expediente el hecho de que la administradora no ha
presentado hasta ahora el inventario de los bienes; pues, segun la ley,
estan exentos de esta formalidad os administradores que son
legatarios del residuo o remanente de los bienes y hayan prestado
fianza para responder de las gestiones de su cargo, y aparece en el
testamento que la administradora Alejandra Austria reune dicha
condicion.
POR TODO LO EXPUESTO, el juzgado declara, 1.o: no haber lugar
a la mocion de Ramon Ventenilla y otros; 2.o, declara asimismo que
los unicos herederos del finado Antonio Ventenilla son su esposa
Alejandra Austria, Maria Ventenilla, hermana del testador, y Ramon
Ventenilla, Maria Ventenilla, Ramon Soriano, Eulalio Soriano, Jose
Soriano, Gabriela Ventenilla, Lorenzo Ventenilla, Felicitas
Ventenilla, Eugenio Ventenilla y Alejandra Ventenilla, en
representacion de los difuntos Juan, Tomas, Catalino y Froilan,
hermanos del testador, declarando, ademas que la heredera Alejandra
Austria tiene derecho al remanente de todos los bienes dejados por el
finado, despues de deducir de ellos la porcion que corresponde a cada

uno de sus coherederos, conforme esta mandado en las clausulas 8.a,
9.a, 10.a, 11.a, 12.a y 13.a del testamento; 3.o, se aprueba el pago
hecho por la administradora de los gastos de la ultima enfermedad y
funerales del testador, de la donacion hecha por el testador a favor de
la Escuela a Publica del Municipio de Mangatarem, y de las misas en
sufragio del alma del finado; 4.o, que una vez prestada la fianza
mencionada al principio de este auto, se haga la entrega y
adjudicacion de los bienes, conforme se dispone en el testamento y se
acaba de declarar en este auto; 5.o, y, finalmente, que verificada la
adjudicacion, se dara por terminada la administracion, revelandole
toda responsabilidad a la administradora, y cancelando su fianza.
ASI SE ORDENA.
Undoubtedly, after the issuance of an order of such tenor, the closure
of any proceedings for the settlement of the estate of a deceased
person cannot be but perfunctory.
In the case at bar, as already pointed out above, the two orders relied
upon by petitioner do not appear ex-facie to be of the same tenor and
nature as the order just quoted, and, what is more, the circumstances
attendant to its issuance do not suggest that such was the intention of
the court, for nothing could have been more violative of the will of
Mrs. Hodges.
Indeed, to infer from Hodges' said motions and from his statements
of accounts for the years 1958, 1959 and 1960, A Annexes I, K and
M, respectively, wherein he repeatedly claimed that "herein executor
(being) the only devisee or legatee of the deceased, in accordance
with the last will and testament already probated," there is "no (other)
person interested in the Philippines of the time and place of
examining herein account to be given notice", an intent to adjudicate
unto himself the whole of his wife's estate in an absolute manner and
without regard to the contingent interests of her brothers and sisters,
is to impute bad faith to him, an imputation which is not legally
permissible, much less warranted by the facts of record herein.
Hodges knew or ought to have known that, legally speaking, the
terms of his wife's will did not give him such a right. Factually, there
are enough circumstances extant in the records of these cases
indicating that he had no such intention to ignore the rights of his
co-heirs. In his very motions in question, Hodges alleged, thru
counsel, that the "deceased Linnie Jane Hodges died leaving no
descendants and ascendants, except brothers and sisters and herein
petitioner, as surviving spouse, to inherit the properties of the
decedent", and even promised that "proper accounting will be had —
in all these transactions" which he had submitted for approval and
authorization by the court, thereby implying that he was aware of his
responsibilities vis-a-vis his co-heirs. As alleged by respondent
Magno in her brief as appellee:
Under date of April 14, 1959, C. N. Hodges filed his first "Account
by the Executor" of the estate of Linnie Jane Hodges. In the
"Statement of Networth of Mr. C. N. Hodges and the Estate of Linnie
Jane Hodges" as of December 31, 1958 annexed thereto, C. N.
Hodges reported that the combined conjugal estate earned a net
income of P328,402.62, divided evenly between him and the estate
of Linnie Jane Hodges. Pursuant to this, he filed an "individual
income tax return" for calendar year 1958 on the estate of Linnie
Jane Hodges reporting, under oath, the said estate as having earned
income of P164,201.31, exactly one-half of the net income of his
combined personal assets and that of the estate of Linnie Jane
Hodges. (p. 91, Appellee's Brief.)
Under date of July 21, 1960, C. N. Hodges filed his second "Annual
Statement of Account by the Executor" of the estate of Linnie Jane
Hodges. In the "Statement of Networth of Mr. C. N. Hodges and the
Estate of Linnie Jane Hodges" as of December 31, 1959 annexed
thereto, C. N. Hodges reported that the combined conjugal estate
174
earned a net income of P270,623.32, divided evenly between him
and the estate of Linnie Jane Hodges. Pursuant to this, he filed an
"individual income tax return" for calendar year 1959 on the estate of
Linnie Jane Hodges reporting, under oath, the said estate as having
earned income of P135,311.66, exactly one-half of the net income of
his combined personal assets and that of the estate of Linnie Jane
Hodges. (pp. 91-92, id.)
Under date of April 20, 1961, C. N. Hodges filed his third "Annual
Statement of Account by the Executor for the year 1960" of the
estate of Linnie Jane Hodges. In the "Statement of Net Worth of Mr.
C. N. Hodges and the Estate of Linnie Jane Hodges" as of December
31, 1960 annexed thereto, C. N. Hodges reported that the combined
conjugal estate earned a net income of P314,857.94, divided of
Linnie Jane Hodges. Pursuant to this, he filed an "individual evenly
between him and the estate income tax return" for calendar year 1960
on the estate of Linnie Jane Hodges reporting, under oath, the said
estate as having earned income of P157,428.97, exactly one-half of
the net income of his combined personal assets and that of the estate
of Linnie Jane Hodges. (pp. 92-93, id.)
In the petition for probate that he (Hodges) filed, he listed the seven
brothers and sisters of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the will to probate
unfortunately omitted one of the heirs, Roy Higdon (see p. 14, Green
ROA). Immediately, C. N. Hodges filed a verified motion to have
Roy Higdon's name included as an heir, stating that he wanted to
straighten the records "in order (that) the heirs of deceased Roy
Higdon may not think or believe they were omitted, and that they
were really and are interested in the estate of deceased Linnie Jane
Hodges".
Thus, he recognized, if in his own way, the separate identity of his
wife's estate from his own share of the conjugal partnership up to the
time of his death, more than five years after that of his wife. He never
considered the whole estate as a single one belonging exclusively to
himself. The only conclusion one can gather from this is that he
could have been preparing the basis for the eventual transmission of
his wife's estate, or, at least, so much thereof as he would not have
been able to dispose of during his lifetime, to her brothers and sisters
in accordance with her expressed desire, as intimated in his tax return
in the United States to be more extensively referred to anon. And
assuming that he did pay the corresponding estate and inheritance
taxes in the Philippines on the basis of his being sole heir, such
payment is not necessarily inconsistent with his recognition of the
rights of his co-heirs. Without purporting to rule definitely on the
matter in these proceedings, We might say here that We are inclined
to the view that under the peculiar provisions of his wife's will, and
for purposes of the applicable inheritance tax laws, Hodges had to be
considered as her sole heir, pending the actual transmission of the
remaining portion of her estate to her other heirs, upon the
eventuality of his death, and whatever adjustment might be warranted
should there be any such remainder then is a matter that could well
be taken care of by the internal revenue authorities in due time.
It is to be noted that the lawyer, Atty. Leon P. Gellada, who signed
the motions of May 27, 1957 and December 11, 1957 and the
aforementioned statements of account was the very same one who
also subsequently signed and filed the motion of December 26, 1962
for the appointment of respondent Magno as "Administratrix of the
Estate of Mrs. Linnie Jane Hodges" wherein it was alleged that "in
accordance with the provisions of the last will and testament of
Linnie Jane Hodges, whatever real properties that may remain at the
death of her husband, Charles Newton Hodges, the said properties
shall be equally divided among their heirs." And it appearing that
said attorney was Hodges' lawyer as Executor of the estate of his
wife, it stands to reason that his understanding of the situation,

implicit in his allegations just quoted, could somehow be reflective
of Hodges' own understanding thereof.
As a matter of fact, the allegations in the motion of the same Atty.
Gellada dated July 1, 1957, a "Request for Inclusion of the Name of
Roy Higdon in the Order of the Court dated July 19, 1957, etc.",
reference to which is made in the above quotation from respondent
Magno's brief, are over the oath of Hodges himself, who verified the
motion. Said allegations read:
1. — That the Hon. Court issued orders dated June 29, 1957,
ordering the probate of the will.
2. — That in said order of the Hon. Court, the relatives of the
deceased Linnie Jane Hodges were enumerated. However, in the
petition as well as in the testimony of Executor during the hearing,
the name Roy Higdon was mentioned, but deceased. It was
unintentionally omitted the heirs of said Roy Higdon who are his
wife Aline Higdon and son David Higdon, all of age, and residents of
Quinlan, Texas, U.S.A.
3. — That to straighten the records, and in order the heirs of
deceased Roy Higdon may not think or believe they were omitted,
and that they were really and are interested in the estate of deceased
Linnie Jane Hodges, it is requested of the Hon. Court to insert the
names of Aline Higdon and David Higdon, wife and son of deceased
Roy Higdon in the said order of the Hon. Court dated June 29, 1957.
(pars. 1 to 3, Annex 2 of Magno's Answer — Record, p. 260)
As can be seen, these italicized allegations indicate, more or less, the
real attitude of Hodges in regard to the testamentary dispositions of
his wife.
In connection with this point of Hodges' intent, We note that there
are documents, copies of which are annexed to respondent Magno's
answer, which purportedly contain Hodges' own solemn declarations
recognizing the right of his co-heirs, such as the alleged tax return he
filed with the United States Taxation authorities, identified as
Schedule M, (Annex 4 of her answer) and his supposed affidavit of
renunciation, Annex 5. In said Schedule M, Hodges appears to have
answered the pertinent question thus:
2a. Had the surviving spouse the right to declare an election between
(1) the provisions made in his or her favor by the will and (11) dower,
curtesy or a statutory interest? (X) Yes ( ) No
2d. Does the surviving spouse contemplate renouncing the will and
electing to take dower, curtesy, or a statutory interest? (X) Yes ( ) No
3. According to the information and belief of the person or persons
filing the return, is any action described under question 1 designed or
contemplated? ( ) Yes (X) No (Annex 4, Answer — Record, p. 263)
and to have further stated under the item, "Description of property
interests passing to surviving spouse" the following:
None, except for purposes of administering the Estate, paying debts,
taxes and other legal charges. It is the intention of the surviving
husband of deceased to distribute the remaining property and
interests of the deceased in their Community Estate to the devisees
and legatees named in the will when the debts, liabilities, taxes and
expenses of administration are finally determined and paid. (Annex 4,
Answer — Record, p. 263)
In addition, in the supposed affidavit of Hodges, Annex 5, it is stated:
I, C. N. Hodges, being duly sworn, on oath affirm that at the time the
United States Estate Tax Return was filed in the Estate of Linnie Jane
Hodges on August 8, 1958, I renounced and disclaimed any and all
right to receive the rents, emoluments and income from said estate,
175
as shown by the statement contained in Schedule M at page 29 of
said return, a copy of which schedule is attached to this affidavit and
made a part hereof.
The purpose of this affidavit is to ratify and confirm, and I do hereby
ratify and confirm, the declaration made in Schedule M of said
return and hereby formally disclaim and renounce any right on my
part to receive any of the said rents, emoluments and income from
the estate of my deceased wife, Linnie Jane Hodges. This affidavit is
made to absolve me or my estate from any liability for the payment
of income taxes on income which has accrued to the estate of Linnie
Jane Hodges since the death of the said Linnie Jane Hodges on May
23, 1957. (Annex 5, Answer — Record, p. 264)
Although it appears that said documents were not duly presented as
evidence in the court below, and We cannot, therefore, rely on them
for the purpose of the present proceedings, still, We cannot close our
eyes to their existence in the record nor fail to note that their tenor
jibes with Our conclusion discussed above from the circumstances
related to the orders of May 27 and December 14, 1957. 5 Somehow,
these documents, considering they are supposed to be copies of their
originals found in the official files of the governments of the United
States and of the Philippines, serve to lessen any possible
apprehension that Our conclusion from the other evidence of Hodges'
manifest intent vis-a-vis the rights of his co-heirs is without basis in
fact.
Verily, with such eloquent manifestations of his good intentions
towards the other heirs of his wife, We find it very hard to believe
that Hodges did ask the court and that the latter agreed that he be
declared her sole heir and that her whole estate be adjudicated to him
without so much as just annotating the contingent interest of her
brothers and sisters in what would remain thereof upon his demise.
On the contrary, it seems to us more factual and fairer to assume that
Hodges was well aware of his position as executor of the will of his
wife and, as such, had in mind the following admonition made by the
Court in Pamittan vs. Lasam, et al., 60 Phil., 908, at pp. 913-914:
Upon the death of Bernarda in September, 1908, said lands continued
to be conjugal property in the hands of the defendant Lasam. It is
provided in article 1418 of the Civil Code that upon the dissolution
of the conjugal partnership, an inventory shall immediately be made
and this court in construing this provision in connection with section
685 of the Code of Civil Procedure (prior to its amendment by Act
No. 3176 of November 24, 1924) has repeatedly held that in the
event of the death of the wife, the law imposes upon the husband the
duty of liquidating the affairs of the partnership without delay (desde
luego) (Alfonso vs. Natividad, 6 Phil., 240; Prado vs. Lagera, 7 Phil.,
395; De la Rama vs. De la Rama, 7 Phil., 745; Enriquez vs. Victoria,
10 Phil., 10; Amancio vs. Pardo, 13 Phil., 297; Rojas vs. Singson
Tongson, 17 Phil., 476; Sochayseng vs. Trujillo, 31 Phil., 153;
Molera vs. Molera, 40 Phil., 566; Nable Jose vs. Nable Jose, 41 Phil.,
713.)
In the last mentioned case this court quoted with approval the case
of Leatherwood vs. Arnold (66 Texas, 414, 416, 417), in which that
court discussed the powers of the surviving spouse in the
administration of the community property. Attention was called to
the fact that the surviving husband, in the management of the
conjugal property after the death of the wife, was a trustee of unique
character who is liable for any fraud committed by him with relation
to the property while he is charged with its administration. In the
liquidation of the conjugal partnership, he had wide powers (as the
law stood prior to Act No. 3176) and the high degree of trust reposed
in him stands out more clearly in view of the fact that he was the
owner of a half interest in his own right of the conjugal estate which
he was charged to administer. He could therefore no more acquire a
title by prescription against those for whom he was administering the

conjugal estate than could a guardian against his ward or a judicial
administrator against the heirs of estate. Section 38 of Chapter III of
the Code of Civil Procedure, with relation to prescription, provides
that "this chapter shall not apply ... in the case of a continuing and
subsisting trust." The surviving husband in the administration and
liquidation of the conjugal estate occupies the position of a trustee of
the highest order and is not permitted by the law to hold that estate or
any portion thereof adversely to those for whose benefit the law
imposes upon him the duty of administration and liquidation. No
liquidation was ever made by Lasam — hence, the conjugal property
which came into his possession on the death of his wife in September,
1908, still remains conjugal property, a continuing and subsisting
trust. He should have made a liquidation immediately (desde luego).
He cannot now be permitted to take advantage of his own wrong.
One of the conditions of title by prescription (section 41, Code of
Civil Procedure) is possession "under a claim of title exclusive of any
other right". For a trustee to make such a claim would be a manifest
fraud.
And knowing thus his responsibilities in the premises, We are not
convinced that Hodges arrogated everything unto himself leaving
nothing at all to be inherited by his wife's brothers and sisters.
PCIB insists, however, that to read the orders of May 27 and
December 14, 1957, not as adjudicatory, but merely as approving
past and authorizing future dispositions made by Hodges in a
wholesale and general manner, would necessarily render the said
orders void for being violative of the provisions of Rule 89
governing the manner in which such dispositions may be made and
how the authority therefor and approval thereof by the probate court
may be secured. If We sustained such a view, the result would only
be that the said orders should be declared ineffective either way they
are understood, considering We have already seen it is legally
impossible to consider them as adjudicatory. As a matter of fact,
however, what surges immediately to the surface, relative to PCIB's
observations based on Rule 89, is that from such point of view, the
supposed irregularity would involve no more than some
non-jurisdictional technicalities of procedure, which have for their
evident fundamental purpose the protection of parties interested in
the estate, such as the heirs, its creditors, particularly the government
on account of the taxes due it; and since it is apparent here that none
of such parties are objecting to said orders or would be prejudiced by
the unobservance by the trial court of the procedure pointed out by
PCIB, We find no legal inconvenience in nor impediment to Our
giving sanction to the blanket approval and authority contained in
said orders. This solution is definitely preferable in law and in equity,
for to view said orders in the sense suggested by PCIB would result
in the deprivation of substantive rights to the brothers and sisters of
Mrs. Hodges, whereas reading them the other way will not cause any
prejudice to anyone, and, withal, will give peace of mind and
stability of rights to the innocent parties who relied on them in good
faith, in the light of the peculiar pertinent provisions of the will of
said decedent.
Now, the inventory submitted by Hodges on May 12, 1958 referred
to the estate of his wife as consisting of "One-half of all the items
designated in the balance sheet, copy of which is hereto attached and
marked as "Annex A"." Although, regrettably, no copy of said Annex
A appears in the records before Us, We take judicial notice, on the
basis of the undisputed facts in these cases, that the same consists of
considerable real and other personal kinds of properties. And since,
according to her will, her husband was to be the sole owner thereof
during his lifetime, with full power and authority to dispose of any of
them, provided that should there be any remainder upon his death,
such remainder would go to her brothers and sisters, and furthermore,
there is no pretension, much less any proof that Hodges had in fact
disposed of all of them, and, on the contrary, the indications are
rather to the effect that he had kept them more or less intact, it cannot
176
truthfully be said that, upon the death of Hodges, there was no more
estate of Mrs. Hodges to speak of. It is Our conclusion, therefore,
that properties do exist which constitute such estate, hence Special
Proceedings 1307 should not yet be closed.
Neither is there basis for holding that respondent Magno has ceased
to be the Administratrix in said proceeding. There is no showing that
she has ever been legally removed as such, the attempt to replace her
with Mr. Benito Lopez without authority from the Court having been
expressly held ineffective by Our resolution of September 8, 1972.
Parenthetically, on this last point, PCIB itself is very emphatic in
stressing that it is not questioning said respondent's status as such
administratrix. Indeed, it is not clear that PCIB has any standing to
raise any objection thereto, considering it is a complete stranger
insofar as the estate of Mrs. Hodges is concerned.
It is the contention of PCIB, however, that as things actually stood at
the time of Hodges' death, their conjugal partnership had not yet been
liquidated and, inasmuch as the properties composing the same were
thus commingled pro indiviso and, consequently, the properties
pertaining to the estate of each of the spouses are not yet identifiable,
it is PCIB alone, as administrator of the estate of Hodges, who should
administer everything, and all that respondent Magno can do for the
time being is to wait until the properties constituting the remaining
estate of Mrs. Hodges have been duly segregated and delivered to her
for her own administration. Seemingly, PCIB would liken the Testate
Estate of Linnie Jane Hodges to a party having a claim of ownership
to some properties included in the inventory of an administrator of
the estate of a decedent, (here that of Hodges) and who normally has
no right to take part in the proceedings pending the establishment of
his right or title; for which as a rule it is required that an ordinary
action should be filed, since the probate court is without jurisdiction
to pass with finality on questions of title between the estate of the
deceased, on the one hand, and a third party or even an heir claiming
adversely against the estate, on the other.
We do not find such contention sufficiently persuasive. As We see it,
the situation obtaining herein cannot be compared with the claim of a
third party the basis of which is alien to the pending probate
proceedings. In the present cases what gave rise to the claim of PCIB
of exclusive ownership by the estate of Hodges over all the
properties of the Hodges spouses, including the share of Mrs. Hodges
in the community properties, were the orders of the trial court issued
in the course of the very settlement proceedings themselves, more
specifically, the orders of May 27 and December 14, 1957 so often
mentioned above. In other words, the root of the issue of title
between the parties is something that the court itself has done in the
exercise of its probate jurisdiction. And since in the ultimate analysis,
the question of whether or not all the properties herein involved
pertain exclusively to the estate of Hodges depends on the legal
meaning and effect of said orders, the claim that respondent court has
no jurisdiction to take cognizance of and decide the said issue is
incorrect. If it was within the competence of the court to issue the
root orders, why should it not be within its authority to declare their
true significance and intent, to the end that the parties may know
whether or not the estate of Mrs. Hodges had already been
adjudicated by the court, upon the initiative of Hodges, in his favor,
to the exclusion of the other heirs of his wife instituted in her will?
At this point, it bears emphasis again that the main cause of all the
present problems confronting the courts and the parties in these cases
was the failure of Hodges to secure, as executor of his wife's estate,
from May, 1957 up to the time of his death in December, 1962, a
period of more than five years, the final adjudication of her estate
and the closure of the proceedings. The record is bare of any showing
that he ever exerted any effort towards the early settlement of said
estate. While, on the one hand, there are enough indications, as
already discuss that he had intentions of leaving intact her share of

the conjugal properties so that it may pass wholly to his co-heirs
upon his death, pursuant to her will, on the other hand, by not
terminating the proceedings, his interests in his own half of the
conjugal properties remained commingled pro-indiviso with those of
his co-heirs in the other half. Obviously, such a situation could not be
conducive to ready ascertainment of the portion of the inheritance
that should appertain to his co-heirs upon his death. Having these
considerations in mind, it would be giving a premium for such
procrastination and rather unfair to his co-heirs, if the administrator
of his estate were to be given exclusive administration of all the
properties in question, which would necessarily include the function
of promptly liquidating the conjugal partnership, thereby identifying
and segregating without unnecessary loss of time which properties
should be considered as constituting the estate of Mrs. Hodges, the
remainder of which her brothers and sisters are supposed to inherit
equally among themselves.
To be sure, an administrator is not supposed to represent the interests
of any particular party and his acts are deemed to be objectively for
the protection of the rights of everybody concerned with the estate of
the decedent, and from this point of view, it maybe said that even if
PCIB were to act alone, there should be no fear of undue
disadvantage to anyone. On the other hand, however, it is evidently
implicit in section 6 of Rule 78 fixing the priority among those to
whom letters of administration should be granted that the criterion in
the selection of the administrator is not his impartiality alone but,
more importantly, the extent of his interest in the estate, so much so
that the one assumed to have greater interest is preferred to another
who has less. Taking both of these considerations into account,
inasmuch as, according to Hodges' own inventory submitted by him
as Executor of the estate of his wife, practically all their properties
were conjugal which means that the spouses have equal shares
therein, it is but logical that both estates should be administered
jointly by representatives of both, pending their segregation from
each other. Particularly is such an arrangement warranted because the
actuations so far of PCIB evince a determined, albeit groundless,
intent to exclude the other heirs of Mrs. Hodges from their
inheritance. Besides, to allow PCIB, the administrator of his estate, to
perform now what Hodges was duty bound to do as executor is to
violate the spirit, if not the letter, of Section 2 of Rule 78 which
expressly provides that "The executor of an executor shall not, as
such, administer the estate of the first testator." It goes without
saying that this provision refers also to the administrator of an
executor like PCIB here.
We are not unmindful of the fact that under Section 2 of Rule 73,
"When the marriage is dissolved by the death of the husband or wife,
the community property shall be inventoried, administered, and
liquidated, and the debts thereof paid, in the testate or intestate
proceedings of the deceased spouse. If both spouses have died, the
conjugal partnership shall be liquidated in the testate or intestate
proceedings of either." Indeed, it is true that the last sentence of this
provision allows or permits the conjugal partnership of spouses who
are both deceased to be settled or liquidated in the testate or intestate
proceedings of either, but precisely because said sentence allows or
permits that the liquidation be made in either proceeding, it is a
matter of sound judicial discretion in which one it should be made.
After all, the former rule referring to the administrator of the
husband's estate in respect to such liquidation was done away with by
Act 3176, the pertinent provisions of which are now embodied in the
rule just cited.
Thus, it can be seen that at the time of the death of Hodges, there was
already the pending judicial settlement proceeding of the estate of
Mrs. Hodges, and, more importantly, that the former was the
executor of the latter's will who had, as such, failed for more than
five years to see to it that the same was terminated earliest, which
was not difficult to do, since from ought that appears in the record,
177
there were no serious obstacles on the way, the estate not being
indebted and there being no immediate heirs other than Hodges
himself. Such dilatory or indifferent attitude could only spell possible
prejudice of his co-heirs, whose rights to inheritance depend entirely
on the existence of any remainder of Mrs. Hodges' share in the
community properties, and who are now faced with the pose of PCIB
that there is no such remainder. Had Hodges secured as early as
possible the settlement of his wife's estate, this problem would not
arisen. All things considered, We are fully convinced that the
interests of justice will be better served by not permitting or allowing
PCIB or any administrator of the estate of Hodges exclusive
administration of all the properties in question. We are of the
considered opinion and so hold that what would be just and proper is
for both administrators of the two estates to act conjointly until after
said estates have been segregated from each other.
At this juncture, it may be stated that we are not overlooking the fact
that it is PCIB's contention that, viewed as a substitution, the
testamentary disposition in favor of Mrs. Hodges' brothers and sisters
may not be given effect. To a certain extent, this contention is correct.
Indeed, legally speaking, Mrs. Hodges' will provides neither for a
simple or vulgar substitution under Article 859 of the Civil Code nor
for a fideicommissary substitution under Article 863 thereof. There is
no vulgar substitution therein because there is no provision for either
(1) predecease of the testator by the designated heir or (2) refusal or
(3) incapacity of the latter to accept the inheritance, as required by
Article 859; and neither is there a fideicommissary substitution
therein because no obligation is imposed thereby upon Hodges to
preserve the estate or any part thereof for anyone else. But from these
premises, it is not correct to jump to the conclusion, as PCIB does,
that the testamentary dispositions in question are therefore
inoperative and invalid.
The error in PCIB's position lies simply in the fact that it views the
said disposition exclusively in the light of substitutions covered by
the Civil Code section on that subject, (Section 3, Chapter 2, Title IV,
Book III) when it is obvious that substitution occurs only when
another heir is appointed in a will "so that he may enter into
inheritance in default of the heir originally instituted," (Article
857, id.) and, in the present case, no such possible default is
contemplated. The brothers and sisters of Mrs. Hodges are not
substitutes for Hodges because, under her will, they are not to inherit
what Hodges cannot, would not or may not inherit, but what he
would not dispose of from his inheritance; rather, therefore, they are
also heirs instituted simultaneously with Hodges, subject, however,
to certain conditions, partially resolutory insofar as Hodges was
concerned and correspondingly suspensive with reference to his
brothers and sisters-in-law. It is partially resolutory, since it
bequeaths unto Hodges the whole of her estate to be owned and
enjoyed by him as universal and sole heir with absolute dominion
over them6 only during his lifetime, which means that while he could
completely and absolutely dispose of any portion thereof inter
vivos to anyone other than himself, he was not free to do so mortis
causa, and all his rights to what might remain upon his death would
cease entirely upon the occurrence of that contingency, inasmuch as
the right of his brothers and sisters-in-law to the inheritance,
although vested already upon the death of Mrs. Hodges, would
automatically become operative upon the occurrence of the death of
Hodges in the event of actual existence of any remainder of her estate
then.
Contrary to the view of respondent Magno, however, it was not the
usufruct alone of her estate, as contemplated in Article 869 of the
Civil Code, that she bequeathed to Hodges during his lifetime, but
the full ownership thereof, although the same was to last also during
his lifetime only, even as there was no restriction whatsoever against
his disposing or conveying the whole or any portion thereof to
anybody other than himself. The Court sees no legal impediment to

this kind of institution, in this jurisdiction or under Philippine law,
except that it cannot apply to the legitime of Hodges as the surviving
spouse, consisting of one-half of the estate, considering that Mrs.
Hodges had no surviving ascendants nor descendants. (Arts. 872, 900,
and 904, New Civil Code.)
But relative precisely to the question of how much of Mrs. Hodges'
share of the conjugal partnership properties may be considered as her
estate, the parties are in disagreement as to how Article 16 of the
Civil Code7 should be applied. On the one hand, petitioner claims
that inasmuch as Mrs. Hodges was a resident of the Philippines at the
time of her death, under said Article 16, construed in relation to the
pertinent laws of Texas and the principle of renvoi, what should be
applied here should be the rules of succession under the Civil Code
of the Philippines, and, therefore, her estate could consist of no more
than one-fourth of the said conjugal properties, the other fourth being,
as already explained, the legitime of her husband (Art. 900, Civil
Code) which she could not have disposed of nor burdened with any
condition (Art. 872, Civil Code). On the other hand, respondent
Magno denies that Mrs. Hodges died a resident of the Philippines,
since allegedly she never changed nor intended to change her original
residence of birth in Texas, United States of America, and contends
that, anyway, regardless of the question of her residence, she being
indisputably a citizen of Texas, under said Article 16 of the Civil
Code, the distribution of her estate is subject to the laws of said State
which, according to her, do not provide for any legitime, hence, the
brothers and sisters of Mrs. Hodges are entitled to the remainder of
the whole of her share of the conjugal partnership properties
consisting of one-half thereof. Respondent Magno further maintains
that, in any event, Hodges had renounced his rights under the will in
favor of his co-heirs, as allegedly proven by the documents touching
on the point already mentioned earlier, the genuineness and legal
significance of which petitioner seemingly questions. Besides, the
parties are disagreed as to what the pertinent laws of Texas provide.
In the interest of settling the estates herein involved soonest, it would
be best, indeed, if these conflicting claims of the parties were
determined in these proceedings. The Court regrets, however, that it
cannot do so, for the simple reason that neither the evidence
submitted by the parties in the court below nor their discussion, in
their respective briefs and memoranda before Us, of their respective
contentions on the pertinent legal issues, of grave importance as they
are, appear to Us to be adequate enough to enable Us to render an
intelligent comprehensive and just resolution. For one thing, there is
no clear and reliable proof of what in fact the possibly applicable
laws of Texas are. 7* Then also, the genuineness of documents relied
upon by respondent Magno is disputed. And there are a number of
still other conceivable related issues which the parties may wish to
raise but which it is not proper to mention here. In Justice, therefore,
to all the parties concerned, these and all other relevant matters
should first be threshed out fully in the trial court in the proceedings
hereafter to be held therein for the purpose of ascertaining and
adjudicating and/or distributing the estate of Mrs. Hodges to her heirs
in accordance with her duly probated will.
To be more explicit, all that We can and do decide in connection with
the petition for certiorari and prohibition are: (1) that regardless of
which corresponding laws are applied, whether of the Philippines or
of Texas, and taking for granted either of the respective contentions
of the parties as to provisions of the latter,8 and regardless also of
whether or not it can be proven by competent evidence that Hodges
renounced his inheritance in any degree, it is easily and definitely
discernible from the inventory submitted by Hodges himself, as
Executor of his wife's estate, that there are properties which should
constitute the estate of Mrs. Hodges and ought to be disposed of or
distributed among her heirs pursuant to her will in said Special
Proceedings 1307; (2) that, more specifically, inasmuch as the
question of what are the pertinent laws of Texas applicable to the
178
situation herein is basically one of fact, and, considering that the sole
difference in the positions of the parties as to the effect of said laws
has reference to the supposed legitime of Hodges — it being the
stand of PCIB that Hodges had such a legitime whereas Magno
claims the negative - it is now beyond controversy for all future
purposes of these proceedings that whatever be the provisions
actually of the laws of Texas applicable hereto, the estate of Mrs.
Hodges is at least, one-fourth of the conjugal estate of the spouses;
the existence and effects of foreign laws being questions of fact, and
it being the position now of PCIB that the estate of Mrs. Hodges,
pursuant to the laws of Texas, should only be one-fourth of the
conjugal estate, such contention constitutes an admission of fact, and
consequently, it would be in estoppel in any further proceedings in
these cases to claim that said estate could be less, irrespective of
what might be proven later to be actually the provisions of the
applicable laws of Texas; (3) that Special Proceedings 1307 for the
settlement of the testate estate of Mrs. Hodges cannot be closed at
this stage and should proceed to its logical conclusion, there having
been no proper and legal adjudication or distribution yet of the estate
therein involved; and (4) that respondent Magno remains and
continues to be the Administratrix therein. Hence, nothing in the
foregoing opinion is intended to resolve the issues which, as already
stated, are not properly before the Court now, namely, (1) whether or
not Hodges had in fact and in law waived or renounced his
inheritance from Mrs. Hodges, in whole or in part, and (2) assuming
there had been no such waiver, whether or not, by the application of
Article 16 of the Civil Code, and in the light of what might be the
applicable laws of Texas on the matter, the estate of Mrs. Hodges is
more than the one-fourth declared above. As a matter of fact, even
our finding above about the existence of properties constituting the
estate of Mrs. Hodges rests largely on a general appraisal of the size
and extent of the conjugal partnership gathered from reference made
thereto by both parties in their briefs as well as in their pleadings
included in the records on appeal, and it should accordingly yield, as
to which exactly those properties are, to the more concrete and
specific evidence which the parties are supposed to present in support
of their respective positions in regard to the foregoing main legal and
factual issues. In the interest of justice, the parties should be allowed
to present such further evidence in relation to all these issues in a
joint hearing of the two probate proceedings herein involved. After
all, the court a quo has not yet passed squarely on these issues, and it
is best for all concerned that it should do so in the first instance.
Relative to Our holding above that the estate of Mrs. Hodges cannot
be less than the remainder of one-fourth of the conjugal partnership
properties, it may be mentioned here that during the deliberations, the
point was raised as to whether or not said holding might be
inconsistent with Our other ruling here also that, since there is no
reliable evidence as to what are the applicable laws of Texas, U.S.A.
"with respect to the order of succession and to the amount of
successional rights" that may be willed by a testator which, under
Article 16 of the Civil Code, are controlling in the instant cases, in
view of the undisputed Texan nationality of the deceased Mrs.
Hodges, these cases should be returned to the court a quo, so that the
parties may prove what said law provides, it is premature for Us to
make any specific ruling now on either the validity of the
testamentary dispositions herein involved or the amount of
inheritance to which the brothers and sisters of Mrs. Hodges are
entitled. After nature reflection, We are of the considered view that,
at this stage and in the state of the records before Us, the feared
inconsistency is more apparent than real. Withal, it no longer lies in
the lips of petitioner PCIB to make any claim that under the laws of
Texas, the estate of Mrs. Hodges could in any event be less than that
We have fixed above.
It should be borne in mind that as above-indicated, the question of
what are the laws of Texas governing the matters herein issue is, in

the first instance, one of fact, not of law. Elementary is the rule that
foreign laws may not be taken judicial notice of and have to be
proven like any other fact in dispute between the parties in any
proceeding, with the rare exception in instances when the said laws
are already within the actual knowledge of the court, such as when
they are well and generally known or they have been actually ruled
upon in other cases before it and none of the parties concerned do not
claim otherwise. (5 Moran, Comments on the Rules of Court, p. 41,
1970 ed.) In Fluemer vs. Hix, 54 Phil. 610, it was held:
It is the theory of the petitioner that the alleged will was executed in
Elkins West Virginia, on November 3, 1925, by Hix who had his
residence in that jurisdiction, and that the laws of West Virginia
govern. To this end, there was submitted a copy of section 3868 of
Acts 1882, c. 84 as found in West Virginia Code, Annotated, by
Hogg Charles E., vol. 2, 1914, p. 1960, and as certified to by the
Director of the National Library. But this was far from a compliance
with the law. The laws of a foreign jurisdiction do not prove
themselves in our courts. The courts of the Philippine Islands are not
authorized to take judicial notice of the laws of the various States of
the American Union. Such laws must be proved as facts. (In re Estate
of Johnson [1918], 39 Phil., 156.) Here the requirements of the law
were not met. There was no showing that the book from which an
extract was taken was printed or published under the authority of the
State of West Virginia, as provided in section 300 of the Code of
Civil Procedure. Nor was the extract from the law attested by the
certificate of the officer having charge of the original, under the seal
of the State of West Virginia, as provided in section 301 of the Code
of Civil Procedure. No evidence was introduced to show that the
extract from the laws of West Virginia was in force at the time the
alleged will was executed."
No evidence of the nature thus suggested by the Court may be found
in the records of the cases at bar. Quite to the contrary, the parties
herein have presented opposing versions in their respective pleadings
and memoranda regarding the matter. And even if We took into
account that in Aznar vs. Garcia, the Court did make reference to
certain provisions regarding succession in the laws of Texas, the
disparity in the material dates of that case and the present ones would
not permit Us to indulge in the hazardous conjecture that said
provisions have not been amended or changed in the meantime.
On the other hand, in In re Estate of Johnson, 39 Phil. 156, We held:
Upon the other point — as to whether the will was executed in
conformity with the statutes of the State of Illinois — we note that it
does not affirmatively appear from the transcription of the testimony
adduced in the trial court that any witness was examined with
reference to the law of Illinois on the subject of the execution of will.
The trial judge no doubt was satisfied that the will was properly
executed by examining section 1874 of the Revised Statutes of
Illinois, as exhibited in volume 3 of Starr & Curtis's Annotated
Illinois Statutes, 2nd ed., p. 426; and he may have assumed that he
could take judicial notice of the laws of Illinois under section 275 of
the Code of Civil Procedure. If so, he was in our opinion mistaken.
That section authorizes the courts here to take judicial notice, among
other things, of the acts of the legislative department of the United
States. These words clearly have reference to Acts of the Congress of
the United States; and we would hesitate to hold that our courts can,
under this provision, take judicial notice of the multifarious laws of
the various American States. Nor do we think that any such authority
can be derived from the broader language, used in the same section,
where it is said that our courts may take judicial notice of matters of
public knowledge "similar" to those therein enumerated. The proper
rule we think is to require proof of the statutes of the States of the
American Union whenever their provisions are determinative of the
issues in any action litigated in the Philippine courts.
179
Nevertheless, even supposing that the trial court may have erred in
taking judicial notice of the law of Illinois on the point in question,
such error is not now available to the petitioner, first, because the
petition does not state any fact from which it would appear that the
law of Illinois is different from what the court found, and, secondly,
because the assignment of error and argument for the appellant in
this court raises no question based on such supposed error. Though
the trial court may have acted upon pure conjecture as to the law
prevailing in the State of Illinois, its judgment could not be set aside,
even upon application made within six months under section 113 of
the Code of Civil Procedure, unless it should be made to appear
affirmatively that the conjecture was wrong. The petitioner, it is true,
states in general terms that the will in question is invalid and
inadequate to pass real and personal property in the State of Illinois,
but this is merely a conclusion of law. The affidavits by which the
petition is accompanied contain no reference to the subject, and we
are cited to no authority in the appellant's brief which might tend to
raise a doubt as to the correctness of the conclusion of the trial court.
It is very clear, therefore, that this point cannot be urged as of serious
moment.
It is implicit in the above ruling that when, with respect to certain
aspects of the foreign laws concerned, the parties in a given case do
not have any controversy or are more or less in agreement, the Court
may take it for granted for the purposes of the particular case before
it that the said laws are as such virtual agreement indicates, without
the need of requiring the presentation of what otherwise would be the
competent evidence on the point. Thus, in the instant cases wherein it
results from the respective contentions of both parties that even if the
pertinent laws of Texas were known and to be applied, the amount of
the inheritance pertaining to the heirs of Mrs. Hodges is as We have
fixed above, the absence of evidence to the effect that, actually and in
fact, under said laws, it could be otherwise is of no longer of any
consequence, unless the purpose is to show that it could be more. In
other words, since PCIB, the petitioner-appellant, concedes that upon
application of Article 16 of the Civil Code and the pertinent laws of
Texas, the amount of the estate in controversy is just as We have
determined it to be, and respondent-appellee is only claiming, on her
part, that it could be more, PCIB may not now or later pretend
differently.
To be more concrete, on pages 20-21 of its petition herein, dated July
31, 1967, PCIB states categorically:
Inasmuch as Article 16 of the Civil Code provides that "intestate and
testamentary successions both with respect to the order of succession
and to the amount of successional rights and to the intrinsic validity
of testamentary provisions, shall be regulated by the national law of
the person whose succession is under consideration, whatever may be
the nature of the property and regardless of the country wherein said
property may be found", while the law of Texas (the Hodges spouses
being nationals of U.S.A., State of Texas), in its conflicts of law rules,
provides that the domiciliary law (in this case Philippine law)
governs the testamentary dispositions and successional rights over
movables or personal properties, while the law of the situs (in this
case also Philippine law with respect to all Hodges properties located
in the Philippines), governs with respect to immovable properties,
and applying therefore the 'renvoi doctrine' as enunciated and applied
by this Honorable Court in the case of In re Estate of Christensen
(G.R. No. L-16749, Jan. 31, 1963), there can be no question that
Philippine law governs the testamentary dispositions contained in the
Last Will and Testament of the deceased Linnie Jane Hodges, as well
as the successional rights to her estate, both with respect to movables,
as well as to immovables situated in the Philippines.
In its main brief dated February 26, 1968, PCIB asserts:
The law governing successional rights.

As recited above, there is no question that the deceased, Linnie Jane
Hodges, was an American citizen. There is also no question that she
was a national of the State of Texas, U.S.A. Again, there is likewise
no question that she had her domicile of choice in the City of Iloilo,
Philippines, as this has already been pronounced by the above-cited
orders of the lower court, pronouncements which are by now res
adjudicata (par. [a], See. 49, Rule 39, Rules of Court; In re Estate of
Johnson, 39 Phil. 156).
Article 16 of the Civil Code provides:
"Real property as well as personal property is subject to the law of
the country where it is situated.
However, intestate and testamentary successions, both with respect to
the order of succession and to the amount of successional rights and
to the intrinsic validity of testamentary provisions, shall be regulated
by the national law of the person whose succession is under
consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found."
Thus the aforecited provision of the Civil Code points towards the
national law of the deceased, Linnie Jane Hodges, which is the law of
Texas, as governing succession "both with respect to the order of
succession and to the amount of successional rights and to the
intrinsic validity of testamentary provisions ...". But the law of Texas,
in its conflicts of law rules, provides that the domiciliary law governs
the testamentary dispositions and successional rights over movables
or personal property, while the law of the situs governs with respect
to immovable property. Such that with respect to both movable
property, as well as immovable property situated in the Philippines,
the law of Texas points to the law of the Philippines.
Applying, therefore, the so-called "renvoi doctrine", as enunciated
and applied by this Honorable Court in the case of "In re
Christensen" (G.R. No. L-16749, Jan. 31, 1963), there can be no
question that Philippine law governs the testamentary provisions in
the Last Will and Testament of the deceased Linnie Jane Hodges, as
well as the successional rights to her estate, both with respect to
movables, as well as immovables situated in the Philippines.
The subject of successional rights.
Under Philippine law, as it is under the law of Texas, the conjugal or
community property of the spouses, Charles Newton Hodges and
Linnie Jane Hodges, upon the death of the latter, is to be divided into
two, one-half pertaining to each of the spouses, as his or her own
property. Thus, upon the death of Linnie Jane Hodges, one-half of
the conjugal partnership property immediately pertained to Charles
Newton Hodges as his own share, and not by virtue of any
successional rights. There can be no question about this.
Again, Philippine law, or more specifically, Article 900 of the Civil
Code provides:
If the only survivor is the widow or widower, she or he shall be
entitled to one-half of the hereditary estate of the deceased spouse,
and the testator may freely dispose of the other half.
If the marriage between the surviving spouse and the testator was
solemnized in articulo mortis, and the testator died within three
months from the time of the marriage, the legitime of the surviving
spouse as the sole heir shall be one-third of the hereditary estate,
except when they have been living as husband and wife for more
than five years. In the latter case, the legitime of the surviving spouse
shall be that specified in the preceding paragraph.
This legitime of the surviving spouse cannot be burdened by a
fideicommisary substitution (Art. 864, Civil code), nor by any charge,
condition, or substitution (Art, 872, Civil code). It is clear, therefore,
180
that in addition to one-half of the conjugal partnership property as his
own conjugal share, Charles Newton Hodges was also immediately
entitled to one-half of the half conjugal share of the deceased, Linnie
Jane Hodges, or one-fourth of the entire conjugal property, as his
legitime.
One-fourth of the conjugal property therefore remains at issue.
In the summary of its arguments in its memorandum dated April 30,
1968, the following appears:
Briefly, the position advanced by the petitioner is:
a. That the Hodges spouses were domiciled legally in the Philippines
(pp. 19-20, petition). This is now a matter of res adjudicata (p. 20,
petition).
b. That under Philippine law, Texas law, and the renvoi doctrine,
Philippine law governs the successional rights over the properties left
by the deceased, Linnie Jane Hodges (pp. 20-21, petition).
c. That under Philippine as well as Texas law, one-half of the Hodges
properties pertains to the deceased, Charles Newton Hodges (p. 21,
petition). This is not questioned by the respondents.
d. That under Philippine law, the deceased, Charles Newton Hodges,
automatically inherited one-half of the remaining one-half of the
Hodges properties as his legitime (p. 21, petition).
e. That the remaining 25% of the Hodges properties was inherited by
the deceased, Charles Newton Hodges, under the will of his deceased
spouse (pp. 22-23, petition). Upon the death of Charles Newton
Hodges, the substitution 'provision of the will of the deceased, Linnie
Jane Hodges, did not operate because the same is void (pp. 23-25,
petition).
f. That the deceased, Charles Newton Hodges, asserted his sole
ownership of the Hodges properties and the probate court sanctioned
such assertion (pp. 25-29, petition). He in fact assumed such
ownership and such was the status of the properties as of the time of
his death (pp. 29-34, petition).
Of similar tenor are the allegations of PCIB in some of its pleadings
quoted in the earlier part of this option.
On her part, it is respondent-appellee Magno's posture that under the
laws of Texas, there is no system of legitime, hence the estate of Mrs.
Hodges should be one-half of all the conjugal properties.
It is thus unquestionable that as far as PCIB is concerned, the
application to these cases of Article 16 of the Civil Code in relation
to the corresponding laws of Texas would result in that the Philippine
laws on succession should control. On that basis, as We have already
explained above, the estate of Mrs. Hodges is the remainder of
one-fourth of the conjugal partnership properties, considering that
We have found that there is no legal impediment to the kind of
disposition ordered by Mrs. Hodges in her will in favor of her
brothers and sisters and, further, that the contention of PCIB that the
same constitutes an inoperative testamentary substitution is untenable.
As will be recalled, PCIB's position that there is no such estate of
Mrs. Hodges is predicated exclusively on two propositions, namely:
(1) that the provision in question in Mrs. Hodges' testament violates
the rules on substitution of heirs under the Civil Code and (2) that, in
any event, by the orders of the trial court of May 27, and December
14, 1957, the trial court had already finally and irrevocably
adjudicated to her husband the whole free portion of her estate to the
exclusion of her brothers and sisters, both of which poses, We have
overruled. Nowhere in its pleadings, briefs and memoranda does
PCIB maintain that the application of the laws of Texas would result
in the other heirs of Mrs. Hodges not inheriting anything under her

will. And since PCIB's representations in regard to the laws of Texas
virtually constitute admissions of fact which the other parties and the
Court are being made to rely and act upon, PCIB is "not permitted to
contradict them or subsequently take a position contradictory to or
inconsistent with them." (5 Moran, id, p. 65, citing Cunanan vs.
Amparo, 80 Phil. 227; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968,
24 SCRA 1018).
Accordingly, the only question that remains to be settled in the
further proceedings hereby ordered to be held in the court below is
how much more than as fixed above is the estate of Mrs. Hodges, and
this would depend on (1) whether or not the applicable laws of Texas
do provide in effect for more, such as, when there is no legitime
provided therein, and (2) whether or not Hodges has validly waived
his whole inheritance from Mrs. Hodges.
In the course of the deliberations, it was brought out by some
members of the Court that to avoid or, at least, minimize further
protracted legal controversies between the respective heirs of the
Hodges spouses, it is imperative to elucidate on the possible
consequences of dispositions made by Hodges after the death of his
wife from the mass of the unpartitioned estates without any express
indication in the pertinent documents as to whether his intention is to
dispose of part of his inheritance from his wife or part of his own
share of the conjugal estate as well as of those made by PCIB after
the death of Hodges. After a long discussion, the consensus arrived at
was as follows: (1) any such dispositions made gratuitously in favor
of third parties, whether these be individuals, corporations or
foundations, shall be considered as intended to be of properties
constituting part of Hodges' inheritance from his wife, it appearing
from the tenor of his motions of May 27 and December 11, 1957 that
in asking for general authority to make sales or other disposals of
properties under the jurisdiction of the court, which include his own
share of the conjugal estate, he was not invoking particularly his right
over his own share, but rather his right to dispose of any part of his
inheritance pursuant to the will of his wife; (2) as regards sales,
exchanges or other remunerative transfers, the proceeds of such sales
or the properties taken in by virtue of such exchanges, shall be
considered as merely the products of "physical changes" of the
properties of her estate which the will expressly authorizes Hodges to
make, provided that whatever of said products should remain with
the estate at the time of the death of Hodges should go to her brothers
and sisters; (3) the dispositions made by PCIB after the death of
Hodges must naturally be deemed as covering only the properties
belonging to his estate considering that being only the administrator
of the estate of Hodges, PCIB could not have disposed of properties
belonging to the estate of his wife. Neither could such dispositions be
considered as involving conjugal properties, for the simple reason
that the conjugal partnership automatically ceased when Mrs. Hodges
died, and by the peculiar provision of her will, under discussion, the
remainder of her share descended also automatically upon the death
of Hodges to her brothers and sisters, thus outside of the scope of
PCIB's administration. Accordingly, these construction of the will of
Mrs. Hodges should be adhered to by the trial court in its final order
of adjudication and distribution and/or partition of the two estates in
question.
THE APPEALS
A cursory examination of the seventy-eight assignments of error in
appellant PCIB's brief would readily reveal that all of them are
predicated mainly on the contention that inasmuch as Hodges had
already adjudicated unto himself all the properties constituting his
wife's share of the conjugal partnership, allegedly with the sanction
of the trial court per its order of December 14, 1957, there has been,
since said date, no longer any estate of Mrs. Hodges of which
appellee Magno could be administratrix, hence the various assailed
orders sanctioning her actuations as such are not in accordance with
181
law. Such being the case, with the foregoing resolution holding such
posture to be untenable in fact and in law and that it is in the best
interest of justice that for the time being the two estates should be
administered conjointly by the respective administrators of the two
estates, it should follow that said assignments of error have lost their
fundamental reasons for being. There are certain matters, however,
relating peculiarly to the respective orders in question, if commonly
among some of them, which need further clarification. For instance,
some of them authorized respondent Magno to act alone or without
concurrence of PCIB. And with respect to many of said orders, PCIB
further claims that either the matters involved were not properly
within the probate jurisdiction of the trial court or that the procedure
followed was not in accordance with the rules. Hence, the necessity
of dealing separately with the merits of each of the appeals.
Indeed, inasmuch as the said two estates have until now remained
commingled pro-indiviso, due to the failure of Hodges and the lower
court to liquidate the conjugal partnership, to recognize appellee
Magno as Administratrix of the Testate Estate of Mrs. Hodges which
is still unsegregated from that of Hodges is not to say, without any
qualification, that she was therefore authorized to do and perform all
her acts complained of in these appeals, sanctioned though they
might have been by the trial court. As a matter of fact, it is such
commingling pro-indiviso of the two estates that should deprive
appellee of freedom to act independently from PCIB, as
administrator of the estate of Hodges, just as, for the same reason, the
latter should not have authority to act independently from her. And
considering that the lower court failed to adhere consistently to this
basic point of view, by allowing the two administrators to act
independently of each other, in the various instances already noted in
the narration of facts above, the Court has to look into the attendant
circumstances of each of the appealed orders to be able to determine
whether any of them has to be set aside or they may all be legally
maintained notwithstanding the failure of the court a quo to observe
the pertinent procedural technicalities, to the end only that graver
injury to the substantive rights of the parties concerned and
unnecessary and undesirable proliferation of incidents in the subject
proceedings may be forestalled. In other words, We have to
determine, whether or not, in the light of the unusual circumstances
extant in the record, there is need to be more pragmatic and to adopt
a rather unorthodox approach, so as to cause the least disturbance in
rights already being exercised by numerous innocent third parties,
even if to do so may not appear to be strictly in accordance with the
letter of the applicable purely adjective rules.
Incidentally, it may be mentioned, at this point, that it was principally
on account of the confusion that might result later from PCIB's
continuing to administer all the community properties,
notwithstanding the certainty of the existence of the separate estate of
Mrs. Hodges, and to enable both estates to function in the meantime
with a relative degree of regularity, that the Court ordered in the
resolution of September 8, 1972 the modification of the injunction
issued pursuant to the resolutions of August 8, October 4 and
December 6, 1967, by virtue of which respondent Magno was
completely barred from any participation in the administration of the
properties herein involved. In the September 8 resolution, We
ordered that, pending this decision, Special Proceedings 1307 and
1672 should proceed jointly and that the respective administrators
therein "act conjointly — none of them to act singly and
independently of each other for any purpose." Upon mature
deliberation, We felt that to allow PCIB to continue managing or
administering all the said properties to the exclusion of the
administratrix of Mrs. Hodges' estate might place the heirs of Hodges
at an unduly advantageous position which could result in
considerable, if not irreparable, damage or injury to the other parties
concerned. It is indeed to be regretted that apparently, up to this date,
more than a year after said resolution, the same has not been given

due regard, as may be gleaned from the fact that recently, respondent
Magno has filed in these proceedings a motion to declare PCIB in
contempt for alleged failure to abide therewith, notwithstanding that
its repeated motions for reconsideration thereof have all been denied
soon after they were filed.9
Going back to the appeals, it is perhaps best to begin first with what
appears to Our mind to be the simplest, and then proceed to the more
complicated ones in that order, without regard to the numerical
sequence of the assignments of error in appellant's brief or to the
order of the discussion thereof by counsel.
Assignments of error numbers
LXXII, LXXVII and LXXVIII.
These assignments of error relate to (1) the order of the trial court of
August 6, 1965 providing that "the deeds of sale (therein referred to
involving properties in the name of Hodges) should be signed jointly
by the PCIB, as Administrator of Testate Estate of C.N. Hodges, and
Avelina A. Magno, as Administratrix of the Testate Estate of Linnie
Jane Hodges, and to this effect, the PCIB should take the necessary
steps so that Administratrix Avelina A. Magno could sign the deeds
of sale," (p. 248, Green Rec. on Appeal) (2) the order of October 27,
1965 denying the motion for reconsideration of the foregoing order,
(pp. 276-277, id.) (3) the other order also dated October 27, 1965
enjoining inter alia, that "(a) all cash collections should be deposited
in the joint account of the estate of Linnie Jane Hodges and estate of
C. N. Hodges, (b) that whatever cash collections (that) had been
deposited in the account of either of the estates should be withdrawn
and since then (sic) deposited in the joint account of the estate of
Linnie Jane Hodges and the estate of C. N. Hodges; ... (d) (that)
Administratrix Magno — allow the PCIB to inspect whatever records,
documents and papers she may have in her possession, in the same
manner that Administrator PCIB is also directed to allow
Administratrix Magno to inspect whatever records, documents and
papers it may have in its possession" and "(e) that the accountant of
the estate of Linnie Jane Hodges shall have access to all records of
the transactions of both estates for the protection of the estate of
Linnie Jane Hodges; and in like manner, the accountant or any
authorized representative of the estate of C. N. Hodges shall have
access to the records of transactions of the Linnie Jane Hodges estate
for the protection of the estate of C. N. Hodges", (pp. 292-295, id.)
and (4) the order of February 15, 1966, denying, among others, the
motion for reconsideration of the order of October 27, 1965 last
referred to. (pp. 455-456, id.)
As may be readily seen, the thrust of all these four impugned orders
is in line with the Court's above-mentioned resolution of September 8,
1972 modifying the injunction previously issued on August 8, 1967,
and, more importantly, with what We have said the trial court should
have always done pending the liquidation of the conjugal partnership
of the Hodges spouses. In fact, as already stated, that is the
arrangement We are ordering, by this decision, to be followed. Stated
differently, since the questioned orders provide for joint action by the
two administrators, and that is precisely what We are holding out to
have been done and should be done until the two estates are
separated from each other, the said orders must be affirmed.
Accordingly the foregoing assignments of error must be, as they are
hereby overruled.
Assignments of error Numbers LXVIII
to LXXI and LXXIII to LXXVI.
The orders complained of under these assignments of error
commonly deal with expenditures made by appellee Magno, as
Administratrix of the Estate of Mrs. Hodges, in connection with her
administration thereof, albeit additionally, assignments of error
Numbers LXIX to LXXI put into question the payment of attorneys
182
fees provided for in the contract for the purpose, as constituting, in
effect, premature advances to the heirs of Mrs. Hodges.
More specifically, assignment Number LXXIII refers to
reimbursement of overtime pay paid to six employees of the court
and three other persons for services in copying the court records to
enable the lawyers of the administration to be fully informed of all
the incidents in the proceedings. The reimbursement was approved as
proper legal expenses of administration per the order of December 19,
1964, (pp. 221-222, id.) and repeated motions for reconsideration
thereof were denied by the orders of January 9, 1965, (pp.
231-232, id.) October 27, 1965, (p. 277, id.) and February 15, 1966.
(pp. 455-456, id.) On the other hand, Assignments Numbers LXVIII
to LXXI, LXXIV and LXXV question the trial court's order of
November 3, 1965 approving the agreement of June 6, 1964 between
Administratrix Magno and James L. Sullivan, attorney-in-fact of the
heirs of Mrs. Hodges, as Parties of the First Part, and Attorneys Raul
Manglapus and Rizal R. Quimpo, as Parties of the Second Part,
regarding attorneys fees for said counsel who had agreed "to
prosecute and defend their interests (of the Parties of the First Part) in
certain cases now pending litigation in the Court of First Instance of
Iloilo —, more specifically in Special Proceedings 1307 and 1672
—" (pp. 126-129, id.) and directing Administratrix Magno "to issue
and sign whatever check or checks maybe needed to implement the
approval of the agreement annexed to the motion" as well as the
"administrator of the estate of C. N. Hodges — to countersign the
said check or checks as the case maybe." (pp. 313-320, id.),
reconsideration of which order of approval was denied in the order of
February 16, 1966, (p. 456, id.) Assignment Number LXXVI imputes
error to the lower court's order of October 27, 1965, already referred
to above, insofar as it orders that "PCIB should counter sign the
check in the amount of P250 in favor of Administratrix Avelina A.
Magno as her compensation as administratrix of Linnie Jane Hodges
estate chargeable to the Testate Estate of Linnie Jane Hodges only."
(p. 294, id.)
Main contention again of appellant PCIB in regard to these eight
assigned errors is that there is no such estate as the estate of Mrs.
Hodges for which the questioned expenditures were made, hence
what were authorized were in effect expenditures from the estate of
Hodges. As We have already demonstrated in Our resolution above
of the petition for certiorari and prohibition, this posture is incorrect.
Indeed, in whichever way the remaining issues between the parties in
these cases are ultimately resolved, 10 the final result will surely be
that there are properties constituting the estate of Mrs. Hodges of
which Magno is the current administratrix. It follows, therefore, that
said appellee had the right, as such administratrix, to hire the persons
whom she paid overtime pay and to be paid for her own services as
administratrix. That she has not yet collected and is not collecting
amounts as substantial as that paid to or due appellant PCIB is to her
credit.
Of course, she is also entitled to the services of counsel and to that
end had the authority to enter into contracts for attorney's fees in the
manner she had done in the agreement of June 6, 1964. And as
regards to the reasonableness of the amount therein stipulated, We
see no reason to disturb the discretion exercised by the probate court
in determining the same. We have gone over the agreement, and
considering the obvious size of the estate in question and the nature
of the issues between the parties as well as the professional standing
of counsel, We cannot say that the fees agreed upon require the
exercise by the Court of its inherent power to reduce it.
PCIB insists, however, that said agreement of June 6, 1964 is not for
legal services to the estate but to the heirs of Mrs. Hodges, or, at
most, to both of them, and such being the case, any payment under it,
insofar as counsels' services would redound to the benefit of the heirs,
would be in the nature of advances to such heirs and a premature

distribution of the estate. Again, We hold that such posture cannot
prevail.
Upon the premise We have found plausible that there is an existing
estate of Mrs. Hodges, it results that juridically and factually the
interests involved in her estate are distinct and different from those
involved in her estate of Hodges and vice versa. Insofar as the
matters related exclusively to the estate of Mrs. Hodges, PCIB, as
administrator of the estate of Hodges, is a complete stranger and it is
without personality to question the actuations of the administratrix
thereof regarding matters not affecting the estate of Hodges. Actually,
considering the obviously considerable size of the estate of Mrs.
Hodges, We see no possible cause for apprehension that when the
two estates are segregated from each other, the amount of attorney's
fees stipulated in the agreement in question will prejudice any
portion that would correspond to Hodges' estate.
And as regards the other heirs of Mrs. Hodges who ought to be the
ones who should have a say on the attorney's fees and other expenses
of administration assailed by PCIB, suffice it to say that they appear
to have been duly represented in the agreement itself by their
attorney-in-fact, James L. Sullivan and have not otherwise interposed
any objection to any of the expenses incurred by Magno questioned
by PCIB in these appeals. As a matter of fact, as ordered by the trial
court, all the expenses in question, including the attorney's fees, may
be paid without awaiting the determination and segregation of the
estate of Mrs. Hodges.
Withal, the weightiest consideration in connection with the point
under discussion is that at this stage of the controversy among the
parties herein, the vital issue refers to the existence or non-existence
of the estate of Mrs. Hodges. In this respect, the interest of
respondent Magno, as the appointed administratrix of the said estate,
is to maintain that it exists, which is naturally common and identical
with and inseparable from the interest of the brothers and sisters of
Mrs. Hodges. Thus, it should not be wondered why both Magno and
these heirs have seemingly agreed to retain but one counsel. In fact,
such an arrangement should be more convenient and economical to
both. The possibility of conflict of interest between Magno and the
heirs of Mrs. Hodges would be, at this stage, quite remote and, in any
event, rather insubstantial. Besides, should any substantial conflict of
interest between them arise in the future, the same would be a matter
that the probate court can very well take care of in the course of the
independent proceedings in Case No. 1307 after the corresponding
segregation of the two subject estates. We cannot perceive any
cogent reason why, at this stage, the estate and the heirs of Mrs.
Hodges cannot be represented by a common counsel.
Now, as to whether or not the portion of the fees in question that
should correspond to the heirs constitutes premature partial
distribution of the estate of Mrs. Hodges is also a matter in which
neither PCIB nor the heirs of Hodges have any interest. In any event,
since, as far as the records show, the estate has no creditors and the
corresponding estate and inheritance taxes, except those of the
brothers and sisters of Mrs. Hodges, have already been paid, 11 no
prejudice can caused to anyone by the comparatively small amount
of attorney's fees in question. And in this connection, it may be
added that, although strictly speaking, the attorney's fees of the
counsel of an administrator is in the first instance his personal
responsibility, reimbursable later on by the estate, in the final
analysis, when, as in the situation on hand, the attorney-in-fact of the
heirs has given his conformity thereto, it would be idle effort to
inquire whether or not the sanction given to said fees by the probate
court is proper.
For the foregoing reasons, Assignments of Error LXVIII to LXXI
and LXXIII to LXXVI should be as they are hereby overruled.
183
Assignments of error I to IV,
XIII to XV, XXII to XXV, XXXV
to XXX VI, XLI to XLIII and L.
These assignments of error deal with the approval by the trial court
of various deeds of sale of real properties registered in the name of
Hodges but executed by appellee Magno, as Administratrix of the
Estate of Mrs. Hodges, purportedly in implementation of
corresponding supposed written "Contracts to Sell" previously
executed by Hodges during the interim between May 23, 1957, when
his wife died, and December 25, 1962, the day he died. As stated on
pp. 118-120 of appellant's main brief, "These are: the, contract to sell
between the deceased, Charles Newton Hodges, and the appellee,
Pepito G. Iyulores executed on February 5, 1961; the contract to sell
between the deceased, Charles Newton Hodges, and the appellant
Esperidion Partisala, executed on April 20, 1960; the contract to sell
between the deceased, Charles Newton Hodges, and the appellee,
Winifredo C. Espada, executed on April 18, 1960; the contract to sell
between the deceased, Charles Newton Hodges, and the appellee,
Rosario Alingasa, executed on August 25, 1958; the contract to sell
between the deceased, Charles Newton Hodges, and the appellee,
Lorenzo Carles, executed on June 17, 1958; the contract to sell
between the deceased, Charles Newton Hodges, and the appellee,
Salvador S. Guzman, executed on September 13, 1960; the contract
to sell between the deceased, Charles Newton Hodges, and the
appellee, Florenia Barrido, executed on February 21, 1958; the
contract to sell between the deceased, Charles Newton Hodges, and
the appellee, Purificacion Coronado, executed on August 14, 1961;
the contract to sell between the deceased, Charles Newton Hodges,
and the appellee, Graciano Lucero, executed on November 27, 1961;
the contract to sell between the deceased, Charles Newton Hodges,
and the appellee, Ariteo Thomas Jamir, executed on May 26, 1961;
the contract to sell between the deceased, Charles Newton Hodges,
and the appellee, Melquiades Batisanan, executed on June 9, 1959;
the contract to sell between the deceased, Charles Newton Hodges,
and the appellee, Belcezar Causing, executed on February 10, 1959
and the contract to sell between the deceased, Charles Newton
Hodges, and the appellee, Adelfa Premaylon, executed on October 31,
1959, re Title No. 13815."
Relative to these sales, it is the position of appellant PCIB that,
inasmuch as pursuant to the will of Mrs. Hodges, her husband was to
have dominion over all her estate during his lifetime, it was as
absolute owner of the properties respectively covered by said sales
that he executed the aforementioned contracts to sell, and
consequently, upon his death, the implementation of said contracts
may be undertaken only by the administrator of his estate and not by
the administratrix of the estate of Mrs. Hodges. Basically, the same
theory is invoked with particular reference to five other sales, in
which the respective "contracts to sell" in favor of these appellees
were executed by Hodges before the death of his wife, namely, those
in favor of appellee Santiago Pacaonsis, Alfredo Catedral, Jose
Pablico, Western Institute of Technology and Adelfa Premaylon.
Anent those deeds of sale based on promises or contracts to sell
executed by Hodges after the death of his wife, those enumerated in
the quotation in the immediately preceding paragraph, it is quite
obvious that PCIB's contention cannot be sustained. As already
explained earlier, 11* all proceeds of remunerative transfers or
dispositions made by Hodges after the death of his wife should be
deemed as continuing to be parts of her estate and, therefore, subject
to the terms of her will in favor of her brothers and sisters, in the
sense that should there be no showing that such proceeds, whether in
cash or property have been subsequently conveyed or assigned
subsequently by Hodges to any third party by acts inter vivos with
the result that they could not thereby belong to him anymore at the
time of his death, they automatically became part of the inheritance
of said brothers and sisters. The deeds here in question involve

transactions which are exactly of this nature. Consequently, the
payments made by the appellees should be considered as payments to
the estate of Mrs. Hodges which is to be distributed and partitioned
among her heirs specified in the will.
The five deeds of sale predicated on contracts to sell executed
Hodges during the lifetime of his wife, present a different situation.
At first blush, it would appear that as to them, PCIB's position has
some degree of plausibility. Considering, however, that the adoption
of PCIB's theory would necessarily have tremendous repercussions
and would bring about considerable disturbance of property rights
that have somehow accrued already in favor of innocent third parties,
the five purchasers aforenamed, the Court is inclined to take a
pragmatic and practical view of the legal situation involving them by
overlooking the possible technicalities in the way, the
non-observance of which would not, after all, detract materially from
what should substantially correspond to each and all of the parties
concerned.
To start with, these contracts can hardly be ignored. Bona fide third
parties are involved; as much as possible, they should not be made to
suffer any prejudice on account of judicial controversies not of their
own making. What is more, the transactions they rely on were
submitted by them to the probate court for approval, and from
already known and recorded actuations of said court then, they had
reason to believe that it had authority to act on their motions, since
appellee Magno had, from time to time prior to their transactions
with her, been allowed to act in her capacity as administratrix of one
of the subject estates either alone or conjointly with PCIB. All the
sales in question were executed by Magno in 1966 already, but
before that, the court had previously authorized or otherwise
sanctioned expressly many of her act as administratrix involving
expenditures from the estate made by her either conjointly with or
independently from PCIB, as Administrator of the Estate of Hodges.
Thus, it may be said that said buyers-appellees merely followed
precedents in previous orders of the court. Accordingly, unless the
impugned orders approving those sales indubitably suffer from some
clearly fatal infirmity the Court would rather affirm them.
It is quite apparent from the record that the properties covered by
said sales are equivalent only to a fraction of what should constitute
the estate of Mrs. Hodges, even if it is assumed that the same would
finally be held to be only one-fourth of the conjugal properties of the
spouses as of the time of her death or, to be more exact, one-half of
her estate as per the inventory submitted by Hodges as executor, on
May 12, 1958. In none of its numerous, varied and voluminous
pleadings, motions and manifestations has PCIB claimed any
possibility otherwise. Such being the case, to avoid any conflict with
the heirs of Hodges, the said properties covered by the questioned
deeds of sale executed by appellee Magno may be treated as among
those corresponding to the estate of Mrs. Hodges, which would have
been actually under her control and administration had Hodges
complied with his duty to liquidate the conjugal partnership. Viewing
the situation in that manner, the only ones who could stand to be
prejudiced by the appealed orders referred to in the assignment of
errors under discussion and who could, therefore, have the requisite
interest to question them would be only the heirs of Mrs. Hodges,
definitely not PCIB.
It is of no moment in what capacity Hodges made the "contracts to
sell' after the death of his wife. Even if he had acted as executor of
the will of his wife, he did not have to submit those contracts to the
court nor follow the provisions of the rules, (Sections 2, 4, 5, 6, 8 and
9 of Rule 89 quoted by appellant on pp. 125 to 127 of its brief) for
the simple reason that by the very orders, much relied upon by
appellant for other purposes, of May 27, 1957 and December 14,
1957, Hodges was "allowed or authorized" by the trial court "to
continue the business in which he was engaged and to perform acts
184
which he had been doing while the deceased was living", (Order of
May 27) which according to the motion on which the court acted was
"of buying and selling personal and real properties", and "to execute
subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes conveyed in the last will and testament
of the latter." (Order of December 14) In other words, if Hodges
acted then as executor, it can be said that he had authority to do so by
virtue of these blanket orders, and PCIB does not question the
legality of such grant of authority; on the contrary, it is relying on the
terms of the order itself for its main contention in these cases. On the
other hand, if, as PCIB contends, he acted as heir-adjudicatee, the
authority given to him by the aforementioned orders would still
suffice.
As can be seen, therefore, it is of no moment whether the "contracts
to sell" upon which the deeds in question were based were executed
by Hodges before or after the death of his wife. In a word, We hold,
for the reasons already stated, that the properties covered by the
deeds being assailed pertain or should be deemed as pertaining to the
estate of Mrs. Hodges; hence, any supposed irregularity attending the
actuations of the trial court may be invoked only by her heirs, not by
PCIB, and since the said heirs are not objecting, and the defects
pointed out not being strictly jurisdictional in nature, all things
considered, particularly the unnecessary disturbance of rights already
created in favor of innocent third parties, it is best that the impugned
orders are not disturbed.
In view of these considerations, We do not find sufficient merit in the
assignments of error under discussion.
Assignments of error V to VIII,
XVI to XVIII, XXVI to XXIX, XXXVII
to XXXVIII, XLIV to XLVI and LI.
All these assignments of error commonly deal with alleged
non-fulfillment by the respective vendees, appellees herein, of the
terms and conditions embodied in the deeds of sale referred to in the
assignments of error just discussed. It is claimed that some of them
never made full payments in accordance with the respective contracts
to sell, while in the cases of the others, like Lorenzo Carles, Jose
Pablico, Alfredo Catedral and Salvador S. Guzman, the contracts
with them had already been unilaterally cancelled by PCIB pursuant
to automatic rescission clauses contained in them, in view of the
failure of said buyers to pay arrearages long overdue. But PCIB's
posture is again premised on its assumption that the properties
covered by the deeds in question could not pertain to the estate of
Mrs. Hodges. We have already held above that, it being evident that
a considerable portion of the conjugal properties, much more than the
properties covered by said deeds, would inevitably constitute the
estate of Mrs. Hodges, to avoid unnecessary legal complications, it
can be assumed that said properties form part of such estate. From
this point of view, it is apparent again that the questions, whether or
not it was proper for appellee Magno to have disregarded the
cancellations made by PCIB, thereby reviving the rights of the
respective buyers-appellees, and, whether or not the rules governing
new dispositions of properties of the estate were strictly followed,
may not be raised by PCIB but only by the heirs of Mrs. Hodges as
the persons designated to inherit the same, or perhaps the
government because of the still unpaid inheritance taxes. But, again,
since there is no pretense that any objections were raised by said
parties or that they would necessarily be prejudiced, the contentions
of PCIB under the instant assignments of error hardly merit any
consideration.
Assignments of error IX to XII, XIX
to XXI, XXX to XXIV, XXXIX to XL,
XLVII to XLIX, LII and LIII to LXI.

PCIB raises under these assignments of error two issues which
according to it are fundamental, namely: (1) that in approving the
deeds executed by Magno pursuant to contracts to sell already
cancelled by it in the performance of its functions as administrator of
the estate of Hodges, the trial court deprived the said estate of the
right to invoke such cancellations it (PCIB) had made and (2) that in
so acting, the court "arrogated unto itself, while acting as a probate
court, the power to determine the contending claims of third parties
against the estate of Hodges over real property," since it has in effect
determined whether or not all the terms and conditions of the
respective contracts to sell executed by Hodges in favor of the
buyers-appellees concerned were complied with by the latter. What is
worse, in the view of PCIB, is that the court has taken the word of
the appellee Magno, "a total stranger to his estate as determinative of
the issue".
Actually, contrary to the stand of PCIB, it is this last point regarding
appellee Magno's having agreed to ignore the cancellations made by
PCIB and allowed the buyers-appellees to consummate the sales in
their favor that is decisive. Since We have already held that the
properties covered by the contracts in question should be deemed to
be portions of the estate of Mrs. Hodges and not that of Hodges, it is
PCIB that is a complete stranger in these incidents. Considering,
therefore, that the estate of Mrs. Hodges and her heirs who are the
real parties in interest having the right to oppose the consummation
of the impugned sales are not objecting, and that they are the ones
who are precisely urging that said sales be sanctioned, the
assignments of error under discussion have no basis and must
accordingly be as they are hereby overruled.
With particular reference to assignments LIII to LXI, assailing the
orders of the trial court requiring PCIB to surrender the respective
owner's duplicate certificates of title over the properties covered by
the sales in question and otherwise directing the Register of Deeds of
Iloilo to cancel said certificates and to issue new transfer certificates
of title in favor of the buyers-appellees, suffice it to say that in the
light of the above discussion, the trial court was within its rights to so
require and direct, PCIB having refused to give way, by withholding
said owners' duplicate certificates, of the corresponding registration
of the transfers duly and legally approved by the court.
Assignments of error LXII to LXVII
All these assignments of error commonly deal with the appeal against
orders favoring appellee Western Institute of Technology. As will be
recalled, said institute is one of the buyers of real property covered
by a contract to sell executed by Hodges prior to the death of his wife.
As of October, 1965, it was in arrears in the total amount of
P92,691.00 in the payment of its installments on account of its
purchase, hence it received under date of October 4, 1965 and
October 20, 1965, letters of collection, separately and respectively,
from PCIB and appellee Magno, in their respective capacities as
administrators of the distinct estates of the Hodges spouses, albeit,
while in the case of PCIB it made known that "no other arrangement
can be accepted except by paying all your past due account", on the
other hand, Magno merely said she would "appreciate very much if
you can make some remittance to bring this account up-to-date and
to reduce the amount of the obligation." (See pp. 295-311, Green R.
on A.) On November 3, 1965, the Institute filed a motion which, after
alleging that it was ready and willing to pay P20,000 on account of
its overdue installments but uncertain whether it should pay PCIB or
Magno, it prayed that it be "allowed to deposit the aforesaid amount
with the court pending resolution of the conflicting claims of the
administrators." Acting on this motion, on November 23, 1965, the
trial court issued an order, already quoted in the narration of facts in
this opinion, holding that payment to both or either of the two
administrators is "proper and legal", and so "movant — can pay to
both estates or either of them", considering that "in both cases
185
(Special Proceedings 1307 and 1672) there is as yet no judicial
declaration of heirs nor distribution of properties to whomsoever are
entitled thereto."
The arguments under the instant assignments of error revolve around
said order. From the procedural standpoint, it is claimed that PCIB
was not served with a copy of the Institute's motion, that said motion
was heard, considered and resolved on November 23, 1965, whereas
the date set for its hearing was November 20, 1965, and that what the
order grants is different from what is prayed for in the motion. As to
the substantive aspect, it is contended that the matter treated in the
motion is beyond the jurisdiction of the probate court and that the
order authorized payment to a person other than the administrator of
the estate of Hodges with whom the Institute had contracted.
The procedural points urged by appellant deserve scant consideration.
We must assume, absent any clear proof to the contrary, that the
lower court had acted regularly by seeing to it that appellant was duly
notified. On the other hand, there is nothing irregular in the court's
having resolved the motion three days after the date set for hearing
the same. Moreover, the record reveals that appellants' motion for
reconsideration wherein it raised the same points was denied by the
trial court on March 7, 1966 (p. 462, Green R. on A.) Withal, We are
not convinced that the relief granted is not within the general intent
of the Institute's motion.
Insofar as the substantive issues are concerned, all that need be said
at this point is that they are mere reiterations of contentions We have
already resolved above adversely to appellants' position. Incidentally,
We may add, perhaps, to erase all doubts as to the propriety of not
disturbing the lower court's orders sanctioning the sales questioned in
all these appeal s by PCIB, that it is only when one of the parties to a
contract to convey property executed by a deceased person raises
substantial objections to its being implemented by the executor or
administrator of the decedent's estate that Section 8 of Rule 89 may
not apply and, consequently, the matter has, to be taken up in a
separate action outside of the probate court; but where, as in the
cases of the sales herein involved, the interested parties are in
agreement that the conveyance be made, it is properly within the
jurisdiction of the probate court to give its sanction thereto pursuant
to the provisions of the rule just mentioned. And with respect to the
supposed automatic rescission clauses contained in the contracts to
sell executed by Hodges in favor of herein appellees, the effect of
said clauses depend on the true nature of the said contracts, despite
the nomenclature appearing therein, which is not controlling, for if
they amount to actual contracts of sale instead of being mere
unilateral accepted "promises to sell", (Art. 1479, Civil Code of the
Philippines, 2nd paragraph) thepactum commissorium or the
automatic rescission provision would not operate, as a matter of
public policy, unless there has been a previous notarial or judicial
demand by the seller (10 Manresa 263, 2nd ed.) neither of which
have been shown to have been made in connection with the
transactions herein involved.
Consequently, We find no merit in the assignments of error
Number LXII to LXVII.
SUMMARY
Considering the fact that this decision is unusually extensive and that
the issues herein taken up and resolved are rather numerous and
varied, what with appellant making seventy-eight assignments of
error affecting no less than thirty separate orders of the court a quo, if
only to facilitate proper understanding of the import and extent of our
rulings herein contained, it is perhaps desirable that a brief
restatement of the whole situation be made together with our
conclusions in regard to its various factual and legal aspects. .

The instant cases refer to the estate left by the late Charles Newton
Hodges as well as that of his wife, Linnie Jane Hodges, who
predeceased him by about five years and a half. In their respective
wills which were executed on different occasions, each one of them
provided mutually as follows: "I give, devise and bequeath all of the
rest, residue and remainder (after funeral and administration
expenses, taxes and debts) of my estate, both real and personal,
wherever situated or located, to my beloved (spouse) to have and to
hold unto (him/her) — during (his/her) natural lifetime", subject to
the condition that upon the death of whoever of them survived the
other, the remainder of what he or she would inherit from the other is
"give(n), devise(d) and bequeath(ed)" to the brothers and sisters of
the latter.
Mrs. Hodges died first, on May 23, 1957. Four days later, on May 27,
Hodges was appointed special administrator of her estate, and in a
separate order of the same date, he was "allowed or authorized to
continue the business in which he was engaged, (buying and selling
personal and real properties) and to perform acts which he had been
doing while the deceased was living." Subsequently, on December 14,
1957, after Mrs. Hodges' will had been probated and Hodges had
been appointed and had qualified as Executor thereof, upon his
motion in which he asserted that he was "not only part owner of the
properties left as conjugal, but also, the successor to all the properties
left by the deceased Linnie Jane Hodges", the trial court ordered that
"for the reasons stated in his motion dated December 11, 1957, which
the Court considers well taken, ... all the sales, conveyances, leases
and mortgages of all properties left by the deceased Linnie Jane
Hodges executed by the Executor, Charles Newton Hodges are
hereby APPROVED. The said Executor is further authorized to
execute subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes contained in the last will and testament
of the latter."
Annually thereafter, Hodges submitted to the court the corresponding
statements of account of his administration, with the particularity that
in all his motions, he always made it point to urge the that "no person
interested in the Philippines of the time and place of examining the
herein accounts be given notice as herein executor is the only devisee
or legatee of the deceased in accordance with the last will and
testament already probated by the Honorable Court." All said
accounts approved as prayed for.
Nothing else appears to have been done either by the court a quo or
Hodges until December 25, 1962. Importantly to be the provision in
the will of Mrs. Hodges that her share of the conjugal partnership
was to be inherited by her husband "to have and to hold unto him, my
said husband, during his natural lifetime" and that "at the death of my
said husband, I give, devise and bequeath all the rest, residue and
remainder of my estate, both real and personal, wherever situated or
located, to be equally divided among my brothers and sisters, share
and share alike", which provision naturally made it imperative that
the conjugal partnership be promptly liquidated, in order that the
"rest, residue and remainder" of his wife's share thereof, as of the
time of Hodges' own death, may be readily known and identified, no
such liquidation was ever undertaken. The record gives no indication
of the reason for such omission, although relatedly, it appears
therein:
1. That in his annual statement submitted to the court of the net worth
of C. N. Hodges and the Estate of Linnie Jane Hodges, Hodges
repeatedly and consistently reported the combined income of the
conjugal partnership and then merely divided the same equally
between himself and the estate of the deceased wife, and, more
importantly, he also, as consistently, filed corresponding separate
income tax returns for each calendar year for each resulting half of
186
such combined income, thus reporting that the estate of Mrs. Hodges
had its own income distinct from his own.
2. That when the court a quo happened to inadvertently omit in its
order probating the will of Mrs. Hodges, the name of one of her
brothers, Roy Higdon then already deceased, Hodges lost no time in
asking for the proper correction "in order that the heirs of deceased
Roy Higdon may not think or believe they were omitted, and that
they were really interested in the estate of the deceased Linnie Jane
Hodges".
3. That in his aforementioned motion of December 11, 1957, he
expressly stated that "deceased Linnie Jane Hodges died leaving no
descendants or ascendants except brothers and sisters and herein
petitioner as the surviving spouse, to inherit the properties of the
decedent", thereby indicating that he was not excluding his wife's
brothers and sisters from the inheritance.
4. That Hodges allegedly made statements and manifestations to the
United States inheritance tax authorities indicating that he had
renounced his inheritance from his wife in favor of her other heirs,
which attitude he is supposed to have reiterated or ratified in an
alleged affidavit subscribed and sworn to here in the Philippines and
in which he even purportedly stated that his reason for so disclaiming
and renouncing his rights under his wife's will was to "absolve (him)
or (his) estate from any liability for the payment of income taxes on
income which has accrued to the estate of Linnie Jane Hodges", his
wife, since her death.
On said date, December 25, 1962, Hodges died. The very next day,
upon motion of herein respondent and appellee, Avelina A. Magno,
she was appointed by the trial court as Administratrix of the Testate
Estate of Linnie Jane Hodges, in Special Proceedings No. 1307 and
as Special Administratrix of the estate of Charles Newton Hodges,
"in the latter case, because the last will of said Charles Newton
Hodges is still kept in his vault or iron safe and that the real and
personal properties of both spouses may be lost, damaged or go to
waste, unless Special Administratrix is appointed," (Order of
December 26, 1962, p. 27, Yellow R. on A.) although, soon enough,
on December 29, 1962, a certain Harold K. Davies was appointed as
her Co-Special Administrator, and when Special Proceedings No.
1672, Testate Estate of Charles Newton Hodges, was opened, Joe
Hodges, as next of kin of the deceased, was in due time appointed as
Co-Administrator of said estate together with Atty. Fernando P.
Mirasol, to replace Magno and Davies, only to be in turn replaced
eventually by petitioner PCIB alone.
At the outset, the two probate proceedings appear to have been
proceeding jointly, with each administrator acting together with the
other, under a sort of modus operandi. PCIB used to secure at the
beginning the conformity to and signature of Magno in transactions it
wanted to enter into and submitted the same to the court for approval
as their joint acts. So did Magno do likewise. Somehow, however,
differences seem to have arisen, for which reason, each of them
began acting later on separately and independently of each other,
with apparent sanction of the trial court. Thus, PCIB had its own
lawyers whom it contracted and paid handsomely, conducted the
business of the estate independently of Magno and otherwise acted as
if all the properties appearing in the name of Charles Newton Hodges
belonged solely and only to his estate, to the exclusion of the
brothers and sisters of Mrs. Hodges, without considering whether or
not in fact any of said properties corresponded to the portion of the
conjugal partnership pertaining to the estate of Mrs. Hodges. On the
other hand, Magno made her own expenditures, hired her own
lawyers, on the premise that there is such an estate of Mrs. Hodges,
and dealth with some of the properties, appearing in the name of
Hodges, on the assumption that they actually correspond to the estate
of Mrs. Hodges. All of these independent and separate actuations of

the two administrators were invariably approved by the trial court
upon submission. Eventually, the differences reached a point wherein
Magno, who was more cognizant than anyone else about the ins and
outs of the businesses and properties of the deceased spouses because
of her long and intimate association with them, made it difficult for
PCIB to perform normally its functions as administrator separately
from her. Thus, legal complications arose and the present judicial
controversies came about.
Predicating its position on the tenor of the orders of May 27 and
December 14, 1957 as well as the approval by the court a quo of the
annual statements of account of Hodges, PCIB holds to the view that
the estate of Mrs. Hodges has already been in effect closed with the
virtual adjudication in the mentioned orders of her whole estate to
Hodges, and that, therefore, Magno had already ceased since then to
have any estate to administer and the brothers and sisters of Mrs.
Hodges have no interests whatsoever in the estate left by Hodges.
Mainly upon such theory, PCIB has come to this Court with a
petition for certiorari and prohibition praying that the lower court's
orders allowing respondent Magno to continue acting as
administratrix of the estate of Mrs. Hodges in Special Proceedings
1307 in the manner she has been doing, as detailed earlier above, be
set aside. Additionally, PCIB maintains that the provision in Mrs.
Hodges' will instituting her brothers and sisters in the manner therein
specified is in the nature of a testamentary substitution, but inasmuch
as the purported substitution is not, in its view, in accordance with
the pertinent provisions of the Civil Code, it is ineffective and may
not be enforced. It is further contended that, in any event, inasmuch
as the Hodges spouses were both residents of the Philippines,
following the decision of this Court in Aznar vs. Garcia, or the case
of Christensen, 7 SCRA 95, the estate left by Mrs. Hodges could not
be more than one-half of her share of the conjugal partnership,
notwithstanding the fact that she was citizen of Texas, U.S.A., in
accordance with Article 16 in relation to Articles 900 and 872 of the
Civil Code. Initially, We issued a preliminary injunction against
Magno and allowed PCIB to act alone.
At the same time PCIB has appealed several separate orders of the
trial court approving individual acts of appellee Magno in her
capacity as administratrix of the estate of Mrs. Hodges, such as,
hiring of lawyers for specified fees and incurring expenses of
administration for different purposes and executing deeds of sale in
favor of her co-appellees covering properties which are still
registered in the name of Hodges, purportedly pursuant to
corresponding "contracts to sell" executed by Hodges. The said
orders are being questioned on jurisdictional and procedural grounds
directly or indirectly predicated on the principal theory of appellant
that all the properties of the two estates belong already to the estate
of Hodges exclusively.
On the other hand, respondent-appellee Magno denies that the trial
court's orders of May 27 and December 14, 1957 were meant to be
finally adjudicatory of the hereditary rights of Hodges and contends
that they were no more than the court's general sanction of past and
future acts of Hodges as executor of the will of his wife in due course
of administration. As to the point regarding substitution, her position
is that what was given by Mrs. Hodges to her husband under the
provision in question was a lifetime usufruct of her share of the
conjugal partnership, with the naked ownership passing directly to
her brothers and sisters. Anent the application of Article 16 of the
Civil Code, she claims that the applicable law to the will of Mrs.
Hodges is that of Texas under which, she alleges, there is no system
of legitime, hence, the estate of Mrs. Hodges cannot be less than her
share or one-half of the conjugal partnership properties. She further
maintains that, in any event, Hodges had as a matter of fact and of
law renounced his inheritance from his wife and, therefore, her whole
estate passed directly to her brothers and sisters effective at the latest
upon the death of Hodges.
187
In this decision, for the reasons discussed above, and upon the issues
just summarized, We overrule PCIB's contention that the orders of
May 27, 1957 and December 14, 1957 amount to an adjudication to
Hodges of the estate of his wife, and We recognize the present
existence of the estate of Mrs. Hodges, as consisting of properties,
which, while registered in that name of Hodges, do actually
correspond to the remainder of the share of Mrs. Hodges in the
conjugal partnership, it appearing that pursuant to the pertinent
provisions of her will, any portion of said share still existing and
undisposed of by her husband at the time of his death should go to
her brothers and sisters share and share alike. Factually, We find that
the proven circumstances relevant to the said orders do not warrant
the conclusion that the court intended to make thereby such alleged
final adjudication. Legally, We hold that the tenor of said orders
furnish no basis for such a conclusion, and what is more, at the time
said orders were issued, the proceedings had not yet reached the
point when a final distribution and adjudication could be made.
Moreover, the interested parties were not duly notified that such
disposition of the estate would be done. At best, therefore, said
orders merely allowed Hodges to dispose of portions of his
inheritance in advance of final adjudication, which is implicitly
permitted under Section 2 of Rule 109, there being no possible
prejudice to third parties, inasmuch as Mrs. Hodges had no creditors
and all pertinent taxes have been paid.
More specifically, We hold that, on the basis of circumstances
presently extant in the record, and on the assumption that Hodges'
purported renunciation should not be upheld, the estate of Mrs.
Hodges inherited by her brothers and sisters consists of one-fourth of
the community estate of the spouses at the time of her death, minus
whatever Hodges had gratuitously disposed of therefrom during the
period from, May 23, 1957, when she died, to December 25, 1962,
when he died provided, that with regard to remunerative dispositions
made by him during the same period, the proceeds thereof, whether
in cash or property, should be deemed as continuing to be part of his
wife's estate, unless it can be shown that he had subsequently
disposed of them gratuitously.
At this juncture, it may be reiterated that the question of what are the
pertinent laws of Texas and what would be the estate of Mrs. Hodges
under them is basically one of fact, and considering the respective
positions of the parties in regard to said factual issue, it can already
be deemed as settled for the purposes of these cases that, indeed, the
free portion of said estate that could possibly descend to her brothers
and sisters by virtue of her will may not be less than one-fourth of the
conjugal estate, it appearing that the difference in the stands of the
parties has reference solely to the legitime of Hodges, PCIB being of
the view that under the laws of Texas, there is such a legitime of
one-fourth of said conjugal estate and Magno contending, on the
other hand, that there is none. In other words, hereafter, whatever
might ultimately appear, at the subsequent proceedings, to be
actually the laws of Texas on the matter would no longer be of any
consequence, since PCIB would anyway be in estoppel already to
claim that the estate of Mrs. Hodges should be less than as contended
by it now, for admissions by a party related to the effects of foreign
laws, which have to be proven in our courts like any other
controverted fact, create estoppel.
In the process, We overrule PCIB's contention that the provision in
Mrs. Hodges' will in favor of her brothers and sisters constitutes
ineffective hereditary substitutions. But neither are We sustaining, on
the other hand, Magno's pose that it gave Hodges only a lifetime
usufruct. We hold that by said provision, Mrs. Hodges
simultaneously instituted her brothers and sisters as co-heirs with her
husband, with the condition, however, that the latter would have
complete rights of dominion over the whole estate during his lifetime
and what would go to the former would be only the remainder
thereof at the time of Hodges' death. In other words, whereas they are

not to inherit only in case of default of Hodges, on the other hand,
Hodges was not obliged to preserve anything for them. Clearly then,
the essential elements of testamentary substitution are absent; the
provision in question is a simple case of conditional simultaneous
institution of heirs, whereby the institution of Hodges is subject to a
partial resolutory condition the operative contingency of which is
coincidental with that of the suspensive condition of the institution of
his brothers and sisters-in-law, which manner of institution is not
prohibited by law.
We also hold, however, that the estate of Mrs. Hodges inherited by
her brothers and sisters could be more than just stated, but this would
depend on (1) whether upon the proper application of the principle
of renvoi in relation to Article 16 of the Civil Code and the pertinent
laws of Texas, it will appear that Hodges had no legitime as
contended by Magno, and (2) whether or not it can be held that
Hodges had legally and effectively renounced his inheritance from
his wife. Under the circumstances presently obtaining and in the state
of the record of these cases, as of now, the Court is not in a position
to make a final ruling, whether of fact or of law, on any of these two
issues, and We, therefore, reserve said issues for further proceedings
and resolution in the first instance by the court a quo, as hereinabove
indicated. We reiterate, however, that pending such further
proceedings, as matters stand at this stage, Our considered opinion is
that it is beyond cavil that since, under the terms of the will of Mrs.
Hodges, her husband could not have anyway legally adjudicated or
caused to be adjudicated to himself her whole share of their conjugal
partnership, albeit he could have disposed any part thereof during his
lifetime, the resulting estate of Mrs. Hodges, of which Magno is the
uncontested administratrix, cannot be less than one-fourth of the
conjugal partnership properties, as of the time of her death, minus
what, as explained earlier, have been gratuitously disposed of
therefrom, by Hodges in favor of third persons since then, for even if
it were assumed that, as contended by PCIB, under Article 16 of the
Civil Code and applying renvoi the laws of the Philippines are the
ones ultimately applicable, such one-fourth share would be her free
disposable portion, taking into account already the legitime of her
husband under Article 900 of the Civil Code.
The foregoing considerations leave the Court with no alternative than
to conclude that in predicating its orders on the assumption, albeit
unexpressed therein, that there is an estate of Mrs. Hodges to be
distributed among her brothers and sisters and that respondent
Magno is the legal administratrix thereof, the trial court acted
correctly and within its jurisdiction. Accordingly, the petition
for certiorari and prohibition has to be denied. The Court feels
however, that pending the liquidation of the conjugal partnership and
the determination of the specific properties constituting her estate,
the two administrators should act conjointly as ordered in the Court's
resolution of September 8, 1972 and as further clarified in the
dispositive portion of its decision.
Anent the appeals from the orders of the lower court sanctioning
payment by appellee Magno, as administratrix, of expenses of
administration and attorney's fees, it is obvious that, with Our
holding that there is such an estate of Mrs. Hodges, and for the
reasons stated in the body of this opinion, the said orders should be
affirmed. This We do on the assumption We find justified by the
evidence of record, and seemingly agreed to by appellant PCIB, that
the size and value of the properties that should correspond to the
estate of Mrs. Hodges far exceed the total of the attorney's fees and
administration expenses in question.
With respect to the appeals from the orders approving transactions
made by appellee Magno, as administratrix, covering properties
registered in the name of Hodges, the details of which are related
earlier above, a distinction must be made between those predicated
on contracts to sell executed by Hodges before the death of his wife,
188
on the one hand, and those premised on contracts to sell entered into
by him after her death. As regards the latter, We hold that inasmuch
as the payments made by appellees constitute proceeds of sales of
properties belonging to the estate of Mrs. Hodges, as may be implied
from the tenor of the motions of May 27 and December 14, 1957,
said payments continue to pertain to said estate, pursuant to her intent
obviously reflected in the relevant provisions of her will, on the
assumption that the size and value of the properties to correspond to
the estate of Mrs. Hodges would exceed the total value of all the
properties covered by the impugned deeds of sale, for which reason,
said properties may be deemed as pertaining to the estate of Mrs.
Hodges. And there being no showing that thus viewing the situation,
there would be prejudice to anyone, including the government, the
Court also holds that, disregarding procedural technicalities in favor
of a pragmatic and practical approach as discussed above, the
assailed orders should be affirmed. Being a stranger to the estate of
Mrs. Hodges, PCIB has no personality to raise the procedural and
jurisdictional issues raised by it. And inasmuch as it does not appear
that any of the other heirs of Mrs. Hodges or the government has
objected to any of the orders under appeal, even as to these parties,
there exists no reason for said orders to be set aside.
DISPOSITIVE PART
IN VIEW OF ALL THE FOREGOING PREMISES, judgment is
hereby rendered DISMISSING the petition in G. R. Nos. L-27860
and L-27896, and AFFIRMING, in G. R. Nos. L-27936-37 and the
other thirty-one numbers hereunder ordered to be added after
payment of the corresponding docket fees, all the orders of the trial
court under appeal enumerated in detail on pages 35 to 37 and 80 to
82 of this decision; the existence of the Testate Estate of Linnie Jane
Hodges, with respondent-appellee Avelina A. Magno, as
administratrix thereof is recognized, and it is declared that, until final
judgment is ultimately rendered regarding (1) the manner of applying
Article 16 of the Civil Code of the Philippines to the situation
obtaining in these cases and (2) the factual and legal issue of whether
or not Charles Newton Hodges had effectively and legally renounced
his inheritance under the will of Linnie Jane Hodges, the said estate
consists of one-fourth of the community properties of the said
spouses, as of the time of the death of the wife on May 23, 1957,
minus whatever the husband had already gratuitously disposed of in
favor of third persons from said date until his death, provided, first,
that with respect to remunerative dispositions, the proceeds thereof
shall continue to be part of the wife's estate, unless subsequently
disposed of gratuitously to third parties by the husband, and second,
that should the purported renunciation be declared legally effective,
no deductions whatsoever are to be made from said estate; in
consequence, the preliminary injunction of August 8, 1967, as
amended on October 4 and December 6, 1967, is lifted, and the
resolution of September 8, 1972, directing that petitioner-appellant
PCIB, as Administrator of the Testate Estate of Charles Newton
Hodges, in Special Proceedings 1672, and respondent-appellee
Avelina A. Magno, as Administratrix of the Testate Estate of Linnie
Jane Hodges, in Special Proceedings 1307, should act thenceforth
always conjointly, never independently from each other, as such
administrators, is reiterated, and the same is made part of this
judgment and shall continue in force, pending the liquidation of the
conjugal partnership of the deceased spouses and the determination
and segregation from each other of their respective estates, provided,
that upon the finality of this judgment, the trial court should
immediately proceed to the partition of the presently combined
estates of the spouses, to the end that the one-half share thereof of
Mrs. Hodges may be properly and clearly identified; thereafter, the
trial court should forthwith segregate the remainder of the one-fourth
herein adjudged to be her estate and cause the same to be turned over
or delivered to respondent for her exclusive administration in Special
Proceedings 1307, while the other one-fourth shall remain under the
 189

joint administration of said respondent and petitioner under a joint

proceedings in Special Proceedings 1307 and 1672, whereas the half
unquestionably pertaining to Hodges shall be administered by
petitioner exclusively in Special Proceedings 1672, without prejudice
to the resolution by the trial court of the pending motions for its
removal as administrator12; and this arrangement shall be maintained
until the final resolution of the two issues of renvoi and renunciation
hereby reserved for further hearing and determination, and the
corresponding complete segregation and partition of the two estates
in the proportions that may result from the said resolution.

Generally and in all other respects, the parties and the court a quo are
directed to adhere henceforth, in all their actuations in Special
Proceedings 1307 and 1672, to the views passed and ruled upon by
the Court in the foregoing opinion.

Appellant PCIB is ordered to pay, within five (5) days from notice
hereof, thirty-one additional appeal docket fees, but this decision
shall nevertheless become final as to each of the parties herein after
fifteen (15) days from the respective notices to them hereof in
accordance with the rules.

Costs against petitioner-appellant PCIB.


[G.R. No. 114776. February 2, 2000]
MENANDRO B. LAUREANO, petitioner, vs. COURT OF
APPEALS AND SINGAPORE AIRLINES
LIMITED, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari under Rule 45 of the Rules of
Court seeks to reverse the Decision of the Court of Appeals, dated
October 29, 1993, in C.A. G.R. No. CV 34476, as well as its
Resolution dated February 28, 1994, which denied the motion for
reconsideration.
The facts of the case as summarized by the respondent appellate
court are as follows:
"Sometime in 1978, plaintiff [Menandro B. Laureano, herein
petitioner], then Director of Flight Operations and Chief Pilot of Air
Manila, applied for employment with defendant company [herein
private respondent] through its Area Manager in Manila.
On September 30, 1978, after the usual personal interview, defendant
wrote to plaintiff, offering a contract of employment as an expatriate
B-707 captain for an original period of two (2) years commencing on
January 21, 1978, Plaintiff accepted the offer and commenced
working on January 20, 1979. After passing the six-month probation
period, plaintiff's appointment was confirmed effective July 21, 1979.
(Annex "B", p. 30, Rollo).
On July 21, 1979, defendant offered plaintiff an extension of his
two-year contract to five (5) years effective January 21, 1979 to
January 20, 1984 subject to the terms and conditions set forth in the
contract of employment, which the latter accepted (Annex "C", p. 31,
Rec.).
During his service as B-707 captain, plaintiff on August 24, 1980,
while in command of a flight, committed a noise violation offense at
the Zurich Airport, for which plaintiff apologized. (Exh. "3", p. 307,
Rec.).
Sometime in 1980, plaintiff featured in a tail scraping incident
wherein the tail of the aircraft scraped or touched the runway during
landing. He was suspended for a few days until he was investigated
by a board headed by Capt. Choy. He was reprimanded. Scjuris
On September 25, 1981, plaintiff was invited to take a course of
A-300 conversion training at Aeroformacion, Toulouse, France at
defendant's expense. Having successfully completed and passed the
training course, plaintiff was cleared on April 7, 1981 for solo duty
as captain of the Airbus A-300 and subsequently appointed as captain
of the A-300 fleet commanding an Airbus A-300 in flights over
Southeast Asia. (Annexes "D", "E" and "F", pp. 34-38, Rec.).
Sometime in 1982, defendant, hit by a recession, initiated
cost-cutting measures. Seventeen (17) expatriate captains in the
Airbus fleet were found in excess of the defendant's requirement
(t.s.n., July 6, 1988. p. 11). Consequently, defendant informed its
expatriate pilots including plaintiff of the situation and advised them
to take advance leaves. (Exh. "15", p. 466, Rec.).
Realizing that the recession would not be for a short time, defendant
decided to terminate its excess personnel (t.s.n., July 6, 1988, p. 17).
It did not, however, immediately terminate it's A-300 pilots. It
reviewed their qualifications for possible promotion to the B-747
fleet. Among the 17 excess Airbus pilots reviewed, twelve were
found qualified. Unfortunately, plaintiff was not one of the
twelve. Jurissc
190
On October 5, 1982, defendant informed plaintiff of his termination
effective November 1, 1982 and that he will be paid three (3) months
salary in lieu of three months notice (Annex "I", pp. 41-42, Rec.).
Because he could not uproot his family on such short notice, plaintiff
requested a three-month notice to afford him time to exhaust all
possible avenues for reconsideration and retention. Defendant gave
only two (2) months notice and one (1) month salary. (t.s.n., Nov. 12,
1987. p. 25).
Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal
dismissal before the Labor Arbiter. Defendant moved to dismiss on
jurisdictional grounds. Before said motion was resolved, the
complaint was withdrawn. Thereafter, plaintiff filed the instant case
for damages due to illegal termination of contract of services before
the court a quo (Complaint, pp. 1-10, Rec.).
Again, defendant on February 11, 1987 filed a motion to dismiss
alleging inter alia: (1) that the court has no jurisdiction over the
subject matter of the case, and (2) that Philippine courts have no
jurisdiction over the instant case. Defendant contends that the
complaint is for illegal dismissal together with a money claim arising
out of and in the course of plaintiff's employment "thus it is the
Labor Arbiter and the NLRC who have the jurisdiction pursuant to
Article 217 of the Labor Code" and that, since plaintiff was
employed in Singapore, all other aspects of his employment contract
and/or documents executed in Singapore. Thus, defendant postulates
that Singapore laws should apply and courts thereat shall have
jurisdiction. (pp. 50-69, Rec.). Misjuris
In traversing defendant's arguments, plaintiff claimed that: (1) where
the items demanded in a complaint are the natural consequences
flowing from a breach of an obligation and not labor benefits, the
case is intrinsically a civil dispute; (2) the case involves a question
that is beyond the field of specialization of labor arbiters; and (3) if
the complaint is grounded not on the employee's dismissal per se but
on the manner of said dismissal and the consequence thereof, the
case falls under the jurisdiction of the civil courts. (pp. 70-73, Rec.)
On March 23, 1987, the court a quo denied defendant's motion to
dismiss (pp. 82-84, Ibid). The motion for reconsideration was
likewise denied. (p. 95 ibid)
On September 16, 1987, defendant filed its answer reiterating the
grounds relied upon in its motion to dismiss and further arguing that
plaintiff is barred by laches, waiver, and estoppel from instituting the
complaint and that he has no cause of action. (pp. 102-115)"[1]
On April 10, 1991, the trial court handed down its decision in favor
of plaintiff. The dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff
Menandro Laureano and against defendant Singapore Airlines
Limited, ordering defendant to pay plaintiff the amounts of -
SIN$396,104.00, or its equivalent in Philippine currency at the
current rate of exchange at the time of payment, as and for unearned
compensation with legal interest from the filing of the complaint
until fully paid; Jjlex
SIN$154,742.00, or its equivalent in Philippine currency at the
current rate of exchange at the time of payment; and the further
amounts of P67,500.00 as consequential damages with legal interest
from the filing of the complaint until fully paid;
P1,000,000.00 as and for moral damages; P1,000,000.00 as and for
exemplary damages; and P100,000.00 as and for attorney's fees.
Costs against defendant.
SO ORDERED."[2]

Singapore Airlines timely appealed before the respondent court and
raised the issues of jurisdiction, validity of termination, estoppel, and
damages.
On October 29, 1993, the appellate court set aside the decision of the
trial court, thus,
"...In the instant case, the action for damages due to illegal
termination was filed by plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity date of his dismissal on
November 1, 1982. Clearly, plaintiff-appellee's action has already
prescribed.
WHEREFORE, the appealed decision is hereby REVERSED and
SET ASIDE. The complaint is hereby dismissed.
SO ORDERED."[3] Newmiso
Petitioner's and Singapore Airlines' respective motions for
reconsideration were denied.
Now, before the Court, petitioner poses the following queries:
1. IS THE PRESENT ACTION ONE BASED ON CONTRACT
WHICH PRESCRIBES IN TEN YEARS UNDER ARTICLE 1144
OF THE NEW CIVIL CODE OR ONE FOR DAMAGES ARISING
FROM AN INJURY TO THE RIGHTS OF THE PLAINTIFF
WHICH PRESCRIBES IN FOUR YEARS UNDER ARTICLE 1146
OF THE NEW CIVIL CODE?
2. CAN AN EMPLOYEE WITH A FIXED PERIOD OF
EMPLOYMENT BE RETRENCHED BY HIS EMPLOYER?
3. CAN THERE BE VALID RETRENCHMENT IF AN
EMPLOYER MERELY FAILS TO REALIZE THE EXPECTED
PROFITS EVEN IF IT WERE NOT, IN FACT, INCURRING
LOSSES?
At the outset, we find it necessary to state our concurrence on the
assumption of jurisdiction by the Regional Trial Court of Manila,
Branch 9. The trial court rightly ruled on the application of
Philippine law, thus: Acctmis
"Neither can the Court determine whether the termination of the
plaintiff is legal under the Singapore Laws because of the defendant's
failure to show which specific laws of Singapore Laws apply to this
case. As substantially discussed in the preceding paragraphs, the
Philippine Courts do not take judicial notice of the laws of Singapore.
The defendant that claims the applicability of the Singapore Laws to
this case has the burden of proof. The defendant has failed to do so.
Therefore, the Philippine law should be applied."[4]
Respondent Court of Appeals acquired jurisdiction when defendant
filed its appeal before said court.[5] On this matter, respondent court
was correct when it barred defendant-appellant below from raising
further the issue of jurisdiction.[6]
Petitioner now raises the issue of whether his action is one based on
Article 1144 or on Article 1146 of the Civil Code. According to him,
his termination of employment effective November 1, 1982, was
based on an employment contract which is under Article 1144, so his
action should prescribe in 10 years as provided for in said article.
Thus he claims the ruling of the appellate court based on Article
1146 where prescription is only four (4) years, is an error. The
appellate court concluded that the action for illegal dismissal
originally filed before the Labor Arbiter on June 29, 1983, but which
was withdrawn, then filed again in 1987 before the Regional Trial
Court, had already prescribed.
191
In our view, neither Article 1144[7] nor Article 1146[8] of the Civil
Code is here pertinent. What is applicable is Article 291 of the Labor
Code, viz:
"Article 291. Money claims. - All money claims arising from
employee-employer relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
x x x" Misact
What rules on prescription should apply in cases like this one has
long been decided by this Court. In illegal dismissal, it is settled, that
the ten-year prescriptive period fixed in Article 1144 of the Civil
Code may not be invoked by petitioners, for the Civil Code is a law
of general application, while the prescriptive period fixed in Article
292 of the Labor Code [now Article 291] is a SPECIAL LAW
applicable to claims arising from employee-employer relations.[9]
More recently in De Guzman. vs. Court of Appeals,[10] where the
money claim was based on a written contract, the Collective
Bargaining Agreement, the Court held:
"...The language of Art. 291 of the Labor Code does not limit its
application only to 'money claims specifically recoverable under said
Code' but covers all money claims arising from an
employee-employer relations" (Citing Cadalin v. POEA
Administrator, 238 SCRA 721, 764 [1994]; and Uy v. National
Labor Relations Commission, 261 SCRA 505, 515 [1996]). ...
It should be noted further that Article 291 of the Labor Code is a
special law applicable to money claims arising from
employer-employee relations; thus, it necessarily prevails over
Article 1144 of the Civil Code, a general law. Basic is the rule in
statutory construction that 'where two statutes are of equal theoretical
application to a particular case, the one designed therefore should
prevail.' (Citing Leveriza v. Intermediate Appellate Court, 157 SCRA
282, 294.) Generalia specialibus non derogant."[11]
In the light of Article 291, aforecited, we agree with the appellate
court's conclusion that petitioner's action for damages due to illegal
termination filed again on January 8, 1987 or more than four (4)
years after the effective date of his dismissal on November 1, 1982
has already prescribed.
"In the instant case, the action for damages due to illegal termination
was filed by plaintiff-appellee only on January 8, 1987 or more than
four (4) years after the effectivity date of his dismissal on November
1, 1982. Clearly, plaintiff-appellee's action has already prescribed."
We base our conclusion not on Article 1144 of the Civil Code but on
Article 291 of the Labor Code, which sets the prescription period at
three (3) years and which governs under this jurisdiction.
Petitioner claims that the running of the prescriptive period was
tolled when he filed his complaint for illegal dismissal before the
Labor Arbiter of the National Labor Relations Commission.
However, this claim deserves scant consideration; it has no legal leg
to stand on. In Olympia International, Inc. vs. Court of Appeals, we
held that "although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or
voluntary abandonment by plaintiff leaves the parties in exactly the
same position as though no action had been commenced at all."[12]
Now, as to whether petitioner's separation from the company due to
retrenchment was valid, the appellate court found that the
employment contract of petitioner allowed for pre-termination of
employment. We agree with the Court of Appeals when it said, Sdjad
 192

"It is a settled rule that contracts have the force of law between the
parties. From the moment the same is perfected, the parties are bound
not only to the fulfillment of what has been expressly stipulated but
also to all consequences which, according to their nature, may be in
keeping with good faith, usage and law. Thus, when
plaintiff-appellee accepted the offer of employment, he was bound by
the terms and conditions set forth in the contract, among others, the
right of mutual termination by giving three months written notice or
by payment of three months salary. Such provision is clear and
readily understandable, hence, there is no room for interpretation."

xxx

Further, plaintiff-appellee's contention that he is not bound by the

provisions of the Agreement, as he is not a signatory thereto,
deserves no merit. It must be noted that when plaintiff-appellee's
employment was confirmed, he applied for membership with the
Singapore Airlines Limited (Pilots) Association, the signatory to the
aforementioned Agreement. As such, plaintiff-appellee is estopped
from questioning the legality of the said agreement or any proviso
contained therein."[13]

Moreover, the records of the present case clearly show that

respondent court's decision is amply supported by evidence and it did
not err in its findings, including the reason for the retrenchment:

"When defendant-appellant was faced with the world-wide recession

of the airline industry resulting in a slow down in the company's
growth particularly in the regional operation (Asian Area) where the
Airbus 300 operates. It had no choice but to adopt cost cutting
measures, such as cutting down services, number of frequencies of
flights, and reduction of the number of flying points for the A-300
fleet (t.s.n., July 6, 1988, pp. 17-18). As a result, defendant-appellant
had to layoff A-300 pilots, including plaintiff-appellee, which it
found to be in excess of what is reasonably needed."[14]

All these considered, we find sufficient factual and legal basis to

conclude that petitioner's termination from employment was for an
authorized cause, for which he was given ample notice and
opportunity to be heard, by respondent company. No error nor grave
abuse of discretion, therefore, could be attributed to respondent
appellate court. Sppedsc

ACCORDINGLY, the instant petition is DISMISSED. The decision

of the Court of Appeals in C.A. CV No. 34476 is AFFIRMED.

SO ORDERED.

G.R. No. L-55960 November 24, 1988
YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN
YEN, petitioners,
vs.
AIDA SY-GONZALES, MANUEL SY, TERESITA
SY-BERNABE, RODOLFO SY, and HONORABLE COURT
OF APPEALS, respondents.
Montesa, Albon, & Associates for petitioners.
De Lapa, Salonga, Fulgencio & De Lunas for respondents.
CORTES, J.:
Sy Kiat, a Chinese national. died on January 17, 1977 in Caloocan
City where he was then residing, leaving behind real and personal
properties here in the Philippines worth P300,000.00 more or less.
Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and
Rodolfo Sy filed a petition for the grant of letters of administration
docketed as Special Proceedings Case No. C-699 of the then Court of
First Instance of Rizal Branch XXXIII, Caloocan City. In said
petition they alleged among others that (a) they are the children of
the deceased with Asuncion Gillego; (b) to their knowledge Sy Mat
died intestate; (c) they do not recognize Sy Kiat's marriage to Yao
Kee nor the filiation of her children to him; and, (d) they nominate
Aida Sy-Gonzales for appointment as administratrix of the intestate
estate of the deceased [Record on Appeal, pp. 4-9; Rollo, p. 107.]
The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai Cho
and Sy Yun Chen who alleged that: (a) Yao Kee is the lawful wife of
Sy Kiat whom he married on January 19, 1931 in China; (b) the other
oppositors are the legitimate children of the deceased with Yao Kee;
and, (c) Sze Sook Wah is the eldest among them and is competent,
willing and desirous to become the administratrix of the estate of Sy
Kiat [Record on Appeal, pp. 12-13; Rollo, p. 107.] After hearing, the
probate court, finding among others that:
(1) Sy Kiat was legally married to Yao Kee [CFI decision, pp. 12-27;
Rollo, pp. 49-64;]
(2) Sze Sook Wah, Sze Lai Cho and Sze Chun Yen are the legitimate
children of Yao Kee with Sy Mat [CFI decision, pp. 28-31; Rollo. pp.
65-68;] and,
(3) Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo
Sy are the acknowledged illegitimate offsprings of Sy Kiat with
Asuncion Gillego [CFI decision, pp. 27-28; Rollo, pp. 64- 65.]
held if favor of the oppositors (petitioners herein) and appointed Sze
Sook Wah as the administratrix of the intestate estate of the deceased
[CFI decision, pp. 68-69; Rollo, pp. 105-106.]
On appeal the Court of Appeals rendered a decision modifying that
of the probate court, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, the decision of the lower Court is
hereby MODIFIED and SET ASIDE and a new judgment rendered
as follows:
(1) Declaring petitioners Aida Sy-Gonzales, Manuel Sy, Teresita Sy-
Bernabe and Rodolfo Sy acknowledged natural children of the
deceased Sy Kiat with Asuncion Gillego, an unmarried woman with
whom he lived as husband and wife without benefit of marriage for
many years:
(2) Declaring oppositors Sze Sook Wah, Sze Lai Chu and Sze Chun
Yen, the acknowledged natural children of the deceased Sy Kiat with
193
his Chinese wife Yao Kee, also known as Yui Yip, since the legality
of the alleged marriage of Sy Mat to Yao Kee in China had not been
proven to be valid to the laws of the Chinese People's Republic of
China (sic);
(3) Declaring the deed of sale executed by Sy Kiat on December 7,
1976 in favor of Tomas Sy (Exhibit "G-1", English translation of
Exhibit "G") of the Avenue Tractor and Diesel Parts Supply to be
valid and accordingly, said property should be excluded from the
estate of the deceased Sy Kiat; and
(4) Affirming the appointment by the lower court of Sze Sook Wah
as judicial administratrix of the estate of the deceased. [CA decision,
pp. 11-12; Rollo, pp. 36- 37.]
From said decision both parties moved for partial reconsideration,
which was however denied by respondent court. They thus
interposed their respective appeals to this Court.
Private respondents filed a petition with this Court docketed as G.R.
No. 56045 entitled "Aida Sy-Gonzales, Manuel Sy, Teresita
Sy-Bernabe and Rodolfo Sy v. Court of Appeals, Yao Kee, Sze Sook
Wah, Sze Lai Cho and Sy Chun Yen" questioning paragraphs (3) and
(4) of the dispositive portion of the Court of Appeals' decision. The
Supreme Court however resolved to deny the petition and the motion
for reconsideration. Thus on March 8, 1982 entry of judgment was
made in G.R. No. 56045. **
The instant petition, on the other hand, questions paragraphs (1) and
(2) of the dispositive portion of the decision of the Court of Appeals.
This petition was initially denied by the Supreme Court on June 22,
1981. Upon motion of the petitioners the Court in a resolution dated
September 16, 1981 reconsidered the denial and decided to give due
course to this petition. Herein petitioners assign the following as
errors:
I. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
DECLARING THE MARRIAGE OF SY KIAT TO YAO YEE AS
NOT HAVE (sic) BEEN PROVEN VALID IN ACCORDANCE
WITH LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.
II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN
DECLARING AIDA SY-GONZALES, MANUEL SY, TERESITA
SY-BERNABE AND RODOLFO SY AS NATURAL CHILDREN
OF SY KIAT WITH ASUNCION GILLEGO. [Petition, p. 2; Rollo,
p. 6.]
I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in
accordance with Chinese law and custom was conclusively proven.
To buttress this argument they rely on the following testimonial and
documentary evidence.
First, the testimony of Yao Kee summarized by the trial court as
follows:
Yao Kee testified that she was married to Sy Kiat on January 19,
1931 in Fookien, China; that she does not have a marriage certificate
because the practice during that time was for elders to agree upon the
betrothal of their children, and in her case, her elder brother was the
one who contracted or entered into [an] agreement with the parents
of her husband; that the agreement was that she and Sy Mat would be
married, the wedding date was set, and invitations were sent out; that
the said agreement was complied with; that she has five children with
Sy Kiat, but two of them died; that those who are alive are Sze Sook
Wah, Sze Lai Cho, and Sze Chun Yen, the eldest being Sze Sook
Wah who is already 38 years old; that Sze Sook Wah was born on
November 7, 1939; that she and her husband, Sy Mat, have been
living in FooKien, China before he went to the Philippines on several
occasions; that the practice during the time of her marriage was a
written document [is exchanged] just between the parents of the bride

and the parents of the groom, or any elder for that matter; that in
China, the custom is that there is a go- between, a sort of marriage
broker who is known to both parties who would talk to the parents of
the bride-to-be; that if the parents of the bride-to-be agree to have the
groom-to-be their son in-law, then they agree on a date as an
engagement day; that on engagement day, the parents of the groom
would bring some pieces of jewelry to the parents of the bride-to-be,
and then one month after that, a date would be set for the wedding,
which in her case, the wedding date to Sy Kiat was set on January 19,
1931; that during the wedding the bridegroom brings with him a
couch (sic) where the bride would ride and on that same day, the
parents of the bride would give the dowry for her daughter and then
the document would be signed by the parties but there is no
solemnizing officer as is known in the Philippines; that during the
wedding day, the document is signed only by the parents of the
bridegroom as well as by the parents of the bride; that the parties
themselves do not sign the document; that the bride would then be
placed in a carriage where she would be brought to the town of the
bridegroom and before departure the bride would be covered with a
sort of a veil; that upon reaching the town of the bridegroom, the
bridegroom takes away the veil; that during her wedding to Sy Kiat
(according to said Chinese custom), there were many persons present;
that after Sy Kiat opened the door of the carriage, two old ladies
helped her go down the carriage and brought her inside the house of
Sy Mat; that during her wedding, Sy Chick, the eldest brother of Sy
Kiat, signed the document with her mother; that as to the
whereabouts of that document, she and Sy Mat were married for
46 years already and the document was left in China and she doubt if
that document can still be found now; that it was left in the
possession of Sy Kiat's family; that right now, she does not know the
whereabouts of that document because of the lapse of many years
and because they left it in a certain place and it was already eaten by
the termites; that after her wedding with Sy Kiat, they lived
immediately together as husband and wife, and from then on, they
lived together; that Sy Kiat went to the Philippines sometime in
March or April in the same year they were married; that she went to
the Philippines in 1970, and then came back to China; that again she
went back to the Philippines and lived with Sy Mat as husband and
wife; that she begot her children with Sy Kiat during the several trips
by Sy Kiat made back to China. [CFI decision, pp. 13-15; Rollo, pp.
50-52.]
Second, the testimony of Gan Ching, a younger brother of Yao Kee
who stated that he was among the many people who attended the
wedding of his sister with Sy Kiat and that no marriage certificate is
issued by the Chinese government, a document signed by the parents
or elders of the parties being sufficient [CFI decision, pp. 15-16;
Rollo, pp.
52-53.]
Third, the statements made by Asuncion Gillego when she testified
before the trial court to the effect that (a) Sy Mat was married to Yao
Kee according to Chinese custom; and, (b) Sy Kiat's admission to her
that he has a Chinese wife whom he married according to Chinese
custom [CFI decision, p. 17; Rollo, p. 54.]
Fourth, Sy Kiat's Master Card of Registered Alien issued in
Caloocan City on October 3, 1972 where the following entries are
found: "Marital status—Married"; "If married give name of
spouses—Yao Kee"; "Address-China; "Date of marriage—1931";
and "Place of marriage—China" [Exhibit "SS-1".]
Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on
January 12, 1968 where the following entries are likewise found:
"Civil status—Married"; and, 'If married, state name and address of
spouse—Yao Kee Chingkang, China" [Exhibit "4".]
194
And lastly, the certification issued in Manila on October 28, 1977 by
the Embassy of the People's Republic of China to the effect that
"according to the information available at the Embassy Mr. Sy Kiat a
Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were
married on January 19, 1931 in Fukien, the People's Republic of
China" [Exhibit "5".]
These evidence may very well prove the fact of marriage between
Yao Kee and Sy Kiat. However, the same do not suffice to establish
the validity of said marriage in accordance with Chinese law or
custom.
Custom is defined as "a rule of conduct formed by repetition of acts,
uniformly observed (practiced) as a social rule, legally binding and
obligatory" [In the Matter of the Petition for Authority to Continue
Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and
Reyes", July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno,
Outline of Phil. Civil Law, Fourth Ed., Vol. 1, p. 7.] The law requires
that "a custom must be proved as a fact, according to the rules of
evidence" [Article 12, Civil Code.] On this score the Court had
occasion to state that "a local custom as a source of right can not be
considered by a court of justice unless such custom is properly
established by competent evidence like any other fact" [Patriarca v.
Orate, 7 Phil. 390, 395 (1907).] The same evidence, if not one of a
higher degree, should be required of a foreign custom.
The law on foreign marriages is provided by Article 71 of the Civil
Code which states that:
Art. 71. All marriages performed outside the Philippines in
accordance with the laws in force in the country where they were
performed and valid there as such, shall also be valid in this country,
except bigamous, Polygamous, or incestuous marriages, as
determined by Philippine law. (Emphasis supplied.) ***
Construing this provision of law the Court has held that to establish a
valid foreign marriage two things must be proven, namely: (1) the
existence of the foreign law as a question of fact; and (2) the alleged
foreign marriage by convincing evidence [Adong v. Cheong Seng
Gee, 43 Phil. 43, 49 (1922).]
In proving a foreign law the procedure is provided in the Rules of
Court. With respect to an unwritten foreign law, Rule 130 section 45
states that:
SEC. 45. Unwritten law.—The oral testimony of witnesses, skilled
therein, is admissible as evidence of the unwritten law of a foreign
country, as are also printed and published books of reports of
decisions of the courts of the foreign country, if proved to be
commonly admitted in such courts.
Proof of a written foreign law, on the other hand, is provided for
under Rule 132 section 25, thus:
SEC. 25. Proof of public or official record.—An official record or an
entry therein, when admissible for any purpose, may be evidenced by
an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in which the
record is kept is in a foreign country, the certificate may be made by
a secretary of embassy or legation, consul general, consul, vice
consul, or consular agent or by any officer in the foreign service of
the Philippines stationed in the foreign country in which the record is
kept and authenticated by the seal of his office.
The Court has interpreted section 25 to include competent evidence
like the testimony of a witness to prove the existence of a written
foreign law [Collector of Internal Revenue v. Fisher 110 Phil. 686,

700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal,
61 Phil. 471 (1935).]
In the case at bar petitioners did not present any competent evidence
relative to the law and custom of China on marriage. The testimonies
of Yao and Gan Ching cannot be considered as proof of China's law
or custom on marriage not only because they are
self-serving evidence, but more importantly, there is no showing that
they are competent to testify on the subject matter. For failure to
prove the foreign law or custom, and consequently, the validity of the
marriage in accordance with said law or custom, the marriage
between Yao Kee and Sy Kiat cannot be recognized in this
jurisdiction.
Petitioners contend that contrary to the Court of Appeals' ruling they
are not duty bound to prove the Chinese law on marriage as judicial
notice thereof had been taken by this Court in the case of Sy Joc
Lieng v. Sy Quia [16 Phil. 137 (1910).]
This contention is erroneous. Well-established in this jurisdiction is
the principle that Philippine courts cannot take judicial notice of
foreign laws. They must be alleged and proved as any other fact
[Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915);
Fluemer v. Hix, 54 Phil. 610 (1930).]
Moreover a reading of said case would show that the party alleging
the foreign marriage presented a witness, one Li Ung Bieng, to prove
that matrimonial letters mutually exchanged by the contracting
parties constitute the essential requisite for a marriage to be
considered duly solemnized in China. Based on his testimony, which
as found by the Court is uniformly corroborated by authors on the
subject of Chinese marriage, what was left to be decided was the
issue of whether or not the fact of marriage in accordance with
Chinese law was duly proven [Sy Joc Lieng v. Sy Quia, supra., at p.
160.]
Further, even assuming for the sake of argument that the Court has
indeed taken judicial notice of the law of China on marriage in the
aforecited case, petitioners however have not shown any proof that
the Chinese law or custom obtaining at the time the Sy Joc
Lieng marriage was celebrated in 1847 was still the law when the
alleged marriage of Sy Kiat to Yao Kee took place in 1931 or
eighty-four (84) years later.
Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil.
633 (1916)] as being applicable to the instant case. They aver that the
judicial pronouncement in the Memoracion case, that the testimony
of one of the contracting parties is competent evidence to show the
fact of marriage, holds true in this case.
The Memoracion case however is not applicable to the case at bar as
said case did not concern a foreign marriage and the issue posed was
whether or not the oral testimony of a spouse is competent evidence
to prove the fact of marriage in a complaint for adultery.
Accordingly, in the absence of proof of the Chinese law on marriage,
it should be presumed that it is the same as ours *** [Wong Woo Yiu
v. Vivo, G.R. No. L-21076, March 31, 1965, 13 SCRA 552, 555.]
Since Yao Kee admitted in her testimony that there was no
solemnizing officer as is known here in the Philippines [See Article
56, Civil Code] when her alleged marriage to Sy Mat was celebrated
[CFI decision, p. 14; Rollo, p. 51], it therefore follows that her
marriage to Sy Kiat, even if true, cannot be recognized in this
jurisdiction [Wong Woo Yiu v. Vivo, supra., pp. 555-556.]
II. The second issue raised by petitioners concerns the status of
private respondents.
Respondent court found the following evidence of petitioners'
filiation:
195
(1) Sy Kiat's Master Card of Registered Alien where the following
are entered: "Children if any: give number of children—Four"; and,
"Name—All living in China" [Exhibit "SS-1";]
(2) the testimony of their mother Yao Kee who stated that she had
five children with Sy Kiat, only three of whom are alive namely, Sze
Sook Wah, Sze Lai Chu and Sze Chin Yan [TSN, December 12,
1977, pp. 9-11;] and,
(3) an affidavit executed on March 22,1961 by Sy Kiat for
presentation to the Local Civil Registrar of Manila to support Sze
Sook Wah's application for a marriage license, wherein Sy Kiat
expressly stated that she is his daughter [Exhibit "3".]
Likewise on the record is the testimony of Asuncion Gillego that Sy
Kiat told her he has three daughters with his Chinese wife, two of
whom—Sook Wah and Sze Kai Cho—she knows, and one adopted
son [TSN, December 6,1977, pp. 87-88.]
However, as petitioners failed to establish the marriage of Yao Kee
with Sy Mat according to the laws of China, they cannot be accorded
the status of legitimate children but only that of acknowledged
natural children. Petitioners are natural children, it appearing that at
the time of their conception Yao Kee and Sy Kiat were not
disqualified by any impediment to marry one another [See Art. 269,
Civil Code.] And they are acknowledged children of the deceased
because of Sy Kiat's recognition of Sze Sook Wah [Exhibit "3"] and
its extension to Sze Lai Cho and Sy Chun Yen who are her sisters of
the full blood [See Art. 271, Civil Code.]
Private respondents on the other hand are also the deceased's
acknowledged natural children with Asuncion Gillego, a Filipina
with whom he lived for twenty-five (25) years without the benefit of
marriage. They have in their favor their father's acknowledgment,
evidenced by a compromise agreement entered into by and between
their parents and approved by the Court of First Instance on February
12, 1974 wherein Sy Kiat not only acknowleged them as his children
by Asuncion Gillego but likewise made provisions for their support
and future inheritance, thus:
xxx xxx xxx
2. The parties also acknowledge that they are common-law husband
and wife and that out of such relationship, which they have likewise
decided to definitely and finally terminate effective immediately, they
begot five children, namely: Aida Sy, born on May 30, 1950; Manuel
Sy, born on July 1, 1953; Teresita Sy, born on January 28, 1955;
Ricardo Sy now deceased, born on December 14, 1956; and Rodolfo
Sy, born on May 7, 1958.
3. With respect to the AVENUE TRACTOR AND DIESEL PARTS
SUPPLY ... , the parties mutually agree and covenant that—
(a) The stocks and merchandize and the furniture and equipments ...,
shall be divided into two equal shares between, and distributed to, Sy
Kiat who shall own
one-half of the total and the other half to Asuncion Gillego who shall
transfer the same to their children, namely, Aida Sy, Manuel Sy,
Teresita Sy, and Rodolfo Sy.
(b) the business name and premises ... shall be retained by Sy Kiat.
However, it shall be his obligation to give to the aforenamed children
an amount of One Thousand Pesos ( Pl,000.00 ) monthly out of the
rental of the two doors of the same building now occupied by Everett
Construction.
xxx xxx xxx
(5) With respect to the acquisition, during the existence of the
common-law husband-and-wife relationship between the parties, of
 196

the real estates and properties registered and/or appearing in the
name of Asuncion Gillego ... , the parties mutually agree and
covenant that the said real estates and properties shall be transferred
in equal shares to their children, namely, Aida Sy, Manuel Sy,
Teresita Sy, and Rodolfo Sy, but to be administered by Asuncion
Gillego during her lifetime ... [Exhibit "D".] (Emphasis supplied.)
xxx xxx xxx
This compromise agreement constitutes a statement before a court of
record by which a child may be voluntarily acknowledged [See Art.
278, Civil Code.]
Petitioners further argue that the questions on the validity of Sy Mat's
marriage to Yao Kee and the paternity and filiation of the parties
should have been ventilated in the Juvenile and Domestic Relations
Court.
Specifically, petitioners rely on the following provision of Republic
Act No. 5502, entitled "An Act Revising Rep. Act No. 3278,
otherwise known as the Charter of the City of Caloocan', with regard
to the Juvenile and Domestic Relations Court:
It is true that under the aforequoted section 1 of Republic Act No.
4834 **** a case involving paternity and acknowledgment may be
ventilated as an incident in the intestate or testate proceeding (See
Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal
provision presupposes that such an administration proceeding is
pending or existing and has not been terminated. [at pp. 313-314.]
(Emphasis supplied.)
xxx xxx xxx
The reason for ths rule is not only "to obviate the rendition of
conflicting rulings on the same issue by the Court of First Instance
and the Juvenile and Domestic Relations Court" [Vda. de Baluyut v.
Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but
more importantly to prevent multiplicity of suits. Accordingly, this
Court finds no reversible error committed by respondent court.
WHEREFORE, the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED

SEC. 91-A. Creation and Jurisdiction of the Court.—

xxx xxx xxx

The provisions of the Judiciary Act to the contrary notwithstanding,

the court shall have exclusive original jurisdiction to hear and decide
the following cases:

xxx xxx xxx

(2) Cases involving custody, guardianship, adoption, revocation of

adoption, paternity and acknowledgment;

(3) Annulment of marriages, relief from marital obligations, legal

separation of spouses, and actions for support;

(4) Proceedings brought under the provisions of title six and title
seven, chapters one to three of the civil code;

xxx xxx xxx

and the ruling in the case of Bartolome v. Bartolome [G.R. No.

L-23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira [G.R.
No. L-42615, 72 SCRA 307.]

With the enactment of Batas Pambansa Blg. 129, otherwise known as

the Judiciary Reorganization Act of 1980, the Juvenile and Domestic
Relations Courts were abolished. Their functions and jurisdiction are
now vested with the Regional Trial Courts [See Section 19 (7), B.P.
Blg. 129 and Divinagracia v. Belosillo, G.R. No. L-47407, August 12,
1986, 143 SCRA 356, 360] hence it is no longer necessary to pass
upon the issue of jurisdiction raised by petitioners.

Moreover, even without the exactment of Batas Pambansa Blg. 129

we find in Rep. Act No. 5502 sec. 91-A last paragraph that:

xxx xxx xxx

If any question involving any of the above matters should arise as an

incident in any case pending in the ordinary court, said incident shall
be determined in the main case.

xxx xxx xxx

As held in the case of Divinagracia v. Rovira [G.R. No. L42615.

August 10, 1976, 72 SCRA 307]:

xxx xxx xxx


G.R. No. 119602 October 6, 2000
WILDVALLEY SHIPPING CO., LTD. petitioner,
vs.
COURT OF APPEALS and PHILIPPINE PRESIDENT LINES
INC., respondents.
DECISION
BUENA, J.:
This is a petition for review on certiorari seeking to set aside the
decision of the Court of Appeals which reversed the decision of the
lower court in CA-G.R. CV No. 36821, entitled "Wildvalley
Shipping Co., Ltd., plaintiff-appellant, versus Philippine President
Lines, Inc., defendant-appellant."
The antecedent facts of the case are as follows:
Sometime in February 1988, the Philippine Roxas, a vessel owned by
Philippine President Lines, Inc., private respondent herein, arrived in
Puerto Ordaz, Venezuela, to load iron ore. Upon the completion of
the loading and when the vessel was ready to leave port, Mr. Ezzar
del Valle Solarzano Vasquez, an official pilot of Venezuela, was
designated by the harbour authorities in Puerto Ordaz to navigate the
Philippine Roxas through the Orinoco River.1He was asked to pilot
the said vessel on February 11, 19882 boarding it that night at 11:00
p.m.3
The master (captain) of the Philippine Roxas, Captain Nicandro
Colon, was at the bridge together with the pilot (Vasquez), the
vessel's third mate (then the officer on watch), and a helmsman when
the vessel left the port4 at 1:40 a.m. on February 12, 1988.5 Captain
Colon left the bridge when the vessel was under way.6
The Philippine Roxas experienced some vibrations when it entered
the San Roque Channel at mile 172.7 The vessel proceeded on its way,
with the pilot assuring the watch officer that the vibration was a
result of the shallowness of the channel.8
Between mile 158 and 157, the vessel again experienced some
vibrations.9 These occurred at 4:12 a.m.10 It was then that the watch
officer called the master to the bridge.11
The master (captain) checked the position of the vessel12 and verified
that it was in the centre of the channel.13 He then went to confirm, or
set down, the position of the vessel on the chart.14 He ordered
Simplicio A. Monis, Chief Officer of the President Roxas, to check
all the double bottom tanks.15
At around 4:35 a.m., the Philippine Roxas ran aground in the
Orinoco River,16 thus obstructing the ingress and egress of vessels.
As a result of the blockage, the Malandrinon, a vessel owned by
herein petitioner Wildvalley Shipping Company, Ltd., was unable to
sail out of Puerto Ordaz on that day.
Subsequently, Wildvalley Shipping Company, Ltd. filed a suit with
the Regional Trial Court of Manila, Branch III against Philippine
President Lines, Inc. and Pioneer Insurance Company (the
underwriter/insurer of Philippine Roxas) for damages in the form of
unearned profits, and interest thereon amounting to US $400,000.00
plus attorney's fees, costs, and expenses of litigation. The complaint
against Pioneer Insurance Company was dismissed in an Order dated
November 7, 1988.17
At the pre-trial conference, the parties agreed on the following facts:
"1. The jurisdictional facts, as specified in their respective pleadings;
197
"2. That defendant PPL was the owner of the vessel Philippine Roxas
at the time of the incident;
"3. That defendant Pioneer Insurance was the insurance underwriter
for defendant PPL;
"4. That plaintiff Wildvalley Shipping Co., Inc. is the owner of the
vessel Malandrinon, whose passage was obstructed by the vessel
Philippine Roxas at Puerto Ordaz, Venezuela, as specified in par. 4,
page 2 of the complaint;
"5. That on February 12, 1988, while the Philippine Roxas was
navigating the channel at Puerto Ordaz, the said vessel grounded and
as a result, obstructed navigation at the channel;
"6. That the Orinoco River in Puerto Ordaz is a compulsory pilotage
channel;
"7. That at the time of the incident, the vessel, Philippine Roxas, was
under the command of the pilot Ezzar Solarzano, assigned by the
government thereat, but plaintiff claims that it is under the command
of the master;
"8. The plaintiff filed a case in Middleburg, Holland which is related
to the present case;
"9. The plaintiff caused the arrest of the Philippine Collier, a vessel
owned by the defendant PPL;
"10. The Orinoco River is 150 miles long and it takes approximately
12 hours to navigate out of the said river;
"11. That no security for the plaintiff's claim was given until after the
Philippine Collier was arrested; and
"12. That a letter of guarantee, dated 12-May-88 was issued by the
Steamship Mutual Underwriters Ltd."18
The trial court rendered its decision on October 16, 1991 in favor of
the petitioner, Wildvalley Shipping Co., Ltd. The dispositive portion
thereof reads as follows:
"WHEREFORE, judgment is rendered for the plaintiff, ordering
defendant Philippine President Lines, Inc. to pay to the plaintiff the
sum of U.S. $259,243.43, as actual and compensatory damages, and
U.S. $162,031.53, as expenses incurred abroad for its foreign lawyers,
plus additional sum of U.S. $22,000.00, as and for attorney's fees of
plaintiff's local lawyer, and to pay the cost of this suit.
"Defendant's counterclaim is dismissed for lack of merit.
"SO ORDERED."19
Both parties appealed: the petitioner appealing the non-award of
interest with the private respondent questioning the decision on the
merits of the case.
After the requisite pleadings had been filed, the Court of Appeals
came out with its questioned decision dated June 14, 1994, 20 the
dispositive portion of which reads as follows:
"WHEREFORE, finding defendant-appellant's appeal to be
meritorious, judgment is hereby rendered reversing the Decision of
the lower court. Plaintiff-appellant's Complaint is dismissed and it is
ordered to pay defendant-appellant the amount of Three Hundred
Twenty-three Thousand, Forty-two Pesos and Fifty-three Centavos
(₱323,042.53) as and for attorney's fees plus cost of suit.
Plaintiff-appellant's appeal is DISMISSED.
"SO ORDERED."21

Petitioner filed a motion for reconsideration22 but the same was
denied for lack of merit in the resolution dated March 29, 1995. 23
Hence, this petition.
The petitioner assigns the following errors to the court a quo:
1. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
FINDING THAT UNDER PHILIPPINE LAW NO FAULT OR
NEGLIGENCE CAN BE ATTRIBUTED TO THE MASTER NOR
THE OWNER OF THE "PHILIPPINE ROXAS" FOR THE
GROUNDING OF SAID VESSEL RESULTING IN THE
BLOCKAGE OF THE RIO ORINOCO;
2. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
REVERSING THE FINDINGS OF FACTS OF THE TRIAL
COURT CONTRARY TO EVIDENCE;
3. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
FINDING THAT THE "PHILIPPINE ROXAS" IS SEAWORTHY;
4. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
DISREGARDING VENEZUELAN LAW DESPITE THE FACT
THAT THE SAME HAS BEEN SUBSTANTIALLY PROVED IN
THE TRIAL COURT WITHOUT ANY OBJECTION FROM
PRIVATE RESPONDENT, AND WHOSE OBJECTION WAS
INTERPOSED BELATEDLY ON APPEAL;
5. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
AWARDING ATTORNEY'S FEES AND COSTS TO PRIVATE
RESPONDENT WITHOUT ANY FAIR OR REASONABLE
BASIS WHATSOEVER;
6. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN
NOT FINDING THAT PETITIONER'S CAUSE IS MERITORIOUS
HENCE, PETITIONER SHOULD BE ENTITLED TO
ATTORNEY'S FEES, COSTS AND INTEREST.
The petition is without merit.
The primary issue to be determined is whether or not Venezuelan law
is applicable to the case at bar.
It is well-settled that foreign laws do not prove themselves in our
jurisdiction and our courts are not authorized to take judicial notice
of them. Like any other fact, they must be alleged and proved. 24
A distinction is to be made as to the manner of proving a written and
an unwritten law. The former falls under Section 24, Rule 132 of the
Rules of Court, as amended, the entire provision of which is quoted
hereunder. Where the foreign law sought to be proved is "unwritten,"
the oral testimony of expert witnesses is admissible, as are printed
and published books of reports of decisions of the courts of the
country concerned if proved to be commonly admitted in such
courts.25
Section 24 of Rule 132 of the Rules of Court, as amended, provides:
"Sec. 24. Proof of official record. -- The record of public documents
referred to in paragraph (a) of Section 19, when admissible for any
purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or
by his deputy, and accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. If
the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the
seal of his office." (Underscoring supplied)
198
The court has interpreted Section 25 (now Section 24) to include
competent evidence like the testimony of a witness to prove the
existence of a written foreign law.26
In the noted case of Willamette Iron & Steel Works vs. Muzzal,27 it
was held that:
"… Mr. Arthur W. Bolton, an attorney-at-law of San Francisco,
California, since the year 1918 under oath, quoted verbatim section
322 of the California Civil Code and stated that said section was in
force at the time the obligations of defendant to the plaintiff were
incurred, i.e. on November 5, 1928 and December 22, 1928. This
evidence sufficiently established the fact that the section in question
was the law of the State of California on the above dates. A reading
of sections 300 and 301 of our Code of Civil Procedure will convince
one that these sections do not exclude the presentation of other
competent evidence to prove the existence of a foreign law.
"`The foreign law is a matter of fact …You ask the witness what the
law is; he may, from his recollection, or on producing and referring
to books, say what it is.' (Lord Campbell concurring in an opinion of
Lord Chief Justice Denman in a well-known English case where a
witness was called upon to prove the Roman laws of marriage and
was permitted to testify, though he referred to a book containing the
decrees of the Council of Trent as controlling, Jones on Evidence,
Second Edition, Volume 4, pages 3148-3152.) x x x."
We do not dispute the competency of Capt. Oscar Leon Monzon, the
Assistant Harbor Master and Chief of Pilots at Puerto Ordaz,
Venezuela,28 to testify on the existence of the Reglamento General de
la Ley de Pilotaje (pilotage law of Venezuela)29 and the Reglamento
Para la Zona de Pilotaje No 1 del Orinoco (rules governing the
navigation of the Orinoco River). Captain Monzon has held the
aforementioned posts for eight years.30 As such he is in charge of
designating the pilots for maneuvering and navigating the Orinoco
River. He is also in charge of the documents that come into the office
of the harbour masters.31
Nevertheless, we take note that these written laws were not proven in
the manner provided by Section 24 of Rule 132 of the Rules of
Court.
The Reglamento General de la Ley de Pilotaje was published in
the Gaceta Oficial32 of the Republic of Venezuela. A photocopy of
the Gaceta Oficial was presented in evidence as an official
publication of the Republic of Venezuela.
The Reglamento Para la Zona de Pilotaje No 1 del Orinoco is
published in a book issued by the Ministerio de Comunicaciones of
Venezuela.33 Only a photocopy of the said rules was likewise
presented as evidence.
Both of these documents are considered in Philippine jurisprudence
to be public documents for they are the written official acts, or
records of the official acts of the sovereign authority, official bodies
and tribunals, and public officers of Venezuela.34
For a copy of a foreign public document to be admissible, the
following requisites are mandatory: (1) It must be attested by the
officer having legal custody of the records or by his deputy; and (2)
It must be accompanied by a certificate by a secretary of the embassy
or legation, consul general, consul, vice consular or consular agent or
foreign service officer, and with the seal of his office.35 The latter
requirement is not a mere technicality but is intended to justify the
giving of full faith and credit to the genuineness of a document in a
foreign country.36
It is not enough that the Gaceta Oficial, or a book published by
the Ministerio de Comunicaciones of Venezuela, was presented as
evidence with Captain Monzon attesting it. It is also required by

Section 24 of Rule 132 of the Rules of Court that a certificate that
Captain Monzon, who attested the documents, is the officer who had
legal custody of those records made by a secretary of the embassy or
legation, consul general, consul, vice consul or consular agent or by
any officer in the foreign service of the Philippines stationed in
Venezuela, and authenticated by the seal of his office accompanying
the copy of the public document. No such certificate could be found
in the records of the case.
With respect to proof of written laws, parol proof is objectionable,
for the written law itself is the best evidence. According to the
weight of authority, when a foreign statute is involved, the best
evidence rule requires that it be proved by a duly authenticated copy
of the statute.37
At this juncture, we have to point out that the Venezuelan law was
not pleaded before the lower court.
A foreign law is considered to be pleaded if there is an allegation in
the pleading about the existence of the foreign law, its import and
legal consequence on the event or transaction in issue.38
A review of the Complaint39 revealed that it was never alleged or
invoked despite the fact that the grounding of the M/V Philippine
Roxas occurred within the territorial jurisdiction of Venezuela.
We reiterate that under the rules of private international law, a
foreign law must be properly pleaded and proved as a fact. In the
absence of pleading and proof, the laws of a foreign country, or state,
will be presumed to be the same as our own local or domestic law
and this is known as processual presumption.40
Having cleared this point, we now proceed to a thorough study of the
errors assigned by the petitioner.
Petitioner alleges that there was negligence on the part of the private
respondent that would warrant the award of damages.
There being no contractual obligation, the private respondent is
obliged to give only the diligence required of a good father of a
family in accordance with the provisions of Article 1173 of the New
Civil Code, thus:
"Art. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of
the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2201, paragraph 2, shall apply.
"If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good father
of a family shall be required."
The diligence of a good father of a family requires only that diligence
which an ordinary prudent man would exercise with regard to his
own property. This we have found private respondent to have
exercised when the vessel sailed only after the "main engine,
machineries, and other auxiliaries" were checked and found to be in
good running condition;41 when the master left a competent officer,
the officer on watch on the bridge with a pilot who is experienced in
navigating the Orinoco River; when the master ordered the
inspection of the vessel's double bottom tanks when the vibrations
occurred anew.42
The Philippine rules on pilotage, embodied in Philippine Ports
Authority Administrative Order No. 03-85, otherwise known as the
Rules and Regulations Governing Pilotage Services, the Conduct of
Pilots and Pilotage Fees in Philippine Ports enunciate the duties and
responsibilities of a master of a vessel and its pilot, among other
things.
199
The pertinent provisions of the said administrative order governing
these persons are quoted hereunder:
"Sec. 11. Control of Vessels and Liability for Damage. -- On
compulsory pilotage grounds, the Harbor Pilot providing the service
to a vessel shall be responsible for the damage caused to a vessel or
to life and property at ports due to his negligence or fault. He can be
absolved from liability if the accident is caused by force majeure or
natural calamities provided he has exercised prudence and extra
diligence to prevent or minimize the damage.
"The Master shall retain overall command of the vessel even on
pilotage grounds whereby he can countermand or overrule the order
or command of the Harbor Pilot on board. In such event, any damage
caused to a vessel or to life and property at ports by reason of the
fault or negligence of the Master shall be the responsibility and
liability of the registered owner of the vessel concerned without
prejudice to recourse against said Master.
"Such liability of the owner or Master of the vessel or its pilots shall
be determined by competent authority in appropriate proceedings in
the light of the facts and circumstances of each particular case.
"x x x
"Sec. 32. Duties and Responsibilities of the Pilots or Pilots’
Association. -- The duties and responsibilities of the Harbor Pilot
shall be as follows:
"x x x
"f) A pilot shall be held responsible for the direction of a vessel from
the time he assumes his work as a pilot thereof until he leaves it
anchored or berthed safely; Provided, however, that his responsibility
shall cease at the moment the Master neglects or refuses to carry out
his order."
The Code of Commerce likewise provides for the obligations
expected of a captain of a vessel, to wit:
"Art. 612. The following obligations shall be inherent in the office of
captain:
"x x x
"7. To be on deck on reaching land and to take command on entering
and leaving ports, canals, roadsteads, and rivers, unless there is a
pilot on board discharging his duties. x x x."
The law is very explicit. The master remains the overall commander
of the vessel even when there is a pilot on board. He remains in
control of the ship as he can still perform the duties conferred upon
him by law43 despite the presence of a pilot who is temporarily in
charge of the vessel. It is not required of him to be on the bridge
while the vessel is being navigated by a pilot.
However, Section 8 of PPA Administrative Order No. 03-85,
provides:
"Sec. 8. Compulsory Pilotage Service - For entering a harbor and
anchoring thereat, or passing through rivers or straits within a
pilotage district, as well as docking and undocking at any pier/wharf,
or shifting from one berth or another, every vessel engaged in
coastwise and foreign trade shall be under compulsory pilotage.
"xxx."
The Orinoco River being a compulsory pilotage channel necessitated
the engaging of a pilot who was presumed to be knowledgeable of
every shoal, bank, deep and shallow ends of the river. In his
deposition, pilot Ezzar Solarzano Vasquez testified that he is an

official pilot in the Harbour at Port Ordaz, Venezuela,44 and that he
had been a pilot for twelve (12) years.45 He also had experience in
navigating the waters of the Orinoco River.46
The law does provide that the master can countermand or overrule
the order or command of the harbor pilot on board. The master of the
Philippine Roxas deemed it best not to order him (the pilot) to stop
the vessel,47 mayhap, because the latter had assured him that they
were navigating normally before the grounding of the
vessel.48Moreover, the pilot had admitted that on account of his
experience he was very familiar with the configuration of the river as
well as the course headings, and that he does not even refer to river
charts when navigating the Orinoco River.49
Based on these declarations, it comes as no surprise to us that the
master chose not to regain control of the ship. Admitting his limited
knowledge of the Orinoco River, Captain Colon relied on the
knowledge and experience of pilot Vasquez to guide the vessel
safely.
"Licensed pilots, enjoying the emoluments of compulsory pilotage,
are in a different class from ordinary employees, for they assume to
have a skill and a knowledge of navigation in the particular waters
over which their licenses extend superior to that of the master; pilots
are bound to use due diligence and reasonable care and skill. A pilot's
ordinary skill is in proportion to the pilot's responsibilities, and
implies a knowledge and observance of the usual rules of navigation,
acquaintance with the waters piloted in their ordinary condition, and
nautical skill in avoiding all known obstructions. The character of the
skill and knowledge required of a pilot in charge of a vessel on the
rivers of a country is very different from that which enables a
navigator to carry a vessel safely in the ocean. On the ocean, a
knowledge of the rules of navigation, with charts that disclose the
places of hidden rocks, dangerous shores, or other dangers of the way,
are the main elements of a pilot's knowledge and skill. But the pilot
of a river vessel, like the harbor pilot, is selected for the individual's
personal knowledge of the topography through which the vessel is
steered."50
We find that the grounding of the vessel is attributable to the pilot.
When the vibrations were first felt the watch officer asked him what
was going on, and pilot Vasquez replied that "(they) were in the
middle of the channel and that the vibration was as (sic) a result of
the shallowness of the channel."51
Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel
Philippine Roxas as well as other vessels on the Orinoco River due to
his knowledge of the same. In his experience as a pilot, he should
have been aware of the portions which are shallow and which are not.
His failure to determine the depth of the said river and his decision to
plod on his set course, in all probability, caused damage to the vessel.
Thus, we hold him as negligent and liable for its grounding.
In the case of Homer Ramsdell Transportation Company vs. La
Compagnie Generale Transatlantique, 182 U.S. 406, it was held
that:
"x x x The master of a ship, and the owner also, is liable for any
injury done by the negligence of the crew employed in the ship. The
same doctrine will apply to the case of a pilot employed by the
master or owner, by whose negligence any injury happens to a third
person or his property: as, for example, by a collision with another
ship, occasioned by his negligence. And it will make no difference in
the case that the pilot, if any is employed, is required to be a licensed
pilot; provided the master is at liberty to take a pilot, or not, at his
pleasure, for in such a case the master acts voluntarily, although he is
necessarily required to select from a particular class. On the other
hand, if it is compulsive upon the master to take a pilot, and, a
fortiori, if he is bound to do so under penalty, then, and in such
200
case, neither he nor the owner will be liable for injuries
occasioned by the negligence of the pilot; for in such a case the
pilot cannot be deemed properly the servant of the master or the
owner, but is forced upon them, and the maxim Qui facit per alium
facit per se does not apply." (Underscoring supplied)
Anent the river passage plan, we find that, while there was
none,52 the voyage has been sufficiently planned and monitored as
shown by the following actions undertaken by the pilot, Ezzar
Solarzano Vasquez, to wit: contacting the radio marina via VHF for
information regarding the channel, river traffic,53 soundings of the
river, depth of the river, bulletin on the buoys.54 The officer on watch
also monitored the voyage.55
We, therefore, do not find the absence of a river passage plan to be
the cause for the grounding of the vessel.
The doctrine of res ipsa loquitur does not apply to the case at bar
because the circumstances surrounding the injury do not clearly
indicate negligence on the part of the private respondent. For the said
doctrine to apply, the following conditions must be met: (1) the
accident was of such character as to warrant an inference that it
would not have happened except for defendant's negligence; (2) the
accident must have been caused by an agency or instrumentality
within the exclusive management or control of the person charged
with the negligence complained of; and (3) the accident must not
have been due to any voluntary action or contribution on the part of
the person injured.56
As has already been held above, there was a temporary shift of
control over the ship from the master of the vessel to the pilot on a
compulsory pilotage channel. Thus, two of the requisites necessary
for the doctrine to apply, i.e., negligence and control, to render the
respondent liable, are absent.
As to the claim that the ship was unseaworthy, we hold that it is not.
The Lloyd’s Register of Shipping confirmed the vessel’s
seaworthiness in a Confirmation of Class issued on February 16,
1988 by finding that "the above named ship (Philippine Roxas)
maintained the class "+100A1 Strengthened for Ore Cargoes, Nos. 2
and 8 Holds may be empty (CC) and +LMC" from 31/12/87 up until
the time of casualty on or about 12/2/88."57 The same would not have
been issued had not the vessel been built according to the standards
set by Lloyd's.
Samuel Lim, a marine surveyor, at Lloyd's Register of Shipping
testified thus:
"Q Now, in your opinion, as a surveyor, did top side tank have any
bearing at all to the seaworthiness of the vessel?
"A Well, judging on this particular vessel, and also basing on the
class record of the vessel, wherein recommendations were made on
the top side tank, and it was given sufficient time to be repaired, it
means that the vessel is fit to travel even with those defects on the
ship.
"COURT
What do you mean by that? You explain. The vessel is fit to travel
even with defects? Is that what you mean? Explain.
"WITNESS
"A Yes, your Honor. Because the class society which register (sic) is
the third party looking into the condition of the vessel and as far as
their record states, the vessel was class or maintained, and she is fit
to travel during that voyage."
"x x x
 201

"ATTY. MISA

Before we proceed to other matter, will you kindly tell us what is (sic)
the 'class +100A1 Strengthened for Ore Cargoes', mean?

"WITNESS

"A Plus 100A1 means that the vessel was built according to Lloyd's
rules and she is capable of carrying ore bulk cargoes, but she is
particularly capable of carrying Ore Cargoes with No. 2 and No. 8
holds empty.

"x x x

"COURT

The vessel is classed, meaning?

"A Meaning she is fit to travel, your Honor, or seaworthy."58

It is not required that the vessel must be perfect. To be seaworthy, a

ship must be reasonably fit to perform the services, and to encounter
the ordinary perils of the voyage, contemplated by the parties to the
policy.59

As further evidence that the vessel was seaworthy, we quote the

deposition of pilot Vasquez:

"Q Was there any instance when your orders or directions were not
complied with because of the inability of the vessel to do so?

"A No.

"Q. Was the vessel able to respond to all your commands and orders?

"A. The vessel was navigating normally."60

Eduardo P. Mata, Second Engineer of the Philippine Roxas

submitted an accident report wherein he stated that on February 11,
1988, he checked and prepared the main engine, machineries and all
other auxiliaries and found them all to be in good running condition
and ready for maneuvering. That same day the main engine, bridge
and engine telegraph and steering gear motor were also
tested.61 Engineer Mata also prepared the fuel for consumption for
maneuvering and checked the engine generators.62

Finally, we find the award of attorney’s fee justified.1âwphi1

Article 2208 of the New Civil Code provides that:

"Art. 2208. In the absence of stipulation, attorney's fees and expenses

of litigation, other than judicial costs, cannot be recovered, except:

"x x x

"(11) In any other case where the court deems it just and equitable
that attorney's fees and expenses of litigation should be recovered.

"x x x"

Due to the unfounded filing of this case, the private respondent was
unjustifiably forced to litigate, thus the award of attorney’s fees was
proper.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is

DENIED and the decision of the Court of Appeals in CA G.R. CV
No. 36821 is AFFIRMED.

SO ORDERED.

.R. Nos. L-3087 and L-3088 July 31, 1954
In re: Testate Estate of the deceased JOSE B. SUNTAY.
SILVINO SUNTAY, petitioner-appellant,
vs.
In re: Intestate Estate of the deceased JOSE B. SUNTAY,
FEDERICO C. SUNTAY, administrator-appellee.
Claro M. Recto for appellant.
Sison and Aruego for appellee.
PADILLA, J.:
This is an appeal from a decree of the Court of First Instance of
Bulacan disallowing the alleged will and testament executed in
Manila on November 1929, and the alleged last will and testament
executed in Kulangsu, Amoy, China, on 4 January 1931, by Jose B.
Suntay. The value of the estate left by the deceased is more than
P50,000.
On 14 May 1934 Jose B. Suntay, a Filipino citizen and resident of
the Philippines, died in the city of Amoy, Fookien province,
Republic of China, leaving real and personal properties in the
Philippines and a house in Amoy, Fookien province, China, and
children by the first marriage had with the late Manuela T. Cruz
namely, Apolonio, Concepcion, Angel, Manuel, Federico, Ana,
Aurora, Emiliano, and Jose, Jr. and a child named Silvino by the
second marriage had with Maria Natividad Lim Billian who survived
him. Intestate proceedings were instituted in the Court of First
Instance of Bulacan (special proceedings No. 4892) and after hearing
letters of administration were issued to Apolonio Suntay. After the
latter's death Federico C. Suntay was appointed administrator of the
estate. On 15 October 1934 the surviving widow filed a petition in
the Court of First Instance of Bulacan for the probate of a last will
and testament claimed to have been executed and signed in the
Philippines on November 1929 by the late Jose B. Suntay. This
petition was denied because of the loss of said will after the filing of
the petition and before the hearing thereof and of the insufficiency of
the evidence to establish the loss of the said will. An appeal was
taken from said order denying the probate of the will and this Court
held the evidence before the probate court sufficient to prove the loss
of the will and remanded the case to the Court of First Instance of
Bulacan for the further proceedings (63 Phil., 793). In spite of the
fact that a commission from the probate court was issued on 24 April
1937 for the taking of the deposition of Go Toh, an attesting witness
to the will, on 7 February 1938 the probate court denied a motion for
continuance of the hearing sent by cablegram from China by the
surviving widow and dismissed the petition. In the meantime the
Pacific War supervened. After liberation, claiming that he had found
among the files, records and documents of his late father a will and
testament in Chinese characters executed and signed by the deceased
on 4 January 1931 and that the same was filed, recorded and
probated in the Amoy district court, Province of Fookien, China,
Silvino Suntay filed a petition in the intestate proceedings praying for
the probate of the will executed in the Philippines on November 1929
(Exhibit B) or of the will executed in Amoy, Fookien, China, on 4
January 1931 (Exhibit N).
There is no merit in the contention that the petitioner Silvino Suntay
and his mother Maria Natividad Lim Billian are estopped from
asking for the probate of the lost will or of the foreign will because of
the transfer or assignment of their share right, title and interest in the
estate of the late Jose B. Suntay to Jose G. Gutierrez and the spouses
Ricardo Gutierrez and Victoria Goño and the subsequent assignment
thereof by the assignees to Francisco Pascual and by the latter to
Federico C. Suntay, for the validity and legality of such assignments
cannot be threshed out in this proceedings which is concerned only
with the probate of the will and testament executed in the Philippines
202
on November 1929 or of the foreign will allegedly executed in Amoy
on 4 January 1931 and claimed to have been probated in the
municipal district court of Amoy, Fookien province, Republic of
China.
As to prescription, the dismissal of the petition for probate of the will
on 7 February 1938 was no bar to the filing of this petition on 18
June 1947, or before the expiration of ten years.
As to the lost will, section 6, Rule 77, provides:
No will shall be proved as a lost or destroyed will unless the
execution and validity of the same be established, and the will is
proved to have been in existence at the time of the death of the
testator, or is shown to have been fraudulently or accidentally
destroyed in the lifetime of the testator without his knowledge, nor
unless its provisions are clearly and distinctly proved by at least two
credible witnesses. When a lost will is proved, the provisions thereof
must be distinctly stated and certified by the judge, under the seal of
the court, and the certificate must be filed and recorded as other wills
are filed and recorded.
The witnesses who testified to the provisions of the lost will are Go
Toh, an attesting witness, Anastacio Teodoro and Ana Suntay.
Manuel Lopez, who was an attesting witness to the lost will, was
dead at the time of the hearing of this alternative petition. In his
deposition Go Toh testifies that he was one of the witnesses to the
lost will consisting of twenty-three sheets signed by Jose B. Suntay at
the bottom of the will and each and every page thereof in the
presence of Alberto Barretto, Manuel Lopez and himself and
underneath the testator's signature the attesting witnesses signed and
each of them signed the attestation clause and each and every page of
the will in the presence of the testator and of the other witnesses
(answers to the 31st, 41st, 42nd, 49th, 50th, 55th and 63rd
interrogatories, Exhibit D-1), but did not take part in the drafting
thereof (answer to the 11th interrogatory, Id.); that he knew the
contents of the will written in Spanish although he knew very little of
that language (answers to the 22nd and 23rd interrogatories and to
X-2 cross-interrogatory, Id.) and all he knows about the contends of
the lost will was revealed to him by Jose B. Suntay at the time it was
executed (answers to the 25th interrogatory and to X-4 and X-8
cross-interrogatories, Id.); that Jose B. Suntay told him that the
contents thereof are the same as those of the draft (Exhibit B)
(answers to the 33rd interrogatory and to X-8 cross-interrogatory, Id.)
which he saw in the office of Alberto Barretto in November 1929
when the will was signed (answers to the 69th, 72nd, and 74th
interrogatories, Id); that Alberto Barretto handed the draft and said to
Jose B. Suntay: "You had better see if you want any correction"
(answers to the 81st, 82nd and 83rd interrogatories, Id.); that "after
checking Jose B. Suntay put the "Exhibit B" in his pocket and had
the original signed and executed" (answers to the 91st interrogatory,
and to X-18 cross-interrogatory, Id.); that Mrs. Suntay had the draft
of the will (Exhibit B) translated into Chinese and he read the
translation (answers to the 67th interrogatory, Id.); that he did not
read the will and did not compare it (check it up) with the draft
(Exhibit B) (answers to X-6 and X-20 cross-interrogatories, Id.).
Ana Suntay testifies that sometime in September 1934 in the house
of her brother Apolonio Suntay she learned that her father left a will
"because of the arrival of my brother Manuel Suntay, who was
bringing along with him certain document and he told us or he was
telling us that it was the will of our father Jose B. Suntay which was
taken from Go Toh. ..." (p. 524, t. s. n., hearing of 24 February 1948);
that she saw her brother Apolonio Suntay read the document in her
presence and of Manuel and learned of the adjudication made in the
will by her father of his estate, to wit: one-third to his children,
one-third to Silvino and his mother and the other third to Silvino,
Apolonio, Concepcion and Jose, Jr. (pp. 526-8, 530-1, 542, t. s.

n. Id.); that "after Apolonio read that portion, then he turned over the
document to Manuel, and he went away," (p. 528, t. s. n., Id.). On
cross-examination, she testifies that she read the part of the will on
adjudication to know what was the share of each heir (pp. 530, 544, t.
s. n., Id.) and on redirect she testifies that she saw the signature of her
father, Go Toh, Manuel Lopez and Alberto Barretto (p. 546, t. s.
n., Id.).
Anastacio Teodoro testifies that one day in November 1934 (p. 273, t.
s. n., hearing of 19 January 1948), before the last postponement of
the hearing granted by the Court, Go Toh arrived at his law office in
the De los Reyes Building and left an envelope wrapped in red
handkerchief [Exhibit C] (p. 32, t. s. n., hearing of 13 October 1947);
that he checked up the signatures on the envelope Exhibit A with
those on the will placed in the envelope (p. 33, t. s. n., Id.); that the
will was exactly the same as the draft Exhibit B (pp. 32, 47, 50, t. s.
n., Id.).
If the will was snatched after the delivery thereof by Go Toh to
Anastacio Teodoro And returned by the latter to the former because
they could not agree on the amount of fees, the former coming to the
latter's office straight from the boat (p. 315, t. s. n., hearing of 19
January 1948) that brought him to the Philippines from Amoy, and
that delivery took place in November 1934 (p. 273, t. s. n., Id.), then
the testimony of Ana Suntay that she saw and heard her brother
Apolonio Suntay read the will sometime in September 1934 (p. 524, t.
s. n., hearing of 24 February 1948), must not be true.
Although Ana Suntay would be a good witness because she was
testifying against her own interest, still the fact remains that she did
not read the whole will but only the adjudication (pp. 526-8, 530-1,
542, t. s. n., Id.) and saw only the signature, of her father and of the
witnesses Go Toh, Manuel Lopez and Alberto Barretto (p. 546, t. s.
n., Id.). But her testimony on cross-examination that she read the part
of the will on adjudication is inconsistent with her testimony in chief
that after Apolonio had read that part of the will he turned over or
handed the document to Manuel who went away (p. 528, t. s. n., Id.).
If it is true that Go Toh saw the draft Exhibit B in the office of
Alberto Barretto in November 1929 when the will was signed, then
the part of his testimony that Alberto Barretto handed the draft to
Jose B. Suntay to whom he said: "You had better see if you want any
correction" and that "after checking Jose B. Suntay put the "Exhibit
B" in his pocket and had the original signed and executed" cannot be
true, for it was not the time for correcting the draft of the will,
because it must have been corrected before and all corrections and
additions written in lead pencil must have been inserted and copied
in the final draft of the will which was signed on that occasion. The
bringing in for the draft (Exhibit B) on that occasion is just to fit it
within the framework of the appellant's theory. At any rate, all of Go
Toh's testimony by deposition on the provisions of the alleged lost
will is hearsay, because he came to know or he learned to them from
information given him by Jose B. Suntay and from reading the
translation of the draft (Exhibit B) into Chinese.
Much stress is laid upon the testimony of Federico C. Suntay who
testifies that he read the supposed will or the alleged will of his father
and that the share of the surviving widow, according to the will, is
two-thirds of the estate (p. 229, t. s. n., hearing of 24 October 1947).
But this witness testified to oppose the appointment of a
co-administrator of the estate, for the reason that he had acquired the
interest of the surviving widow not only in the estate of her deceased
husband but also in the conjugal property (pp. 148, 205, 228, 229,
231, t. s. n., Id.) Whether he read the original will or just the copy
thereof (Exhibit B) is not clear. For him the important point was that
he had acquired all the share, participation and interest of the
surviving widow and of the only child by the second marriage in the
estate of his deceased father. Be that as it may, his testimony that
203
under the will the surviving widow would take two-thirds of the
estate of the late Jose B. Suntay is at variance with Exhibit B and the
testimony of Anastacio Teodoro. According to the latter, the third for
strict legitime is for the ten children; the third for betterment is for
Silvino, Apolonio, Concepcion and Jose Jr.; and the third for free
disposal is for the surviving widow and her child Silvino.
Hence, granting that there was a will duly executed by Jose B.
Suntay placed in the envelope (Exhibit A) and that it was in existence
at the time of, and not revoked before, his death, still the testimony of
Anastacio Teodoro alone falls short of the legal requirement that the
provisions of the lost will must be "clearly and distinctly proved by
at least two credible witnesses." Credible witnesses mean competent
witnesses and those who testify to facts from or upon hearsay are
neither competent nor credible witnesses.
On the other hand, Alberto Barretto testifies that in the early part of
1929 he prepared or drew up two mills for Jose B. Suntay at the
latter's request, the rough draft of the first will was in his own
handwriting, given to Manuel Lopez for the final draft or typing and
returned to him; that after checking up the final with the rough draft
he tore it and returned the final draft to Manuel Lopez; that this draft
was in favor of all the children and the widow (pp. 392-4, 449, t. s. n.,
hearing of 21 February 1948); that two months later Jose B. Suntay
and Manuel Lopez called on him and the former asked him to draw
up another will favoring more his wife and child Silvino; that he had
the rough draft of the second will typed (pp. 395, 449 t. s. n., Id.) and
gave it to Manuel Lopez (p. 396, t. s. n., Id.); that he did not sign as
witness the second will of Jose B. Suntay copied from the
typewritten draft [Exhibit B] (p. 420, t. s. n., Id.); that the
handwritten insertions or additions in lead pencil to Exhibit B are not
his (pp. 415-7 435-6, 457, t. s. n., Id.); that the final draft of the first
will made up of four or five pages (p. 400, t. s. n., Id.) was signed
and executed, two or three months after Suntay and Lopez had called
on him (pp. 397-8, 403, 449, t. s. n., Id.) in his office at the Cebu
Portland Cement in the China Banking Building on Dasmariñas
street by Jose B. Suntay, Manuel Lopez and a Chinaman who had all
come from Hagonoy (p. 398, t. s. n., Id.); that on that occasion they
brought an envelope (Exhibit A) where the following words were
written: "Testamento de Jose B. Suntay" (pp. 399, 404, t. s. n., Id.);
that after the signing of the will it was placed inside the envelope
(Exhibit A) together with an inventory of the properties of Jose B.
Suntay and the envelope was sealed by the signatures of the testator
and the attesting witnesses (pp. 398, 401, 441, 443, 461, t. s. n., Id.);
that he again saw the envelope (Exhibit A) in his house one Saturday
in the later part of August 1934, brought by Go Toh and it was then
in perfect condition (pp. 405-6, 411, 440-2, t. s. n., Id.); that on the
following Monday Go Toh went to his law office bringing along with
him the envelope (Exhibit A) in the same condition; that he told Go
Toh that he would charge P25,000 as fee for probating the will (pp.
406, 440-2, Id.); that Go Toh did not leave the envelope (Exhibit A)
either in his house or in his law office (p. 407, t. s. n., Id.); that Go
Toh said he wanted to keep it and on no occasion did Go Toh leave it
to him (pp. 409, 410, t. s. n., Id.).
The testimony of Go Toh taken and heard by Assistant Fiscal F. B.
Albert in connection with the complaint for estafa filed against
Manuel Suntay for the alleged snatching of the envelope (Exhibit A),
corroborates the testimony of Alberto Barretto to the effect that only
one will was signed by Jose B. Suntay at his office in which he
(Alberto Barretto), Manuel Lopez and Go Toh took part as attesting
witnesses (p. 15, t. s. n., Exhibit 6). Go Toh testified before the same
assistant fiscal that he did not leave the will in the hands of Anastacio
Teodoro (p. 26, t. s. n., Exhibit 6). He said, quoting his own words,
"Because I can not give him this envelope even though the contract
(on fees) was signed. I have to bring that document to court or to
anywhere else myself." (p. 27, t. s. n., Exhibit 6).

As to the will claimed to have been executed on 4 January 1931 in
Amoy, China, the law on the point in Rule 78. Section 1 of the rule
provides:
Wills proved and allowed in a foreign country, according to the laws
of such country, may be allowed, filed, and recorded by the proper
Court of First Instance in the Philippines.
Section 2 provides:
When a copy of such will and the allowance thereof, duly
authenticated, is filed with a petition for allowance in the Philippines,
by the executor or other person interested, in the court having
jurisdiction, such court shall fix a time and place for the hearing, and
cause notice thereof to be given as in case of an original will
presented for allowance.
Section 3 provides:
If it appears at the hearing that the will should be allowed in the
Philippines, the court shall so allow it, and a certificate of its
allowance, signed by the Judge, and attested by the seal of the courts,
to which shall be attached a copy of the will, shall be filed and
recorded by the clerk, and the will shall have the same effect as if
originally proved and allowed in such court.
The fact that the municipal district court of Amoy, China, is a
probate court must be proved. The law of China on procedure in the
probate or allowance of wills must also be proved. The legal
requirements for the execution of a valid will in China in 1931
should also be established by competent evidence. There is no proof
on these points. The unverified answers to the questions propounded
by counsel for the appellant to the Consul General of the Republic of
China set forth in Exhibits R-1 and R-2, objected to by counsel for
the appellee, are inadmissible, because apart from the fact that the
office of Consul General does not qualify and make the person who
holds it an expert on the Chinese law on procedure in probate matters,
if the same be admitted, the adverse party would be deprived of his
right to confront and cross-examine the witness. Consuls are
appointed to attend to trade matters. Moreover, it appears that all the
proceedings had in the municipal district court of Amoy were for the
purpose of taking the testimony of two attesting witnesses to the will
and that the order of the municipal district court of Amoy does not
purport to probate the will. In the absence of proof that the municipal
district court of Amoy is a probate court and on the Chinese law of
procedure in probate matters, it may be presumed that the
proceedings in the matter of probating or allowing a will in the
Chinese courts are the a deposition or to a perpetuation of testimony,
and even if it were so it does not measure same as those provided for
in our laws on the subject. It is a proceedings in rem and for the
validity of such proceedings personal notice or by publication or both
to all interested parties must be made. The interested parties in the
case were known to reside in the Philippines. The evidence shows
that no such notice was received by the interested parties residing in
the Philippines (pp. 474, 476, 481, 503-4, t. s. n., hearing of 24
February 1948). The proceedings had in the municipal district court
of Amoy, China, may be likened toe or come up to the standard of
such proceedings in the Philippines for lack of notice to all interested
parties and the proceedings were held at the back of such interested
parties.
The order of the municipal district court of Amoy, China, which
reads as follows:
ORDER:
SEE BELOW
204
The above minutes were satisfactorily confirmed by the interrogated
parties, who declare that there are no errors, after said minutes were
loudly read and announced actually in the court.
Done and subscribed on the Nineteenth day of the English month of
the 35th year of the Republic of China in the Civil Section of the
Municipal District Court of Amoy, China.
HUANG KUANG CHENG
Clerk of Court
CHIANG TENG HWA
Judge
(Exhibit N-13, p. 89 Folder of Exhibits.).
does not purport to probate or allow the will which was the subject of
the proceedings. In view thereof, the will and the alleged probate
thereof cannot be said to have been done in accordance with the
accepted basic and fundamental concepts and principles followed in
the probate and allowance of wills. Consequently, the authenticated
transcript of proceedings held in the municipal district court of Amoy,
China, cannot be deemed and accepted as proceedings leading to the
probate or allowance of a will and, therefore, the will referred to
therein cannot be allowed, filed and recorded by a competent court of
this country.
The decree appealed from is affirmed, without pronouncement as to
costs.
Pablo, Bengzon, A. Reyes, Labrador and Concepcion, JJ., concur.
Separate Opinions
PARAS, C.J., dissenting:
As a preliminary statement we may well refer to the case of Maria
Natividad Lim Billian, petitioner and appellant, vs.Apolonio Suntay,
Angel Suntay, Manuel Suntay, and Jose Suntay, oppositors and
appellees, 63 Phil., 793-797, in which the following decision was
rendered by this Court on November 25, 1936, holding that the will
executed by Jose B. Suntay who died in the City of Amoy, China, on
May 14, 1934, was lost under the circumstances pointed out therein,
and ordering the return of the case to the Court of First Instance of
Bulacan for further proceedings:
On May 14, 1934, Jose B. Suntay died in the City of Amoy, China.
He married twice, the first time to Manuela T. Cruz with whom he
had several children now residing in the Philippines, and the second
time to Maria Natividad Lim Billian with whom he had a son.
On the same date, May 14, 1934, Apolonio Suntay, eldest son of the
deceased by his first marriage, filed the latter's intestate in the Court
of First Instance of Manila (civil case No. 4892).
On October 15, 1934, and in the same court, Maria Natividad Lim
Billian also instituted the present proceedings for the probate of a
will allegedly left by the deceased.
According to the petitioner, before the deceased died in China he left
with her a sealed envelope (Exhibit A) containing his will and, also
another document (Exhibit B of the petitioner) said to be a true copy
of the original contained in the envelope. The will in the envelope
was executed in the Philippines, with Messrs. Go Toh, Alberto
Barretto and Manuel Lopez as attesting witnesses. On August 25,
1934, Go Toh, as attorney-in-fact of the petitioner, arrived in the

Philippines with the will in the envelope and its copy Exhibit B.
While Go Toh was showing this envelope to Apolonio Suntay and
Angel Suntay, children by first marriage of the deceased, they
snatched and opened it and, after getting its contents and throwing
away the envelope, they fled.
Upon this allegation, the petitioner asks in this case that the brothers
Apolonio, Angel, Manuel and Jose Suntay, children by the first
marriage of the deceased, who allegedly have the document
contained in the envelope which is the will of the deceased, be
ordered to present it in court, that a day be set for the reception of
evidence on the will, and that the petitioner be appointed executrix
pursuant to the designation made by the deceased in the will.
In answer to the court's order to present the alleged will, the brothers
Apolonio, Angel, Manuel and Jose Suntay stated that they did not
have the said will and denied having snatched it from Go Toh.
In view of the allegations of the petition and the answer of the
brothers Apolonio, Angel, Manuel and Jose Suntay, the questions
raised herein are: The loss of the alleged will of the deceased,
whether Exhibit B accompanying the petition is an authentic copy
thereof, and whether it has been executed with all the essential and
necessary formalities required by law for its probate.
At the trial of the case on March 26, 1934, the petitioner put two
witnesses upon the stand, Go Toh and Tan Boon Chong, who
corroborated the allegation that the brothers Apolonio and Angel
appropriated the envelope in the circumstances above-mentioned.
The oppositors have not adduced any evidence counter to the
testimony of these two witnesses. The court, while making no
express finding on this fact, took it for granted in its decision; but it
dismissed the petition believing that the evidence is insufficient to
establish that the envelope seized from Go Toh contained the will of
the deceased, and that the said will was executed with all the
essential and necessary formalities required by law for its probate.
In our opinion, the evidence is sufficient to establish the loss of the
document contained in the envelope. Oppositors' answer admits that,
according to Barretto, he prepared a will of the deceased to which he
later become a witness together with Go Toh and Manuel Lopez, and
that this will was placed in an envelope which was signed by the
deceased and by the instrumental witnesses. In court there was
presented and attached to the case an open and empty envelope
signed by Jose B. Suntay, Alberto Barretto, Go Toh and Manuel
Lopez. It is thus undeniable that this envelope Exhibit A is the same
one that contained the will executed by the deceased-drafted by
Barretto and with the latter, Go Toh and Manuel Lopez as attesting
witnesses. These tokens sufficiently point to the loss of the will of
the deceased, a circumstance justifying the presentation of secondary
evidence of its contents and of whether it was executed with all the
essential and necessary legal formalities.
The trial of this case was limited to the proof of loss of the will, and
from what has taken place we deduce that it was not petitioner's
intention to raise, upon the evidence adduced by her, the other points
involved herein, namely, as we have heretofore indicated, whether
Exhibit B is a true copy of the will and whether the latter was
executed with all the formalities required by law for its probate. The
testimony of Alberto Barretto bears importantly in this connection.
Wherefore, the loss of the will executed by the deceased having been
sufficiently established, it is ordered that this case be remanded to the
court of origin for further proceedings in obedience to this decision,
without any pronouncement as to the costs. So ordered
On June 18, 1947, Silvino Suntay, the herein petitioner, filed a
petition in the Court of First Instance of Bulacan praying "that an
order be issued (a) either directing the continuation of the
205
proceedings in the case remanded by the Supreme Court by virtue of
its decision in G. R. No. 44276 and fixing a date for the reception of
evidence of the contents of the will declared lost, or the allowance,
filing and recording of the will of the deceased which had been duly
probated in China, upon the presentation of the certificates and
authentications required by Section 41, Rule 123 (Yu
Chengco vs. Tiaoqui supra), or both proceedings concurrently and
simultaneously; (b) that letters of administration be issued to herein
petitioner as co-administrator of the estate of the deceased together
with Federico Suntay; and (c) that such other necessary and proper
orders be issued which this Honorable Court deems appropriate in
the premises." While this petition was opposed by Federico C.
Suntay, son of the deceased Jose B. Suntay with his first wife,
Manuela T. Cruz, the other children of the first marriage, namely,
Ana Suntay, Aurora Suntay, Concepcion Suntay, Lourdes Guevara
Vda. de Suntay, Manuel Suntay and Emiliano Suntay, filed the
following answer stating that they had no opposition thereto; "Come
now the heirs Concepcion Suntay, Ana Suntay, Aurora Suntay,
Lourdes Guevara Vda. de Suntay, Manuel Suntay, and Emiliano
Suntay, through their undersigned attorney, and, in answer to the
alternative petition filed in these proceedings by Silvino Suntay,
through counsel, dated June 18, 1947, to this Honorable Court
respectfully state that, since said alternative petition seeks only to put
into effect the testamentary disposition and wishes of their late father,
they have no opposition thereto."
After hearing, the Court of First Instance of Bulacan rendered on
April 19, 1948, the following decision:
This action is for the legalization of the alleged will of Jose B.
Suntay, deceased.
In order to have a comprehensive understanding of this case, it is
necessary to state the background on which the alternative petition of
the herein petitioner Silvino Suntay has been based.
The decision of the Supreme Court (Exhibit O), in re will of the
deceased Jose B. Suntay, 63 Phil., 793-797, is hereunder produced:
(As quoted above)
The above quoted decision of the Supreme Court was promulgated
on November 25, 1936 (Exhibit O).
The Clerk of the Court of Court of First Instance of Bulacan notified
the parties of the decision on December 15, 1936; and the case was
set for hearing on February 12, 1937, but it was transferred to March
29, 1937 (Exhibit O), on motion of the then petitioner Maria
Natividad Lim Billian (Exhibit F). Again, it was postponed until
"further setting" in the order of court dated March 18, 1937, upon
motion of the petitioner (Exhibit H).
In the meantime, the deposition of Go Toh was being sought (Exhibit
H).
The hearing of the case was again set for February 7, 1936, by order
of the court dated January 5, 1938, upon motion of Emiliano Suntay
and Jose Suntay, Jr. On the same day of the hearing which had been
set, the petitioner, then, Maria Natividad Lim Billian, sent a telegram
from Amoy, China, addressed to the Court of First Instance of
Bulacan moving for the postponement of the hearing on the ground
that Atty. Eriberto de Silva who was representing her died (Exhibit
K). The court, instead of granting the telegraphic motion for
postponement, dismissed the case in the order dated February 7, 1938
(Exhibit L).
On July 3, 1947, the petitioner Silvino Suntay filed a motion for the
consolidation of the intestate Estate of the deceased Jose B. Suntay,
Special Proceeding No. 4892 and the Testate Estate of Jose B.
Suntay, Special Proceeding No. 4952, which latter case is the subject

of the said alternative petition. The motion for the merger and
consolidation of the two cases was granted on July 3, 1947.
That oppositor, Federico C. Suntay, in the Testate Proceeding filed a
motion to dismiss the alternative petition on November 14, 1947,
which was denied by the court in its resolution of November 22,
1947. The said oppositor not being satisfied with the ruling of this
court denying the motion to dismiss, filed before the Supreme Court
a petition for a writ of certiorari with preliminary injunction, which
was dismissed for lack of merit on January 27, 1948.
In obedience to the decision of the Supreme Court (Exhibit O) and
upon the alternative petition of Silvino Suntay, and, further, upon the
dismissal of the petition for a writ of certiorari with preliminary
injunction, the court was constrained to proceed with the hearing of
the probate of the lost will, the draft of which is Exhibit B, or the
admission and recording of the will which had been probated in
Amoy, China.
The evidence for the petitioner, Silvino Suntay, shows that Jose B.
Suntay married twice; first to Manuela T. Cruz who died on June 15,
1920 and had begotten with her Apolonio, now deceased,
Concepcion, Angel, Manuel, Federico, Ana, Aurora, Emiliano and
Jose, Jr., all surnamed Suntay, and second, to Maria Natividad Lim
Billian with whom he had as the only child Silvino Suntay, the
petitioner herein.
Some time in November 1929, Jose B. Suntay executed his last will
and testament in the office of Atty. Alberto Barretto in Manila, which
was witnessed by Alberto Barretto, Manuel Lopez and Go Toh. The
will was prepared by said Alberto Barretto upon the instance of Jose
B. Suntay, and it was written in the Spanish language which was
understood and spoken by said testator. After the due execution of
the will, that is signing every page and the attestation clause by the
testator and the witnesses in the presence of each other, the will was
placed inside the envelope (Exhibit A), sealed and on the said
envelope the testator and the three subscribing witnesses also signed,
after which it was delivered to Jose B. Suntay.
A year or so after the execution of the will, Jose B. Suntay together
with his second wife Maria Natividad Lim Billian and Silvino Suntay
who was then of tender age went to reside in Amoy, Fookien, China,
where he died on May 14, 1934. The will was entrusted to the widow,
Maria Natividad Lim Billian.
Upon the death of Jose B. Suntay on May 14, 1934, Apolonio Suntay,
the oldest son now deceased, instituted the Intestate Proceedings No.
4892, upon the presumption that no will existed. Maria Natividad
Lim Billian who remained in Amoy, China, had with her the will and
she engaged the services of the law firm of Barretto and Teodoro for
the probate of the will. Upon the request of the said attorneys the will
was brought to the Philippines by Go Toh who was one of the
attesting witnesses, and it was taken to the law office of Barretto and
Teodoro. The law firm of Barretto and Teodoro was composed of
Atty. Alberto Barretto and Judge Anastacio Teodoro. The probate of
the will was entrusted to the junior partner Judge Anastacio Teodoro;
and, upon the presentation of the sealed envelope to him, he opened
it and examined the said will preparatory to the filing of the petition
for probate. There was a disagreement as to the fees to be paid by
Maria Natividad Lim Billian, and as she (through Go Toh) could not
agree to pay, P20,000 as fees, the will was returned to Go Toh by
Judge Anastacio Teodoro after the latter had kept it in his safe, in his
office, for three days.
Subsequently, the will inside the envelope was snatched from Go
Toh by Manuel Suntay and Jose, Jr., which fact has been established
in the decision of the Supreme Court at the beginning of this decision.
Go Toh could recover the envelope (Exhibit A) and the piece of cloth
with which the envelope was wrapped (Exhibit C).
206
The Testate Proceeding was filed nevertheless and in lien of the lost
will a draft of the will (Exhibit B) was presented as secondary
evidence for probate. It was disallowed by this court through Judge
Buenaventura Ocampo, but on appeal the Supreme Court remanded
the case to this court for further proceeding (Exhibit C).
In the meantime, a Chinese will which was executed in Amoy
Fookien, China, on January 4, 1931, by Jose B. Suntay, written in
Chinese characters (Exhibit P) was discovered in Amoy, China,
among the papers left by Jose B. Suntay, and said will had been
allowed to probate in the Amoy District Court, China, which is being
also presented by Silvino Suntay for allowance and recording in this
court.
The said petition is opposed by Federico C. Suntay on the main
ground that Maria Natividad Lim Billian and Silvino Suntay have no
more interest in the properties left by Jose B. Suntay, because they
have already sold their respective shares, interests and participations.
But such a ground of opposition is not of moment in the instant case,
because the proposition involved herein in the legalization of the lost
will or the allowance and recording of the will which had been
probated in Amoy, China.
It is now incumbent upon this court to delve into the evidence
whether or not Jose B. Suntay, deceased, left a will (the draft of
which is Exhibit B) and another will which was executed and another
will which was executed and probated in Amoy, China.
There is no longer any doubt that Jose B. Suntay while he was still
residing in the Philippines, had executed a will; such is the
conclusion of the Supreme Court in its decision (Exhibit O). That the
will was snatched and it has never been produced in court by those
who snatched it, and consequently considered lost, is also an
established fact.
The contention of the oppositor, Federico C. Suntay, is that the will
that was executed by Jose B. Suntay in the Philippines contained
provisions which provided for equal distribution of the properties
among the heirs; hence, the draft (Exhibit B) cannot be considered as
secondary evidence, because it does not provide for equal
distribution, but if favors Maria Natividad Lim Billian and Silvino
Suntay. He relies on the testimony of Atty. Alberto Barretto who
declared that the first will which he drafted and reduced into a plain
copy was the will that was executed by Jose B. Suntay and placed
inside the envelope (Exhibit A).
Granting that the first will which Atty. Alberto Barretto had drafted
became the will of Jose B. Suntay and it was snatched by, and,
therefore, it had fallen into the hands of, Manuel Suntay and the
brothers of the first marriage, it stands to reason that said Manuel
Suntay and brothers would have been primarily interested in the
production of said will in court, for obvious reasons, namely, that
they would have been favored. But it was suppressed and "evidence
willfully suppressed would be adverse if produced" (Section 69 (e),
Rule 123 of the Rules of Court). The contention, therefore, that the
first will which was drafted by Atty. Barretto was the one placed
inside the envelope (Exhibit A) is untenable.
It might be said in this connection that the draft of the will (Exhibit B)
has been admitted by Atty. Alberto Barretto as identical in substance
and form to the second draft which he prepared in typewriting; it
differs only, according to him, in style. He denied that the insertions
in long hand in the said draft are in his own handwriting; however,
Judge Anastacio Teodoro averred that the said insertions are the
handwriting of Atty. Alberto Barretto. But when Atty. Alberto
Barretto was asked to show any manuscript of his for purposes of
comparison, he declined to do so alleging that he did not have any
document in his possession showing his handwriting notwithstanding
the fact that he was testifying in his own house at 188 Sta. Mesa

Boulevard, Manila. He further testified that the first will be drafted
contained four or five pages, but the second draft contained
twenty-three pages; that he declared in one breath that he did not read
the will any more when it was signed by the testator and the attesting
witnesses because it would take up much time, and in the same
breath he declared that he checked it before it was signed; and that he
destroyed the draft of the first will which was in his own handwriting,
but he delivered the draft of the second will which he prepared to
Jose B. Suntay in the presence of Manuel Lopez, now deceased.
Whether or not the final plain copy of the draft of the will (Exhibit B)
was executed by the testator, Jose B. Suntay, and attested by the
subscribing witnesses, Atty. Alberto Barretto, Manuel Lopez and Go
Toh, is the pivotal point in this instant case. Judge Anastacio
Teodoro testified that he opened the sealed envelope when it was
given to him by Go Toh preparatory to the presentation of the
petition for the probate of the said will. As the lawyer entrusted with
that task, he had to examine the will and have it copied to be
reproduced or appended to the petition. He could not do otherwise if
he is worth salt as a good lawyer; he could not perform the stunt of
"blind flying" in the judicial firmament. Every step must be taken
with certainty and precision under any circumstances. He could not
have talked about the attorney's fees with Go Toh, unless he has not
examined the will beforehand. And, declaring that it was the exact
draft of the will that was inside the envelope (Exhibit A), the
testimony of Atty. Alberto Barretto to the contrary notwithstanding.
The testimony of Judge Anastacio Teodoro is corroborated by Go
Toh, one of the attesting witnesses, in his deposition (Exhibit D-1).
Ana Suntay, one of the heirs and who would be affected adversely by
the legalization of the will in question, also testified on rebuttal that
she saw the original will in the possession of Manuel Suntay,
immediately after the snatching. She read it and she particularly
remembers the manner in which the properties were to be distributed.
Exhibit B was shown to her on the witness stand and she declared
that the provision regarding the distribution of the properties in said
Exhibit B is the same as that contained in the original will. Said
testimony of Ana Suntay, therefore, belies the testimony of Atty.
Alberto Barretto.
With respect to the proof of lost or destroyed will, Section 6 of Rule
77 provides as follows:
"No will shall be proved as a lost or destroyed will unless the
execution and validity of the same be established, and the will is
proved to have been in existence at the time of the death of the
testator, or it is shown to have been fraudulently or accidentally
destroyed in the lifetime of the testator without his knowledge, nor
unless its provisions are clearly and distinctly proved by at least two
credible witnesses. When a lost will is proved, the provisions thereof
must be distinctly stated and certified by the judge, under the seal of
the court, and the certificate must be filed and recorded as other wills
are filed and recorded."
Section 8 of the same Rule provides as follows:
"If it appears at the time fixed for the hearing that the subscribing
witnesses are dead or insane, or that none of them resides in the
Philippines the court may admit the testimony of other witnesses to
prove the sanity of the testator, and the due execution of the will; and
as evidence of the due execution of the will, it may admit proof of
the handwriting of the testator and of the subscribing witnesses, or
any of them."
Manuel Lopez as one of the subscribing witnesses is dead. Atty.
Alberto Barretto and Go Toh are still living. The former testified
during the hearing, while Go Toh's deposition was introduced in
evidence which was admitted. In the absence of the testimony of
207
Manuel Lopez, deceased, the testimony of Judge Anastacio Teodoro
and Ana Suntay was received.
It is an established fact that the will, draft of which is Exhibit B, was
lost or destroyed; that it was executed and valid and that it existed at
the time of the death of Jose B. Suntay. These circumstances also
apply to the will (Exhibit P) which was executed in Amoy, China.
The contents of the Chinese will is substantially the same as the draft
(Exhibit B). Granting that the will executed in the Philippines is
non-existent as contended by the oppositor, although the findings of
this court is otherwise, the will executed and probated in China
should be allowed and recorded in this court. All the formalities of
the law in China had been followed in its execution, on account of
which it was duly probated in the Amoy District Court. There is no
cogent reason, therefore, why it should not be admitted and recorded
in this jurisdiction.
The said will (Exhibit P) in Chinese characters is presented as an
alternate in case the will executed in the Philippines would not be
allowed to probate, or as a corroborative evidence that the will, the
draft of which is Exhibit B, has been duly executed in the Philippines
by Jose B. Suntay.
Rule 78 of the Rules of Court covers the allowance of will proved
outside of the Philippines and administration of estate thereunder.
Section 1 of said rule provides:
"Wills proved and allowed in the United States, or any state or
territory thereof, or in foreign country, according to the laws of such
state, territory, or country, may be allowed, filed, and recorded by the
proper Court of First Instance in the Philippines."
Section 2 of the same rule provides:
"When a copy of such will and the allowance thereof, duly
authenticated, is filed with a petition for allowance in the Philippines,
by the executor or other person interested, in the court having
jurisdiction, such court shall fix a time and place for the hearing, and
cause notice thereof to be given as in case of an original will
presented for allowance."
This court has delved deep into the evidence adduced during the
hearing with that penetrating scrutiny in order to discovery the real
facts; it had used unsparingly the judicial scapel; and it has
winnowed the evidenced to separate the grain from the chaff. All the
facts lead to the inevitable conclusion that Jose B. Suntay, in his
sound and disposing mind and not acting under duress or undue
influence, executed the will which is lost, the draft of which is
Exhibit B, with all the necessary formalities prescribed by law. He,
likewise, executed the second will (Exhibit P) in Amoy, China,
which has been duly probated in Amoy District Court,-a
corroborative evidence that the testator really executed the will.
Copies of the said wills duly certified and under the seal of the court
are appended hereto, marked Exhibits B and P, and they form part of
this decision.
In view of the foregoing considerations, the court is of the opinion
and so declares that the draft of the will (Exhibit B) is, to all legal
intents and purposes, and testament of the deceased Jose B. Suntay.
With costs against the oppositor, Federico C. Suntay.
Oppositor Federico C. Suntay filed on May 20, 1948, a motion for
new trial and to set aside the decision rendered on April 19, 1948, to
which the petitioner filed an opposition, followed by a reply filed by
the oppositor and an answer on the part of the petitioner. Without
reopening the case and receiving any new or additional evidence, the
Court of First Instance of Bulacan, on September 29, 1948,
promulgated the following resolution setting aside his first decision

and disallowing the wills sought to be probated by the petitioner in
his alternative petition filed on June 18, 1947:
This is a motion for new trial and to set aside the decision legalizing
the will of Jose B. Suntay and allowing and recording another will
executed by him in Amoy, China.
By virtue of this motion, this court is constrained to go over the
evidence and the law applicable thereto with the view of ascertaining
whether or not the motion is well founded. Both parties have
presented extensive memoranda in support of their respective
contentions.
This court has gone over the evidence conscientiously, and it
reiterates its findings of the same facts in this resolution, whether or
not the facts established by the petitioner, Silvino Suntay, warrant the
legalization of the lost will and the allowance and recording of the
will that was executed in Amoy, China, is therefore, the subject of
this instant motion.
A. As to the legalization of the Lost Will. — There is no question in
the mind of this court that the original will which Jose B. Suntay,
deceased executed in the Philippines in the year 1929 was lost
(Exhibit O, Decision of the Supreme Court). The evidence adduced
by the petitioner during the hearing has established through the
testimony of Judge Anastacio Teodoro and that of Go Toh (an
attesting witness) that the will was executed by Jose B. Suntay,
deceased, with all the formalities required by law. For the purpose of
legalizing an original and existing will, the evidence on record is
sufficient as to the execution and attesting in the manner required by
law.
Section 8 of Rule 77 provides as follows:
"SEC. 8. Proof when witnesses dead or insane or do not reside in
the Philippines. — If it appears at the time fixed for the hearing that
the subscribing witnesses are dead or insane, or that none of them
resides in the Philippines, the court may admit the testimony of other
witnesses to prove the sanity of the testator, and the due execution of
the will; and as evidence of the execution of the will, may admit
proof of the handwriting of the testator and of the subscribing
witnesses, or any of them."
Section 11 of said rule also provides as follows:
"SEC. 11. Subscribing witnesses produced or accounted for where
contest. — If the will is contested, all the subscribing witnesses
present in the Philippines and not insane, must be produced and
examined, and the death, absence, or insanity of any of them must be
satisfactorily shown to the court. If all or some of the subscribing
witnesses are present in the Philippines, but outside the province
where the will has been filed, their deposition must be taken. If all or
some of the subscribing witnesses produced and examined testify
against the due execution of the will, or do not remember having
attested to it, or are otherwise of doubtful credibility, the will may be
allowed if the court is satisfied from the testimony of other witnesses
and from all the evidence presented that the will was executed and
attested in the manner required by law."
The three attesting witnesses were Manuel Lopez, deceased Alberto
Barretto and Go Toh. The last two witnesses are still living; the
former testified against and the latter in favor. In other words, the
attesting witness, Go Toh, only, testified in his deposition in favor of
the due execution of the will. Hence, the petitioner presented another
witness, Judge Anastacio Teodoro, to establish and prove the due
execution of the said will. Ana Suntay was also presented as a
witness in rebuttal evidence. The testimony of Go Toh in his
deposition as an attesting witness, coupled with the testimony of
Judge Anastacio Teodoro who was able to examine the original will
208
that was executed by Jose B. Suntay, deceased, when it was given to
him by Go Toh for the purpose of filing the petition in court for its
legalization, and could recognize the signatures of the testator as well
as of the three attesting witnesses on the said original will is
sufficient to convince the court that the original will was executed by
the deceased Jose B. Suntay with all the formalities required by law.
The original will, therefore, if it was presented in court to probate
would be allowed to all legal intents and purposes. But it was not the
original will that was presented, because it was lost, but an alleged
draft (Exhibit B) of the said original will which does not bear the
signature of the testator and any of the attesting witness. The original
will was duly executed with all the formalities required by law, but it
was unfortunately lost; and the curtain falls for the next setting.
The Court is now confronted with the legalization of the lost will —
whether or not the draft (Exhibit B) should be admitted as secondary
evidence in lieu of the lost will and allowed to probate.
Section 6. Rule 77 provides as follows:
"SEC. 6. Proof of lost or destroyed will — Certificate thereupon. —
No will shall be proved as a lost will or destroyed will unless the
execution and validity of the same be established, and the will is
proved to have been in existence at the time of the death of the
testator, or is shown to have been fraudulently or accidentally
destroyed in the lifetime of the testator without his knowledge, nor
unless its provisions are clearly and distinctly proved by at least two
credible witnesses. When a lost will is proved, the provisions thereof
must be distinctly stated and certified by the Judge, under the seal of
the court and the certificate must be filed and recorded as other wills
are filed and recorded." (Emphasis Court's)
From the above quoted provision of the law, it is clear that the
petitioner should not only establish the execution and validity of the
will, its existence at the time of the death of the testator or its
fraudulent and accidental destruction in the lifetime of the testator
without his knowledge, but also must prove its provisions clearly and
distinctly by at least two credible witnesses. The exact language of
the clause in the above quoted provision of the law is "nor unless its
provisions are clearly and distinctly proved by at least two credible
witnesses." The legalization of a lost will is not so easy, therefore, as
that of an original will. The question, therefore, is boiled down to,
and projected on the screen, in a very sharp focus; namely, the
execution and validity must be established and the provisions must
be clearly and distinctly proved by at least credible witnesses.
Granting that the execution and validity of the lost will have been
established through the testimony of Judge Anastacio Teodoro and
Go Toh, and perhaps superficially by the rebuttal witness, Ana
Suntay, does it follow that the provisions of the lost will have been
clearly and distinctly proved by at least two credible witnesses? A
careful review of the evidence has revealed that at most the only
credible witness who testified as to the provisions of the will was
Judge Anastacio Teodoro, and yet he testified on the provisions of
the lost will with the draft (Exhibit B) in his hands while testifying. It
may be granted, however, that with or without the draft of the will
(Exhibit B) in his hands, he could have testified clearly and distinctly
on the provisions of the said lost will, because he had kept the will in
his safe, in his office, for three days, after opening it, and he is well
versed in Spanish language in which the will as written. But did the
attesting witness Go Toh, testify in his deposition and prove clearly
and distinctly the provisions of the lost will? He did not, and he could
not have done so even if he tried because the original will was not
read to him nor by him before or at the signing of the same. It was
written in Spanish and he did not and does not understand the
Spanish language. Neither was there any occasion for him to have the
contents of the said will, after its execution and sealing inside the
envelope (Exhibit A), read to him because it was opened only when

Judge Teodoro had examined it and then subsequently snatched from
Go Toh. Ana Suntay on rebuttal did not, likewise, prove clearly and
distinctly the provisions of the said lost will because she has not had
enough schooling and she does possess adequate knowledge of the
Spanish language as shown by the fact that she had to testify in
Tagalog on the witness standing.
It is evident, therefore, that although the petitioner has established the
execution and validity of the lost will, yet he had not proved clearly
and distinctly the provisions of the will by at least two credible
witnesses.
B. As to the Allowance and Recording of the will Executed in Amoy,
China. — Jose B. Suntay, while he was residing in China during the
remaining years of his life, executed also a will, written in Chinese
characters, the translation of which is marked Exhibit P. It was
allowed to probate in the District Court of Amoy, China. The
question is whether or not the said will should be allowed and
recorded in this jurisdiction.
Section 1 of Rule 78 provides as follows:
"SEC. 1. Will proved outside Philippines any be allowed here. —
Will proved and allowed in the United States, or any state or territory
thereof, or in a foreign country, according to the laws of such state,
territory, or country, may be allowed, filed, and recorded by the
proper court of First Instance in the Philippines."
Section 2 of the same Rule also provides:
"SEC. 2. Notice of hearing for allowance. — When a copy of such
will and the allowance thereof, duly authenticated, is filed with a
petition for allowance in the Philippines by the executor or other
persons interested, in the Court having jurisdiction, such court shall
fix a time and place for the hearing, and cause notice thereof to be
given as in case of an original will presented for allowance."
Sections 41 and 42 of Rule 123 provides as follows:
"SEC. 41. Proof of Public or official record. — An official record or
an entry therein, when admissible for any purpose, may be evidenced
by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in which the
record is kept is within the United States or its territory, the
certificate may be made by a judge of a court of record of the district
or political subdivision in which the record is kept, authenticated by
the seal of the court, or may be made by any public officer having a
seal of the office and having official duties in the district or political
subdivision in which the record is kept, authenticated by the seal of
his office. If the office in which the record is kept is in a foreign
country, the certificate may be made by a secretary of embassy or
legation, consul general, consul, vice consul, or consular agent or by
any officer in the foreign service of the United States stationed in the
foreign country in which the record is kept, and authenticated by the
seal of his office."
F. "SEC. 42. What attestation of copy must state. — Whenever a
copy of writing is attested for the purpose of evidence, the attestation
must state, in substance, that the copy is a correct copy of the original,
or a specific part thereof, as the case may be. The attestation must be
under the official seal of the attesting officer, if there be any, or if he
be the clerk of a court having a seal, under the seal of such court."
In the case of Yu Changco vs. Tiaoqui, 11 Phil. 598, 599, 600, our
Supreme Court said:
"Section 637 of the Code of Civil Procedure says that will proved
and allowed in a foreign country, according to the laws of such
209
country, may be allowed, filed, and recorded in the Court of First
Instance of the province in which the testator has real or personal
estate on which such will may operate; but section 638 requires that
the proof of the authenticity of a will executed in a foreign country
must be duly "authenticated". Such authentication, considered as a
foreign judicial record, is prescribed by section 304, which requires
the attestation of the clerk or of the legal keeper of the records with
the seal of the court annexed, if there be a seal, together with a
certificate of the chief judge or presiding magistrate that the signature
of either of the functionaries attesting the will is genuine, and, finally,
the certification of the authenticity of the signature of such judge or
presiding magistrate, by the ambassador, minister, consul, vice
consul or consular agent of the United States in such foreign country.
And, should the will be considered, from an administrative point of
view, as a mere official document 'of a foreign country', it may be
proved, 'by the original, or by a copy certified by the legal keeper
thereof, with a certificate, under the seal of the country or sovereign,
that the document is a valid and subsisting document of such country,
and that the copy is duly certified by the officer having the legal
custody of the original. (Sec. 313, par. 8)."
In the case of Fluemer vs. Hix, 54 Phil. 610, 611, 612, and 613, our
Supreme Court said:
"It is the theory of the petitioner that the alleged will was executed in
Elkins, West Virginia, on November 3, 1925, by Hix who had his
residence in that jurisdiction, and that the laws of West Virginia
govern. To this end, there was submitted a copy of section 3868 of
Acts 1882, c. 84 as found in West Virginia Code, Annotated, by
Hogg, Charles E., Vol. 2, 1914, p. 1690, and as certified to by the
Director of the National Library. But this was far from compliance
with the law. The laws of a foreign jurisdiction do not prove
themselves in our courts. The courts of the Philippine Islands are not
authorized to take judicial notice of the laws of the various States of
the American Union. Such laws must be proved as facts. (In re Estate
of Johnson (1918), 39 Phil., 156.) Here the requirements of the law
were not met. There was not showing that the book from which an
extract was taken was printed or published under the authority of the
State of West Virginia, as provided in section 300 of the Code of
Civil Procedure. Nor was the extract from the law attested by the
certificate of the officer having charge of the original under the seal
of the State of West Virginia, as provided in section 301 of the Code
of Civil Procedure. No evidence was introduced to show that the
extract from the laws of West Virginia was in force at the time the
alleged will was executed.
"It was also necessary for the petitioner to prove that the testator had
his domicile in West Virginia and not in the Philippine Islands. The
only evidence introduced to establish this fact consisted of the
recitals in the alleged will and the testimony of the petitioner.
"While the appeal was pending submission in this court, the attorney
for the appellant presented an unverified petition asking the court to
accept as part of the evidence the documents attached to the petition.
One of these documents discloses that a paper writing purporting to
be the last will and testament of Edward Randolph Hix, deceased,
was presented for probate on June 8, 1929, to the clerk of Randolph
County, State of West Virginia, in vacation, and was duly proven by
the oaths of Dana Vansley and Joseph L. Madden, the subscribing
witnesses thereto, and ordered to be recorded and filed. It was shown
by another document that in vacation, on June 8, 1929, the clerk of
court of Randolph County, West Virginia, appointed Claude E.
Maxwell as administrator, cum testamento annexo, of the estate of
Edward Randolph Hix, deceased ... However this may be no attempt
has been made to comply with the provisions of sections 637, 638,
and 639 of the Code of Civil Procedure, for no hearing on the
question of the allowance of a will said to have been proved and
allowed in West Virginia has been requested. ... ."

Granting that the will of Jose B. Suntay which was executed in
Amoy, China, was validly done in accordance with the law of the
Republic of China on the matter, is it necessary to prove in this
jurisdiction the existence of such law in China as a prerequisite to the
allowance and recording of said will? The answer is in the
affirmative as enunciated in Fluemer vs. Hix, supra, and in Yanez de
Barnuevo vs. Fuster, 29 Phil., 606. In the latter case, the Supreme
Court said:
"A foreign law may be proved by the certificate of the officer having
in charge of the original, under the seal of the state or country. It may
also be proved by an official copy of the same published under the
authority of the particular state and purporting to contain such law.
(Secs. 300 and 301, Act No. 190.), (Syllabus.)
The provisions of section 300 and 301 of the Code of Civil Procedure
(Act No. 190) are as follows:
"SEC. 300. Printed laws of the State or Country. — Books printed or
published under the authority of the United States, or one of the
States of the United States, or a foreign country, and purporting to
contain statutes, codes, or other written law of such State or country
or proved to be commonly admitted in the tribunals of such State or
country an evidence of the written law thereof, are admissible in the
Philippine Islands are evidence of such law."
"SEC. 301. Attested copy of foreign laws. — A copy of the written
law or other public writing of any state or country, attested by the
certificate of the officer having charge of the original, under the seal
of the state or country, is admissible as evidence of such law or
writing."
The petitioner has presented in evidence the certification of the
Chinese Consul General, Tsutseng T. Shen, of the existence of the
law in China (Exhibit B-3), relative to the execution and probate of
the will executed by Jose B. Suntay in Amoy, China (Exhibit P). Is
that evidence admissible, in view of the provisions of Sections 41
and 42 of the Rules of the Rules of Court. Is the said certification of
the Chinese Consul General in the Philippines a substantial
compliance with the provisions of the above mentioned section 41
and 42 of our Rules of Court?
This court has its doubts as to the admissibility in evidence of the
Chinese Consul General in the Philippines of the existence of the
laws of Republic of China relative to the execution and probate of a
will executed in China. Such law may exist in China, but —
"An official record or an entry therein, when admissible for any
purpose, may be evidence by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or
by his deputy, and accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. ... If
the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of embassy or legation, consul
general, consul, vice consul, or consular agent or by any officer in
the foreign service of the United States stationed in the foreign
country in which the record is kept, and authenticated by the seal of
his office." (Sec. 41 of Rule 123.)
The law of the Republic of China is a public or official record and it
must be proved in this jurisdiction through the means prescribed by
our Rules of Court. It is, therefore, obvious that the Chinese Counsel
General in the Philippines who certified as to the existence of such
law is not the officer having the legal custody of the record, nor is he
a deputy of such officer. And, if the office in which the record is kept
is in a foreign country, the certificate may be made by a secretary of
embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the United States
210
stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.
It is clear, therefore, that the above provisions of the Rules of Court
(Rule 123, sec. 41) not having been complied with, the doubt of this
court has been dissipated, and it is of the opinion and so holds that
the certification of the Chinese Consul General alone is not
admissible as evidence in the jurisdiction.
The evidence of record is not clear as to whether Jose B. Suntay, who
was born in China, but resided in the Philippines for a long time, has
become a Filipino citizen by naturalization, or he remained a citizen
of the Republic of China. The record does not, likewise, show with
certainty whether or not he had changed his permanent domicile from
the Philippines to Amoy, China. His change of permanent domicile
could only be inferred. But the question of his permanent domicile
pales into insignificance in view of the overtowering fact that the law
of China pertinent to the allowance and recording of the said will in
this jurisdiction has been satisfactorily established by the petitioner.
Both the petitioner and the oppositor have extensively urged in their
respective memorandum and in the oral argument in behalf of the
oppositor the question of estoppel. The consideration of the points
raised by them would open the door to the appreciation of the
intrinsic validity of the provisions of the will which is not of moment
at the present stage of the proceeding. While the probate of a will is
conclusive as to the compliance with all formal requisites necessary
to the lawful execution of the will, such probate does not affect the
intrinsic validity of the provisions of the will. With respect to the
latter the will in governed by the substantive law relative to descent
and distribution. (In re Johnson, 39 Phil., 157).
IN VIEW OF THE FOREGOING, and upon reconsideration, the
previous decision rendered in this case allowing the will (Exhibit B)
and allowing and recording the foreign will (Exhibit P) is set aside;
and this court is of the opinion and so holds that the said two wills
should be, as they are hereby disallowed. Without special
pronouncement as to costs.
It is very significant that in the foregoing resolution, the Court of
First Instance of Bulacan "reiterates its finding of the same facts in
this resolution," and merely proceeds to pose the sole question
"whether or not the facts established by the petitioner, Silvino Suntay,
warrant the legalization of the lost will and allowance and recording
of the will that was executed in Amoy, China." The somersault
executed by the trial court is premised on the ground that "although
the petitioner has established the execution and validity of the lost
will, yet he has not proved clearly and distinctly the provisions of the
will by the least two credible witnesses"; and that, assuming that the
will of Jose B. Suntay executed in Amoy, China, was in accordance
with the law of the Republic of China, the certification of the
Chinese Consul General in the Philippines as the existence of such
law is not admissible evidence in this jurisdiction. In effect the
resolution on the motion for reconsideration promulgated by the trial
court, and the decision of the majority herein, adopt the position that
the testimony of Judge Anastacio Teodoro as to the provisions of the
lost will, while credible and perhaps sufficient in extent, is not
corroborated by the witnesses Go Toh and Ana Suntay and, therefore,
falls short of the requirement in section 6, Rule 77, of the Rules of
Court that the provisions of the lost will must be "clearly and
distinctly proved by at least two witnesses." That this requirement
was obviously construed, to mean that the exact provisions are to be
established, may be deduced from the following dialogue between
his Honor, Judge Potenciano Pecson, and attorney Teofilo Sison, new
counsel for oppositor Federico C. Suntay, who appeared for the first
time at the ex parte hearing of the oppositor's motion for new trial on
September 1, 1949:

COURT: However, Rule 77, Section 6, provides in proving a lost
will, the provisions of the lost will must be distinctly stated and
certified by the Judge.
ATTY. TEOFILO SISON: Yes, Your Honor.
COURT: That presupposes that the judge could only certify to
the exact provisions of the will from the evidence presented.
ATTY. TEOFILO SISON: That is our contention, provided that
provision is clearly established by two credible witnesses so that the
Court could state that in the decision, we agree, that is the very point.
(t. s. n. 75, Session of Sept. 1, 1948)
The sound rule, however, as we have found it to be, as to the degree
of proof required to establish the contents of a lost or destroyed will,
is that there is sufficient compliance if two witnesses have
substantiated the provisions affecting the disposition of the testator's
properties; and this is especially necessary to prevent the
"perpetration of fraud by permitting a presumption to supply the
suppressed proof," to keep a wrong-doer from utilizing the rule as his
"most effective weapon," or to avoid the enjoyment of a "premium
from the rascality of one whose interests might suggest the
destruction of a will."
Section 1865 of the Code requires that the provisions of a lost will
must be clearly and distinctly proved by at least two credible
witnesses before it can be admitted to probate; but this section must
receive a liberal construction (Hook vs. Pratt, 8 Hun. 102-109) and its
spirit is complied with by holding that it applies only to those
provisions which affect the disposition of the testator's property and
which are of the substance of the will.
The allegations of the contents of the will are general, and under
ordinary circumstances, would be in sufficient; but the fact alleged, if
proven as alleged, would certainly authorize the establishment of the
will so far as its bequests are concerned. To require that a copy of the
will or the language of the bequests, in detail, should be pleaded,
where no copy has been preserved, and where the memory of the
witnesses does not hold the exact words, would not only deny the
substance for mere form, but would offer a premium upon the
rascality of one whose interests might suggest the destruction of a
will. As said in Anderson vs. Irwin, 101 Ill. 411: "The instrument in
controversy having been destroyed without the fault of the defendant
in error ... and there not appearing to be any copy of it in existence, it
would be equivalent to denying the complainant relief altogether to
require her to prove the very terms in which it was conceived. All
that could reasonably be required of her under the circumstances
could be to show in general terms the disposition which the testator
made of his property by the instruments; that it purported to be his
will and was duly attested by the requisite number of witnesses." In
Allison vs. Allison, 7 Dana 91, it was said in speaking of the
character and extent of proof required in such a case:" nor is there
any just ground to object to the proof because the witnesses have not
given the language of the will or the substance thereof. They have
given the substance of the different devises as to the property or
interest devised, and to whom devised and we would not stop, in the
case of a destroyed will, to scan with rigid scrutiny the form of the
proof, provided we are satisfied of the substance of its provisions."
(Jose vs. Casler 139 Ind. 392, 38 N. E. 812).
The evidence in the case falls short of establishing the existence of
such a writing, except as it may be presumed, under the maxim
Omnia preasumuntur in odium spoliateris." There was evidence
tending to show that the second will of Anne Lambie was in the
possession of Francis Lambie, and that it came to the hands of the
proponents, warranting the inference that it has been suppressed or
destroyed. If from this evidence the jury found such paper destroyed
211
the law permits the presumption that it was legally drawn and
executed, notwithstanding the terms of the statute, which requires the
revoking instrument to be formally executed. If a will be lost,
secondary evidence may be given of its contents; if suppressed or
destroyed, the same is true; and, if necessary the law will prevent the
perpetration of a fraud by permitting a presumption to supply the
suppressed proof. We cannot assent to the proposition that the
statute is so right as to be the wrongdoer's most effective weapons.
The misconduct once established to the satisfaction of the jury, it is
no hardship to the wrongdoer to say. "Produce the evidence in your
possession, or we will presume that your opponent's contention is
true." When one deliberately destroys, or purposely induces another
to destroy, a written instrument subsequently become a matter of
judicial inquiry between the spoliator and an innocent party, the
latter will not be required to make strict proof of the contents of such
instrument in order to establish a right founded thereon. Brook, Leg.
Max. 576, Preston vs. Preston, 132, Atl. 55, 61. (Re Lambie's Estate,
97 Mich, 55,56 N. W. 225)
Judged from the standard set forth in the foregoing authorities, and
bearing in mind that the circumstances of this case lead to the only
conclusion that the loss of the will in question is of course imputable
to those whose interests are adverse to the petitioner and the widow
Lim Billian, we have no hesitancy in holding the view that the
dispositions of the properties left by the deceased Jose B. Suntay is
provided in his will which was lost or snatched in the manner recited
in the decision of this Court in the case of Lim Billian vs. Suntay, 63
Phil., 798-797, had been more than sufficiently proved by the
testimony of Judge Anastacio Teodoro, Go Toh, and Ana Suntay,
supported conclusively by the draft of the lost will presented in
evidence as Exhibit "B", and even by the testimony of oppositor
Federico C. Suntay himself.
It is to be recalled that the trial Judge, in his first decision of April 19,
1948, made the following express findings with respect to the
testimony of Judge Teodoro: "Judge Anastacio Teodoro testified that
he opened the sealed envelope when it was given to him by Go Toh
preparatory to the presentation of the petition for the probate of the
said will. As the lawyer entrusted with that task, he had to examine
the will and have it copied to be reproduced or appended to the
petition. He could not do otherwise if he is worth his salt as a good
lawyer. He could not perform the stunt of "blind flying" in the
judicial firmament. Every step must be taken with certainty and
precision under any circumstances. He could not have talked about
the attorney's fees with Go Toh, unless he has not examined the will
beforehand. And, when he was shown Exhibit B, he did not hesitate
in declaring that it was the exact draft of the will that was inside the
envelope (Exhibit A), the testimony of Atty. Alberto Barretto to the
contrary notwithstanding."
We should not forget, in this connection, that in the resolution on the
motion for reconsideration the trial Judge reiterated the findings in
his decision, although as regards the testimony of Judge Teodoro
admittedly "the only credible witness who testified as to the
provisions of the will," he observed that Judge Teodoro had the draft
Exhibit "B" in his hands while testifying. We cannot see any
justifying for the observation, assuming that Judge Teodoro
consulted the draft, since even the trial Judge granted that he "could
have testified clearly and distinctly on the provisions of the said lost
will, because he had kept the will in his safe, in his office, for three
days, after opening it, and he is well versed in Spanish language in
which the will was written." As a matter of fact, however, it is not
true that Judge Teodoro had the draft in question before him while
testifying as may be seen from the following passages of the
transcript:
Q. And, have you read that will which was inside this envelope,
Exhibit A? — "A. Yes.

Q. Do you remember more or less the contents of the will?
ATTY. FERRIN: With our objection, the best evidence is original
will itself, Your Honor.
ATTY. RECTO: We are precisely proving by means of secondary
evidence, the contents of the will, because according to the Supreme
Court, and that is a fact already decided, that the will of Jose B.
Suntay was lost and that is res adjudicata.
COURT: Witness may answer.
WITNESS: I remember the main features of the will because as I
said I was the one fighting for the postponement of the hearing of the
intestate case because I was asked by Don Alberto Barretto to secure
the postponement until the will that was executed by the deceased is
sent here by the widow from China, with whom we communicated
with several letters, and when the will arrived. I had to check the
facts as appearing in the will, and examined fully in connection with
the facts alleged in the intestate, and there was a striking fact in the
intestate that Apolonio Suntay has..
ATTY. FERRIN: (Interrupting) May we ask that the witness answer
categorically the questions of Atty. Recto, it seems that the answers
of the witness are kilometric ...
ATTY. RECTO: Sometimes the question cannot be answered fully
unless the witness would relate and give all the facts.
COURT: The Attorney for the Administrator may move for the
striking out of any testimony that is not responsive to the question.
ATTY. FERRIN: That is why, our objection, the answer is out of the
question.
COURT: Atty. Recto may propound another question.
ATTY. RECTO: I heard the witness was saying something and he
has not finished the sentence, and I want to ask the Court just to
allow the witness to finish his sentence.
COURT: You may finish.
WITNESS: "A. There was a sentence, the point I was trying to check
first was whether the value of the estate left by the deceased was
SIXTY THOUSAND PESOS (P60,000.00) as Apolonio Suntay
made it appear in his petition, and when I looked at the original will,
I found out that it was several hundred thousand pesos, several
thousands of pesos, hundreds of pesos, that was very striking fact to
me because the petition for intestate was for SIXTY THOUSAND
PESOS (P60,000.00), and I came to know that it was worth more
than SEVEN HUNDRED THOUSAND (P700,000.00) PESOS.
Q. Do you remember, Judge, the disposition of the will, the main
disposition of the will? — "A. Yes, because our client were the
widow, Maria Natividad Lim Billian, and his son, Silvino, the only
son in the second marriage, that was very important for me to know.
Q. How were the properties distributed according to that will?- "A.
The properties were distributed into three (3) parts, one part which
we call legitima corta, were equally distributed to the ten (10)
children, nine (9) in the first marriage, and one (1) in the second
marriage with Maria Natividad Lim Billian. The other third, the
betterment was given to four (4) children, Concepcion, and Apolonio
getting a quiet substantial share in the betterment, around SIXTY
THOUSAND (P60,000.00) for Concepcion, Apolonio the amount of
SEVENTY THOUSAND (70,000,00) PESOS or little over, and then
about ONE HUNDRED THOUSAND (P100,000.00) PESOS of the
betterment in favor of Silvino, the minor of the second marriage, and
to Jose equal to Concepcion.
212
Q. So the betterment, as I understand from you went to four (4)
children?-"A. Yes.
Q. Silvino in the second marriage, Concepcion, Apolonio and Jose in
the first marriage? — " A. Yes.
Q. What about the free disposal?-" A. The free disposal was disposed
in favor of the widow, Maria Natividad Lim Billian and Silvino, his
minor son in equal parts..
Q. What about, if you remember, if there was something in the will
in connection with that particular of the usufruct of the widow? —
"A. It was somewhat incorporated into the assets of the estate left by
the deceased.
Q. Do you remember the number of pages of which that will
consisted? — "A. Twenty-three (23) pages.
Q. Do you remember if the pages were signed by the testator? — "A.
Yes, sir, it was signed.
Q. And the foot of the testament or the end of the testament, was it
signed by the testator? — "A. Yes, sir, and the attestation clause was
the last page signed by the three instrumental witnesses, Alberto
Barretto, one Chinaman Go Toh, and Manuel Lopez, my former
Justice of the Peace of Hagonoy.
Q. Do you remember if there witnesses signed on the different pages
of the will? — "A. Yes, sir, they signed with their name signatures.
Q. Showing you this document consisting of twenty-three (23) pages
in Spanish and which document appears already attached to this same
testamentary proceedings and already marked as EXHIBIT B, will
you please tell the Court if and for instance on page eight (8) of this
document, pagina octavo, it says, there are handwritings in pencil,
some of which read as follows: "Los cinco-octavos (5/8) partes
corresponds a mi hijo Emiliano", can you recognize whose
handwriting is that? — "A. From my best estimate it is the
handwriting of Don Alberto Barretto.
Q. About the end of the same page eight (8) pagina octavo, of the
same document Exhibit B, there is also the handwriting in pencil
which reads: "La otra sexta parte (6.a) corresponde a Bonifacio
Lopez", can you recognize that handwriting? — "A. Yes, sir, this is
the handwriting of Don Alberto Barretto, and I wish to call the
attention of the Court to compare letter "B" which is in capital letter
with the signature of Don Alberto Barretto in the envelope, "Alberto
Barretto" and stroke identifies one hand as having written those
words.
Q. Will you please go over cursorily this document, Exhibit B
composed of twenty-three (23) pages and please tell the Court if this
document had anything to do with the will which according to you
was contained in the envelope, Exhibit A? — "A. This is exactly the
contents of the original will which I received and kept in my office
inside the safe for three (3) days, and I precisely took special case in
the credits left by the deceased, and I remember among them, were
the De Leon family, and Sandiko, well known to me, and then the
disposition of the estate, divided into three (3) equal parts, and I
noticed that they are the contents of the will read.
His Honor, Judge Pecson, was positive in his first decision that "the
testimony of Judge Anastacio Teodoro is corroborated by Go Toh,
one of the attesting witnesses, in his deposition (Exhibit D-1)." Yet in
setting aside his first decision, he remarked that Go Toh's testimony
did not prove clearly and distinctly the provision of the lost will,
because: "He did not, and he could not have done so even if he tried
because the original will was not read to him nor by him before or at
the signing of the same. It was written in Spanish and he did not and
does not understand the Spanish language. Neither was there any

occasion for him to have the contents of the said will, after its
execution and sealing inside the envelope (Exhibit A), read to him,
because it was opened only when Judge Teodoro had examined it
and then subsequently snatched from Go Toh."
The later position thus taken by Judge Pecson is palpably
inconsistent with the following unequivocal statements of Go Toh
contained in hid disposition taken in Amoy, China, on April 17, 1938,
and in oppositor's Exhibit "6":
26. State what you know of the contents of that will.
. . . . Regarding (1) expenditures (2) Philippine citizenship; (3)
Distribution of estates among children (4) Taking care of grave lot;
(5) guardianship of Silvino Suntay and (6) after paying his debts he
will have approximately 720,000 pesos left. This amount will be
divided into three equal parts of 240,000 pesos each. The first part is
to be divided equally among the ten children born by the first and
second wives and the second part among the three sons Silvino
Suntay, 75,000 approximately; Apolonio Suntay, 50,000 pesos
approximately; Jose Suntay and Concepcion Suntay, 36,000 each
approximately. The third part is to be divided between Maria Lim
Billian and Silvino Suntay; each will get approximately 110,000
pesos. Silvino Suntay will get a total of 210,000 pesos approximately,
Maria Natividad Lim Billian a total of 290,000 approximately, and
Apolonio Suntay a total of 80,000 approximately, Concepcion
Suntay and Jose Suntay will get 60,000 pesos each approximately.
The rest of the children will get approximately 29,000 each. The way
of distribution of the property of Jose B. Suntay, movable and
immovable, and the outstanding debts to be collected was arranged
by Jose B. Suntay.
xxx xxx xxx
78. On the occasion of the execution of the testament of Jose B.
Suntay, state whether or not you say Exhibit B — ... Yes.
79. In the affirmative case, state if you know who had the possession
of Exhibit B and the testament the first time you saw them on that
occasion. — ... Yes, I know who had possession of them.
80. Can you say whether or not Jose B. Suntay happened to get those
documents later on, on that same occasion? — ... He got them after
the execution.
81. Please name the person who gave those documents to Mr. Suntay.
— ... Alberto Barretto gave the documents to Jose B. Suntay.
82. Did the person who gave those documents to Suntay say anything
to him (Suntay) at the time of giving them? — ... Yes.
83. If so what was it that he said, if he said any? — ... He said, "You
had better see if you want any correction."
84. What did Mr. Suntay do after those documents were given to him?
— ... Jose B. Suntay looked at them and then gave one copy to
Manuel Lopez for checking.
85. State whether or not Mr. Suntay gave one of those documents to
another man. — ... Yes.
86. In the affirmative case, can you say which of the two documents
was given and who the man was? — ... Yes he gave Exhibit B to
Manuel Lopez.
87. State whether or not Mr. Suntay said something to the man to
whom he gave one of those documents. — ... Yes.
88. In the affirmative case can you repeat more or less what Mr.
Suntay said to that man? — ... He told him to read it for checking.
213
89. State if you know what did the man do with one of those
documents given to him. — ... He took it and read it for checking.
90. What did in turn Mr. Suntay do with the other one left with him?
— ... Jose B. Suntay looked at the original and checked them.
91. What was done with those documents later on if there was
anything done with them? — ... After checking, Jose B. Suntay put
Exhibit B in his pocket and had the original signed and executed.
92. What was done with the testament of Jose B. Suntay after it was
signed by the testator and its witnesses? — ... It was taken away by
Jose B. Suntay. (Exhibit D, D-1.)
Q. Did you know the contents of this envelope? — "A. I knew that it
was a will.
Q. But did you know the provisions of the will? — "A. It is about the
distribution of the property to the heirs.
Q. Did you know how the property was distributed according to the
will? — "A. I know that more than P500,000 was for the widow and
her son, more than P100,000 for the heirs that are in the family.
(Exhibit "6", p. 28).
Q. You stated that you were one of the witnesses to the will and that
the will was written in Spanish. Was it written in typewriting or in
handwriting of somebody? — "A. That will was written in
typewriting.
Q. Did you read the contents of that will, or do you know the
contents of that will? — A. No, sir, because I do not know Spanish.
Q. How do you know that it was the will of Jose B. Suntay ? — "A.
Because I was one of the signers and I saw it." (Exhibit "6", p. 19.)
22. Do you understand the language in which that will was written?
— ... I know a little Spanish.
23. Do you talk or write that language? I can write and talk a little
Spanish. (Exhibits D, D-1.)
As to Ana Suntay's corroborating testimony, Judge Pecson aptly
made the following findings: "Ana Suntay, one of the heirs and who
would be affected adversely by the legalization of the will in
question, also testified on rebuttal that she saw the original will in the
possession of Manuel Suntay immediately after the snatching. She
read it and she particularly remembers the manner in which the
properties were to be distributed. Exhibit B was shown to her on the
witness stand and she declared that the provision regarding the
distribution of the properties in said Exhibit B is the same as that
contained in the original will. Said testimony of Ana Suntay,
therefore, belies the testimony of Atty. Alberto Barretto." And yet in
the resolution on the motion for new trial, the trial Judge had to state
that "Ana Suntay on rebuttal did not, likewise, prove clearly and
distinctly the provisions of the said lost will, because she has not had
enough schooling and she does not possess adequate knowledge of
the Spanish language as shown by the fact that she had to testify in
Tagalog on the witness stand." The potent error committed by Judge
Pecson in reversing his views as regards Ana's testimony, is revealed
readily in the following portions of the transcript:
P. Cuantas paginas tenia aquel documento a que usted se refiere? —
"R. Probablemente seria mas de veinte (20) paginas.
P. No serian treinta (30) paginas? — "Abogado Recto: La testigo ha
contestado ya que mas de veinte (20).
Juzgado: Se estima
Abogado Mejia:

P. Usted personalmente leyo el documento" — "R. Yo leyo mi
hermano en presencia mia.
P. La pregunta es, si usted personalmente ha leido el documento? —
" R. Si, lo he visto.
P. No solamente le pregunto a usted si Vd. ha visto el testamento
sino si usted ha leido personalmente el testamento? — "R. Si la parte
de la adjudicacion lo he leido para asegurarme a que porcion
corresponde a cada uno de nosotros.
P. Puede usted repetir poco mas o menos esa porcion a que se hacia
la distribucion del alegado testamento? — "R. Como ya he declarado,
que las propiedades de mi difunto padre se habian dividido en tres
partes, una tercera parte se nos adjudica a nosotros diez (1) hijos en
primeros nupcias y segunda nupcia, la segunda tercera parte los
adjudica a la viuda y a Silvino, y la otra tercera parte se lo adjudica a
sus hijos como mejora a Silvino, Apolonio, Concepcion y Jose.
P. Eso, tal como usted personalmente lo leyo en el documento? —
"R. Si Señor.
P. Quiere usted tener la bondad, señora, de repetir poco mas o menos
las palabras en ese documento que se distribuia las propiedades del
defundo padre usted como usted relata aqui? "Abogado Recto:
Objetamos a la pregunta por falta de base, porque elle solamente se
fijo en la parte como se distribuian las propiedades pero no ha dicho
la testigo que ella lo ha puesto de memoria, ni Vd. ha preguntado en
que lenguaje estaba escrito el testamento ...
Juzgado: Se estima.
Abogado Mejia:
P. Sabe usted en que lenguaje estaba redactado el documento que
usted leyo personalmente? — "R. En Castellano.
P. Puede usted repetirnos ahora en Castellano algunas frases o
palabras como se hizo la distribucion en aquel supuesto testamento?
— will would not have been "snatched" from Go Toh — and the loss
Abogado Recto: Objecion, por falta de base, uno puede entender el
español y sin embargo no podra repetir lo que ha leido, y no se sabe
todavia si ha estudiado el español bastante hasta el punto de poder
hablarlo.
Juzgado: Se estima.
Abogado Mejia
P. Usted dijo que estaba puesto en castellano el supuesto testamento
que Vda. leyo, usted poso el castellano? — "R. Yo entiendo el
castellano, pero no puedo hablar bien.
P. Usted estudio el castellano en algun colegio? — "Rj. Si, señor, En
Sta. Catalina.
P. Cuantos años? — "R. Nuestros estudios no han sido continuous
porque mi padre nos ingresaba en el colegio y despues nos sacaba
para estar afuera, y no era continuo nuestro estudio.
P. Pero en total, como cuantos meses o años estaba usted en el
colegio aprendiendo el castelano? — "R. Unos cuatro o cinco años.
P. Entonces usted puede leer el castellano con facilidad, señora? —
"R. Si, castellano sencillo puedo entender y lo puedo leer.
P. Usted entiende las preguntas que se le dirigian aqui en castellano
sin interpretacion o sin el interprete? — "R. Si, Señor.
214
P. Puede usted contestar en castellano? — "R. Bueno, pero como de
contestar, por eso quiero que la pregunta se me traduzca antes. asi
puedo contestar debidamente. (t.s.n. pp. 533-534.)
We are really at a loss to understand why, without any change
whatsoever in the evidence, the trial Judge reversed his first decision,
particularly when he announced therein that "it is now incumbent
upon this court to delve into the evidence whether or not Jose B.
Suntay, deceased, left a will (the draft of which is Exhibit B) and
another will which was executed and probated in Amoy, China." His
action is indeed surprising when we take into account the various
circumstancial features presently to be stated, that clearly confirm the
testimony of Judge Anastacio Teodoro, G. Toh and Ana Suntay, or
otherwise constitute visible indicia of oppositor's desire to frustrate
the wishes of his father, Jose B. Suntay.
In our opinion the most important piece of evidence in favor of the
petitioner's case is the draft of the lost will, Exhibit "B." Its
authenticity cannot be seriously questioned, because according to the
trial Judge himself, oppositor's own witness, Atty. Alberto Barretto,
admitted it to be "identical in substance and form to the second draft
which he prepared in typewriting." Indeed, all the "A's" and "B's" in
the handwritten insertions of the draft are very similar to those in
Barretto's admittedly genuine signature on the envelope, Exhibit "A."
The finding of Judge Pecson on the point in his first decision
(reiterated expressly in the resolution on the motion for new trial),
should control, not only because it is in accordance with the evidence
but because the oppositor had failed and did not even attempt to have
the trial Judge reconsider or reverse his factual conclusions. The draft,
Exhibit "B," having been positively identified by the witnesses for
the petitioner to be an exact copy of the lost will of Jose B. Suntay, is
therefore conclusive. Oppositor's effort to show that said draft was
never signed in final form, and was thought of merely to deceive
petitioner's mother, Lim Billian, and that the will actually executed
and put in the envelope, Exhibit "A", provided that the testator's
estate would be divided equally among his heirs, as in the case of
intestacy, was necessarily futile because, if this allegation is true, the
certainly cannot be imputed to the widow Lim Billian or the
petitioner; the snatched will would have been produced to put an end
to petitioner's and his mother's claim for greater inheritance or
participation under the lost will; and the envelope containing the first
will providing for equal shares, would not have been entrusted to the
care and custody of the widow Lim Billian.
It is very noteworthy that out of the nine children of the first
marriage, only Angel, Jose and Federico Suntay had opposed the
probate of the will in question; the rest, namely, Ana, Aurora,
Concepcion, Lourdes, Manuel and Emiliano Suntay, having
expressly manifested in their answer that they had no opposition
thereto, since the petitioner's alternative petition "seeks only to put
into effect the testamentary disposition and wishes of their late
father." This attitude is significantly an indication of the justness of
petitioner's claim, because it would have been to their greater
advantage if they had sided with oppositor Federico Suntay in his
theory of equal inheritance for all the children of Jose B. Suntay.
Under the lost will or its draft Exhibit "B", each of the Suntay
children would receive only some P 25,000.00, whereas in case of
intestacy or under the alleged will providing for equal shares, each of
them would receive some P100,000.00. And yet the Suntay children
other than Angel, Jose and Federico had chosen to give their
conformity to the alternative petition in this case.
Another unequivocal confirmation of the lost will is the will which
Jose B. Suntay executed in Amoy, Fookien, China, on January 4,
1931, and probated in Amoy District Court, China, containing
virtually the same provisions as those in the draft Exhibit "B". What
better evidence is there of an man's desire or insistence to express his

last wishes than the execution of a will reiterating the same
provisions contained in an earlier will. Assuming that the Chinese
will cannot be probated in the jurisdiction, its probative value as
corroborating evidence cannot be ignored.
Oppositor himself had admitted having read the will in question
under which the widow Lim Billian was favored; and this again in a
way goes to corroborate the evidence for the petitioner as to the
contents of the will sought to be probated.
COURT:
Q. Have you read the supposed will or the alleged will of your father?
— "A. Yes, sir.
COURT:
Q. Can you tell the court the share or participation in the inheritance
of Maria Natividad Lim Billian according to the will? —
A. Yes sir, she will inherit, I think, two-thirds (2/3) of the estate, in
other words she is the most favored in the will, so when they sold that,
they sold everything, they are selling everything even the conjugal
property. (t. s. n. 228-229.)
The decision of the majority leans heavily on the testimony of Atty.
Alberto Barretto, forgetful perhaps of the fact that the trial Judge
gave no credence to said witness. It should be repeated that Judge
Pecson reiterated in the resolution on the motion for new trial all his
findings in the first decision. If as Atty. Barretto testified, Lim Billian
was entitled under the will actually signed by Jose Suntay only to
P10,000.00, in addition to properties in China value at P15,000.00,
the fees of P25,000.00 admittedly asked by him would absorb her
entire inheritance; and this would normally not be done by any law
practitioner. Upon the other hand, there is evidence to the effect that
Atty. Barretto might have become hostile to the petitioner and his
mother Lim Billian in view of the latter's refusal to agree to the
amount of P25,000.00 and her offer to pay only P100.00. There is
also evidence tending to show that as early as 1942, Atty. Barretto
was paid by oppositor Federico Suntay the sum of P16,000.00 which,
although allegedly for services in the testate proceedings, was paid
out of the personal funds of said oppositors to supply Atty. Barretto's
needs. This circumstances perhaps further explains why the latter had
to support the side of Federico Suntay.
We have quoted in full the decision of this court in the "snatching"
case and the first decision of Judge Pecson in this case, both in the
hope and in the belief (1) that the first would reveal the manner by
which those adversely affected had planned to prevent the last wishes
of the deceased Jose B. Suntay from being carried on, and (2) that the
second, by the facts correctly recited therein and by the force and
accuracy of its logic would amply show the weakness and utter lack
of foundation of the resolution on the motion for reconsideration. We
have set forth at length pertinent portions of the testimony of various
witnesses to demonstrate more plainly the plausibility of the original
decision of Judge Pecson, and the latter's consequent bad judgment in
having forced himself to accomplish a somersault, a feat which the
majority, in my opinion, have mistakenly commended. We have
found this to be one of the cases of this court in which we have had
occasion to participate, where there can be absolutely no doubt as to
the result — outright reversal — for which, with due respect to the
majority opinion, we vote without hesitancy.
Montemayor and Jugo, JJ., concur.
RESOLUTION
215
5 November 1954
PADILLA, J.:
This is a motion for reconsideration of the decision promulgated on
31 July 1954, affirming the decree of the Court of First Instance of
Bulacan which disallowed the alleged last will and testament
executed in November 1929 and the alleged last will and testament
executed in Kulangsu, Amoy, China, on 4 January 1931, by Jose B.
Suntay, without pronouncement as to costs, on grounds that will
presently be taken up and discussed.
Appellant points to an alleged error in the decision where it states
that —
. . . This petition was denied because of the loss of said will after the
filing of the petition and before the hearing thereof, . . .
because according to him the "will was lost before not after (the)
filing of the petition." This slight error, if it is an error at all, does not,
and cannot, after the conclusions and pronouncements made in the
judgment rendered in the case. In his alternative petition the
appellant alleges:
4. That on October 15, 1934, Marian Natividad Lim Billian, the
mother of herein petitioner filed a petition in this court for the
allowance and probate of a last will and testament executed, and
signed in the Philippines in the year 1929 by said deceased Jose B.
Suntay. (P. 3, amended record on appeal.)
If such will and testament was already lost or destroyed at the time of
the filing of the petition by Maria Natividad Lim Billian (15 October
1934), the appellant would have so stated and alleged. If Anastacio
Teodoro, a witness for the appellant, is to be believed when he
testified —
. . . that one day in November 1934 (p. 273, t. s. n., hearing of 19
January 1948), ... Go Toh arrived at his law office in the De Los
Reyes Building and left an envelope wrapped in red handkerchief
[Exhibit C] (p. 32, t. s. n., hearing of 13 October 19470 . . .
and —
If the will was snatched after the delivery thereof by Go Toh to
Anastacio Teodoro and returned by the latter to the former because
they could not agree on the amount of fees, . . .
then on 15 October 1934, the date of the filing of the petition, the
will was not yet lost. And if the facts alleged in paragraph 5 of the
appellant's alternative petition which states:
That this Honorable Court, after hearing, denied the aforesaid
petition for probate filed by Maria Natividad Lim Billian in view of
the loss and/or destruction of said will subsequent to the filing of said
petition and prior to the hearing thereof, and the alleged
insufficiency of the evidence adduced to established the loss and/or
destruction of the said will, (Emphasis supplied, P. 3, amended
record on appeal.)
may be relied upon, then the alleged error pointed out by the
appellant, if it is an error, is due to the allegation in said paragraph of
his alternative petition. Did the appellant allege the facts in said
paragraph with reckless abandon? Or, did the appellant make the
allegation as erroneously as that which he made in paragraph 10 of
the alternative petition that "his will which was lost and
ordered probated by our Supreme Court in G. R. No. 44276, above
referred to?" (P. 7, amended record on appeal.) This Court did not
order the probate of the will in said case because if it did, there
would have been no further and subsequent proceedings in the case

after the decision of this Court referred to had been rendered and had
become final. Be that as it may, whether the loss of the will was
before or subsequent to the filing of the petition, as already stated,
the fact would not affect in the slightest degree the conclusions and
pronouncements made by this Court.
The appellant advances the postulate that the decision of this Court in
the case of Lim Billian vs. Suntay, G. R. No. 44276, 63 Phil., 793,
constitutes res judicata on these points: (a) that only one will was
prepared by attorney Barretto, and (b) that the issue to be resolved by
the trial court was whether the draft (Exhibit B) is a true copy or draft
of the snatched will, and contends that these points already adjudged
were overlooked in the majority opinion. The decision of this Court
in the case referred to does not constitute res judicata on the points
adverted to by the appellant. The only point decided in that case is
that "the evidence is sufficient to establish the loss of the document
contained in the envelope." In the opinion of this Court, this
circumstance justified "the presentation of secondary evidence of its
contents and of whether it was executed with all the essential and
necessary legal formalities." That is all that was decided. This Court
further said:
The trial of this case was limited to the proof of loss of the will, and
from what has taken place we deduce that it was not petitioner's
intention to raise, upon the evidence adduced by her, and other points
involved herein, namely, as we have heretofore indicated, whether
Exhibit B is a true copy of the will and whether the latter was
executed with all the formalities required by law for its probate. The
testimony of Alberto Barretto bears importantly in this connection. (P.
796, supra.)
Appellant's contention that the question before the probate court was
whether the draft (Exhibit B) is a true copy or draft of the snatched
will is a mistaken interpretation and view of the decision of this
Court in the case referred to, for if this Court did make that
pronouncement, which, of course, it did not, such pronouncement
would be contrary to law and would have been a grievous and
irreparable mistake, because what the Court passed upon and decided
in that case, as already stated, is that there was sufficient evidence to
prove the loss of the of the will and that the next step was to prove by
secondary evidence its due execution in accordance with the
formalities of the law and its contents, clearly and districtly, by the
testimony of at least two credible witnesses.1
The appellant invokes Rule 133 to argue that Rule 77 should not
have been applied to the case but the provisions of section 623 of the
Code of Civil Procedure (Act No. 190), for the reason that this case
had been commenced before the Rules of Court took effect. But Rule
133 cited by the appellant provides:
These rules shall take effect on July 1, 1940. They shall govern all
cases brought after they take effect, and also all further proceedings
in cases then pending, except to the extent that in the opinion of the
court their application would not be feasible or would work injustice,
in which event the former procedure shall apply. (Emphasis
supplied.)
So, Rule 77 applies to this case because it was a further proceedings
in a case then pending. But even if section 623 of the Code of Civil
Procedure were to be applied, still the evidence to prove the contents
and due execution of the will and the fact of its unauthorized
destruction, cancellation, or obliteration must be established "by full
evidence to the satisfaction of the Court." This requirement may even
be more strict and exacting than the two-witness rule provided for in
section 6, Rule 77. The underlying reason for the exacting provisions
found in section 623 of Act No. 190 and section 6, Rule 77, the
product of experience and wisdom, is to prevent imposters from
216
foisting, or at least to make for them difficult to foist, upon probate
courts alleged last wills or testaments that were never executed.
In commenting unfavorably upon the decree disallowing the lost will,
both the appellant and the dissenting opinion suffer from an infirmity
born of a mistaken premise that all the conclusions and
pronouncements made by the probate court in the first decree which
allowed the probate of the lost will of the late Jose B. Suntay must be
accepted by this Court. This is an error. It must be borne in mind that
this is not a petition for a writ of certiorari to review a judgment of
the Court of Appeals on questions of law where the findings of fact
by said Court are binding upon this Court. This is an appeal from the
probate court, because the amount involved in the controversy
exceeds P50,000, and this Court in the exercise of its appellate
jurisdiction must review the evidence and the findings of fact and
legal pronouncements made by the probate court. If such conclusions
and pronouncements are unjustified and erroneous this Court is in
duty bound to correct them. Not long after entering the first decree
the probate court was convinced that it had committed a mistake, so
it set aside the decree and entered another. This Court affirmed the
last decree not precisely upon the facts found by the probate court but
upon facts found by it after a careful review and scrutiny of the
evidence, parole and documentary. After such review this Court has
found that the provisions of the will had not been established clearly
and distinctly by at least two credible witnesses and that conclusion
is unassailable because it is solidly based on the established facts and
in accordance with law.
The appellant and the dissent try to make much out of a pleading
filed by five (5) children and the widow of Apolonio Suntay, another
child of the deceased by the first marriage, wherein they state that —
. . . in answer to the alternative petition filed in these proceedings by
Silvino Suntay, through counsel, dated June 18, 1947, to this
Honorable Court respectfully state that, since said alternative petition
seeks only to put into effect the testamentary disposition and wishes
of their late father, they have no opposition thereto. (Pp. 71-72,
amended record on appeal.)
Does that mean that they were consenting to the probate of the lost
will? Of course not. If the lost will sought to be probated in the
alternative petition was really the will of their late father, they, as
good children, naturally had, could have, no objection to its probate.
That is all that their answer implies and means. But such lack of
objection to the probate of the lost will does not relieve the proponent
thereof or the party interested in its probate from establishing its due
execution and proving clearly and distinctly the provisions thereof at
least two credible witnesses. It does not mean that they accept the
draft Exhibit B as an exact and true copy of the lost will and consent
to its probate. Far from it. In the pleading copied in the dissent,
which the appellant has owned and used as argument in the motion
for reconsideration, there is nothing that may bolster up his
contention. Even if all the children were agreeable to the probate of
said lost will, still the due execution of the lost will must be
established and the provisions thereof proved clearly and distinctly
by at least two credible witnesses, as provided for in section 6, Rule
77. The appellant's effort failed to prove what is required by the rule.
Even if the children of the deceased by the first marriage, out of
generosity, were willing to donate their shares in the estate of their
deceased father or parts thereof to their step mother and her only
child, the herein appellant, still the donation, if validly made, would
not dispense with the proceedings for the probate of the will in
accordance with section 6, Rule 77, because the former may convey
by way of donation their shares in the state of their deceased father or
parts thereof to the latter only after the decree disallowing the will
shall have been rendered and shall have become final. If the lost will
is allowed to probate there would be no room for such donation
except of their respective shares in the probated will.
 217

The part of the deposition of Go Toh quoted in the motion for Q. More or less when was such payment made, during the Japanese
reconsideration which appellant underscores does not refer to Go time, what particular month and year, do you remember? — A. I
Toh but to Manuel Lopez. Even if Go Toh heard Manuel Lopez read think in 1942.
the draft (Exhibit B) for the purpose of checking it up with the
original held and read by Jose B. Suntay, Go Toh should not have Q. And you said you paid him because of services he rendered? — A.
understood the provisions of the will because he knew very little of Upon the order to the Court.
the Spanish language in which the will was written (answer to 22nd
Q. And those services were precisely because he made a will and he
and 23rd interrogatories and to X-2 cross-interrogatory). In fact, he
made a will which was lost, the will of Jose B. Suntay? ... (P. 181, t. s.
testifies in his deposition that all he knows about the contents of the
n., supra.) — A. I think I remember correctly according to
lost will was revealed to him by Jose B. Suntay at the time it was
ex-Representative Vera who is the administrator whom I followed at
executed (answers to 25th interrogatory and to X-4 and X-8
that time, that was paid according to the services rendered by Don
cross-interrogatories); that Jose B. Suntay told him that the contents
Alberto Barretto with regard to our case in the testamentaria but he
thereof are the same as those of the draft [Exhibit B] (answers to
also rendered services to my father.
33rd interrogatory and to X-8 cross-interrogatory); that Mrs. Suntay
had the draft of the will (Exhibit B) translated into Chinese and he Q. At least your Counsel said that there was an order of the Court
read the translation (answer to the 67th interrogatory); that he did not ordering you to pay that, do you have that copy of the order? — A.
read the will and did not compare it (check it up) with the draft Yes, sir, I have, but I think that was burned. (P. 184, t. s. n., supra.).
[Exhibit B] (answers to X-6 and X-20 cross-interrogatories). We
repeat that — So the sum of P16,000 was paid upon recommendation of the former
administrator and order of the probate court for services rendered by
. . . all of Go Toh's testimony by deposition on the provisions of the Alberto Barretto not only in the probate proceedings that also for
alleged lost will is hearsay, because he came to know or he learned of services rendered to his father. But if this sum of P16,000 paid to
them from information given him by Jose B. Suntay and from Alberto Barretto upon recommendation of the previous administrator
reading the translation of the draft (Exhibit B) into Chinese. and order of the probate court for professional services rendered in
the probate proceedings and to the deceased in his lifetime be taken
This finding cannot be contested and assailed.
against his truthfulness and veracity as to affect adversely his
The appellant does not understand how the Court came to the testimony, what about the professional services of Anastacio
conclusion that Ana Suntay, a witness for the appellant could not Teodoro who appeared in this case as one of the attorneys for the
have read the part of the will on adjudication. According to her petitioner-appellant? (P. 2, t. s. n., hearing of 13 October
testimony "she did not read the whole will but only the adjudication," 1947.)Would that not likewise or by the same token affect his
which, this Court found, "is inconsistent with her testimony in chief credibility? It is the latter's interest more compelling than the
(to the effect) that "after Apolonio read that portion, then he turned former's?
over the document of Manuel, and he went away." (P. 528, t. s. n.,
For the foregoing reasons, the motion for reconsideration is denied.
hearing of 24 February 1948.) And appellant asks the question: "Who
went away? Was it Manuel or Apolonio?" In answer to his own
question the appellant says: "The more obvious inference is that it
was Apolonio and not Manuel who went away." This inference made
by the appellant not only is not obvious but it is also illogical, if it be
borne in mind that Manuel came to the house of Apolonio and it
happened that Ana was there, according to her testimony. So the
sentence "he went away" in Ana's testimony must logically and
reasonably refer to Manuel, who was a caller or visitor in the house
of his brother Apolonio and not to the latter who was in his house. If
it was Apolonio who "went away," counsel for the appellant could
have brought that out by a single question. As the evidence stands
could it be said that the one who went away was Apolonio and not
Manuel? The obvious answer is that it was Manuel. That inference is
the result of a straight process of reasoning and clear thinking.

There is a veiled insinuation in the dissent that Alberto Barretto

testified as he did because he had been paid by Federico C. Suntay
the sum of P16,000. Federico C. Suntay testifies on the point thus —

Q. You mentioned in your direct testimony that you paid certain

amount to Atty. Alberto Barretto for services rendered, how much
did you pay? — A. Around SIXTEEN THOUSAND (P16,000.00).

Q. When did you make the payment? — A. During the Japanese

time.

Q. Did you state that fact in any accounts you presented to the Court?
— A. I do not quite remember that.

. . . (P. 180, t. s. n., hearing of 24 October 1947.)

Q. When you made that payment, was (it) your intention to charge it
to the state or to collect it later from the estate? — A. Yes, sir.

[G.R. No. 74495. July 11, 1996]
DUMEZ COMPANY and TRANS-ORIENT ENGINEERS,
INC., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and VERONICO EBILANE, respondents.
DECISION
HERMOSISIMA, JR., J.:
Before us is a petition for certiorari assailing the Decision[1] of the
National Labor Relations Commission (hereafter, NLRC)[2] in an
illegal dismissal case[3] involving an overseas contract worker who
contracted a debilitating illness while rendering services under a
subsisting job contract in Riyadh, Saudi Arabia. The assailed
Decision affirmed the award[4] by the Workers' Assistance and
Adjudication Office of the Philippine Overseas Employment
Administration (hereafter POEA) in favor of private respondent in
the amount of U.S.$1,110.00 or its peso equivalent as and for his
medical compensation benefits.
The facts of the case are not in dispute:
On May 21, 1982, petitioner Dumez Company, a French company,
through petitioner Trans-Orient Engineers, Inc., a corporation
organized and existing under the laws of the Philippines, engaged the
services of private respondent Veronico Ebilane as carpenter for one
of its projects in the Middle East, with Riyadh, Saudi Arabia, as his
place of actual employment. The parties executed and signed a
one-year overseas employment agreement embodying the terms and
conditions of private respondent's employment.
Private respondent commenced performance of said contract on July
3, 1982. On August 31, 1982, while at the job site, private respondent
was suddenly seized by abdominal pain and rushed to the Riyadh
Central Hospital were appendectomy was performed on him. During
his confinement, he developed right-sided weakness and numbness
and difficulty of speaking which was found to have been caused by
Atrial Fibrillation and CVA embolism.
In a letter dated September 22, 1982, petitioners formally terminated
private respondent's employment effective September 29, 1982, up to
which time petitioners paid private respondent his salaries under his
employment contract. Thereafter, on October 13, 1982, private
respondent was repatriated to Manila.
On November 23, 1982, private respondent filed a complaint for
illegal dismissal against petitioners. Such complaint was filed with
the Workers' Assistance and Adjudication Office of the POEA.
Private respondent asseverates that he bad been terminated pursuant
to the provision of Section 1 (d) of the employment agreement which
refers to termination of an employee who is unqualified. He
maintains that such ground for termination did not exist in his case
and, thus, his dismissal was without cause.[5]
On January 24, 1984, the POEA Administrator rendered the assailed
Decision ordering petitioners to pay private respondent medical
compensation benefits in the amount of U.S.$1,110.00 or its peso
equivalent. Notwithstanding an explicit finding made in the assailed
Decision that "there can be no dispute that complainant could be
terminated for medical reasons," still petitioners were found to have
failed to perform its obligation to give private respondent his "daily
allowance for each day of work disability, including holidays."[6]
Believing that the POEA Administrator erred in finding them liable
for private respondent's medical compensation benefits, petitioners
appealed to the NLRC. In a Resolution[7]promulgated on March 25,
1986, the NLRC affirmed in toto the assailed Decision and dismissed
the appeal for lack of merit.
218
Petitioners thus came to this Court on a petition
for certiorari[8] seeking the voiding of the Resolution of the
NLRC. In the meantime, petitioners prayed that a temporary
restraining order be issued to enjoin the POEA from enforcing the
assailed Resolution.
As prayed for, we issued a temporary restraining order enjoining the
POEA and the NLRC from enforcing the assailed Resolution. [9]
On November 17, 1986, the Solicitor General filed a Comment "as
his own, considering that he is unable to agree with the position
adopted by public respondent National Labor Relations
Commission."[10] The Solicitor General does not dispute private
complainant's entitlement, under Saudi Arabia law, to medical
benefits corresponding to the period of his physical incapacity. It is
his position, however, that while payment of said medical benefits is
explicitly mandated by the Social Insurance Law of Saudi Arabia,
x x x the same law x x x is equally explicit that the liability decreed
therein devolves at the General Organization's expense, and not on
the employer of the private respondent.[11]
Significantly, neither the private nor the public respondent has filed
any pleading to refute the aforementioned postulate of the Solicitor
General.
Understandably, the sole error attributed to the NLRC and the POEA
is that there is no legal basis to require petitioners to pay private
respondent medical compensation benefits equal to 75% of his
salaries for four (4) months.
Petitioners are correct.
The POEA Administrator, in finding petitioners liable to private
respondent for medical benefits accruing to the latter under the Social
Insurance Law of Saudi Arabia, took judicial notice of the said
law. To this extent, the POEA Administrator's actuations are legally
defensible. We have earlier ruled in Norse Management Co. (PTE) vs.
National Seamen Board[12] that evidence is usually a matter of
procedure of which a mere quasi-judicial body is not strict
about. Although in a long line of cases, we have ruled that a foreign
law, being a matter of evidence must be alleged and proved, in order
to be recognized and applied in a particular controversy involving
conflicts of laws, jurisprudence on this matter was not meant to apply
to cases before administrative or quasi-judicial bodies in the light of
the well-settled rule that administrative and quasi-judicial bodies are
not bound strictly by technical rules.[13] Nonetheless, only to this
extent were the acts of the POEA Administrator amply supported by
the law. Her actual application thereof, however, is starkly erroneous.
Section 6(a) of the Overseas Employment Agreement entered into
and signed by the private parties herein, provides that "Workmen's
Compensation insurance benefits will be provided within the limits
of the compensation law of the host country."[14] That compensation
for disability was to be provided in accordance with the law of the
host country, Saudi Arabia, is a necessary consequence of the
compulsory coverage under the General Organization for Social
Insurance Law of Saudi Arabia (hereafter, GOSI Law of Saudi
Arabia), upon all workers, regardless of nationality, sex or age, who
render their services within the territory of Saudi Arabia by virtue of
a labor contract.
Article 49 of the GOSI Law of Saudi Arabia provides that the
General Organization shall pay to the beneficiaries the insurance
compensation, the employer being under no obligation to pay any
allowance to the insured or to his heirs unless the injury has been
intentionally caused by the employer or the injury has occurred by
reason of the latter's gross error or failure to abide by the GOSI Law
or the rules relating to occupational health and safety.[15]
 219

Under the GOSI Law of Saudi Arabia as pleaded by petitioners

clearly the obligation to pay medical benefits as compensation for
work-related injury or illness, devolves upon the General
Organization and not upon petitioners. Furthermore, after taking
judicial notice of the GOSI Law of Saudi Arabia, the POEA
Administrator considered the said law as one of a similar nature as
that of our own compensation laws. Thus, in awarding the medical
benefits to private respondent, she rationalized the same by quoting
Article 166 of the Labor Code of the Philippines which provides that
"the State shall promote and develop a tax-exempt employees'
compensation program whereby employees x x x in the event of
work-connected disability or death, may promptly secure adequate
income benefit and medical or related benefits." Indeed, we may
postulate further that the policies underlying our compensation laws
and the GOSI Law of Saudi Arabia being similar, the nature thereof
could not be so dissimilar. Suffice it to say that our own
compensation program imposes on the employer nothing more than
the obligation to remit monthly premiums to the State Insurance
Fund and it is the latter, not the employer, on which is laid the burden
of compensating the employee for any disability; in fact, once the
employer pays his share to the fund, all obligation on his part to his
employees is ended.[16] No showing at all has there been that
petitioners had failed to comply with its obligations as employer
under the GOSI Law of Saudi Arabia.

WHEREFORE, the petition for certiorari is GRANTED. The

decisions of the POEA Administrator and of the NLRC are hereby
ANNULLED and SET ASIDE. No pronouncement as to costs.

SO ORDERED.

G.R. No. 128803 September 25, 1998
ASIAVEST LIMITED, petitioner,
vs.
THE COURT OF APPEALS and ANTONIO
HERAS, respondents.
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign judgment.
The antecedents are summarized in the 24 August 1990 Decision1 of
Branch 107 of the Regional Trial Court of Quezon City in Civil Case
No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3,
1987 against the defendant Antonio Heras praying that said
defendant be ordered to pay to the plaintiff the amounts awarded by
the Hong Kong Court Judgment dated December 28, 1984 and
amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the
time of payment with legal interest from December 28, 1984 until
fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from
October 31, 1984 to December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorney's fees, litigation expenses
and cost, with interest thereon from the date of the judgment until
fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However,
before the court could resolve the said motion, a fire which partially
razed the Quezon City Hall Building on June 11, 1988 totally
destroyed the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the plaintiff, through
counsel filed a Motion for Reconstitution of Case Records. The
Court, after allowing the defendant to react thereto, granted the said
Motion and admitted the annexes attached thereto as the
reconstituted records of this case per Order dated September 6, 1988.
Thereafter, the Motion to Dismiss, the resolution of which had been
deferred; was denied by the Court in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then
set for pre-trial conference. At the conference, the parties could not
arrive at any settlement. However, they agreed on the following
stipulations of facts:
1. The defendant admits the existence of the judgment dated
December 28, 1984 as well as its amendment dated April 13, 1987,
but not necessarily the authenticity or validity thereof;
2. The plaintiff is not doing business and is not licensed to do
business in the Philippines;
3. The residence of defendant, Antonio Heras, is New Manila,
Quezon City.
The only issue for this Court to determine is, whether or not the
judgment of the Hong Kong Court has been repelled by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud or
clear mistake of law or fact, such as to overcome the presumption
established in Section 50, Rule 39 of the Rules of Court in favor of
foreign judgments.
220
In view of the admission by the defendant of the existence of the
aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989),
as well as the legal presumption in favor of the plaintiff as provided
for in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented only
documentary evidence to show rendition, existence, and
authentication of such judgment by the proper officials concerned
(Pls. See Exhibits "A" thru "B", with their submarkings). In addition,
the plaintiff presented testimonial and documentary evidence to show
its entitlement to attorney's fees and other expenses of litigation. . . . .
On the other hand, the defendant presented two witnesses, namely.
Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect that no writ of
summons or copy of a statement of claim of Asiavest Limited was
ever served in the office of the Navegante Shipping Agency Limited
and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New
Manila, Quezon City. Her knowledge is based on the fact that she
was the personal secretary of Mr. Heras during his JD Transit days
up to the latter part of 1972 when he shifted or diversified to shipping
business in Hong Kong; that she was in-charge of all his letters and
correspondence, business commitments, undertakings, conferences
and appointments, until October 1984 when Mr. Heras left Hong
Kong for good; that she was also the Officer-in-Charge or Office
Manager of Navegante Shipping Agency LTD, a Hong Kong
registered and based company acting as ships agent, up to and until
the company closed shop sometime in the first quarter of 1985, when
shipping business collapsed worldwide; that the said company held
office at 34-35 Connaught Road, Central Hong Kong and later
transferred to Carton House at Duddel Street, Hong Kong, until the
company closed shop in 1985; and that she was certain of such facts
because she held office at Caxton House up to the first quarter of
1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong,
and as a representative of the law office of the defendant's counsel
who made a verification of the record of the case filed by the plaintiff
in Hong Kong against the defendant, as well as the procedure in
serving Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct testimony, the
said witness stated that:
The defendant was sued on the basis of his personal guarantee of the
obligations of Compania Hermanos de Navegacion S.A. There is no
record that a writ of summons was served on the person of the
defendant in Hong Kong, or that any such attempt at service was
made. Likewise, there is no record that a copy of the judgment of the
High Court was furnished or served on the defendant; anyway, it is
not a legal requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor
(lawyer) of the claimant or plaintiff. In Hong Kong there are no
Court personnel who serve writs of summons and/or most other
processes.
b) If the writ of summons or claim (or complaint) is not contested,
the claimant or the plaintiff is not required to present proof of his
claim or complaint nor present evidence under oath of the claim in
order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision
rendered by the Court in Hong Kong [to] make a recitation of the
facts or the law upon which the claim is based.
d) There is no necessity to furnish the defendant with a copy of the
Judgment or decision rendered against him.

e) In an action based on a guarantee, there is no established legal
requirement or obligation under Hong Kong laws that the creditor
must first bring proceedings against the principal debtor. The creditor
can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was
commissioned by the law firm of the defendant's counsel as an expert
witness and to verify the records of the Hong Kong case, he had been
acting as counsel for the defendant in a number of commercial
matters; that there was an application for service of summons upon
the defendant outside the jurisdiction of Hong Kong; that there was
an order of the Court authorizing service upon Heras outside of Hong
Kong, particularly in Manila or any other place in the Philippines (p.
9, TSN, 2/14/90); that there must be adequate proof of service of
summons, otherwise the Hong Kong Court will refuse to render
judgment (p. 10, ibid); that the mere fact that the Hong Kong Court
rendered judgment, it can be presumed that there was service of
summons; that in this case, it is not just a presumption because there
was an affidavit stating that service was effected in [sic] a particular
man here in Manila; that such affidavit was filed by one Jose R.
Fernandez of the firm Sycip Salazar on the 21st of December 1984,
and stated in essence that "on Friday, the 23rd of November 1984 he
served the 4th defendant at No. 6 First Street, Quezon City by
leaving it at that address with Mr. Dionisio Lopez, the son-in-law of
the 4th defendant the copy of the writ and Mr. Lopez informed me
and I barely believed that he would bring the said writ to the
attention of the 4th defendant" (pp. 11-12, ibid.); that upon filing of
that affidavit, the Court was asked and granted judgment against the
4th defendant; and that if the summons or claim is not contested, the
claimant of the plaintiff is not required to present proof of his claim
or complaint or present evidence under oath of the claim in order to
obtain judgment; and that such judgment can be enforced in the same
manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had
been duly proved, it is a presumptive evidence of a right as between
the parties; hence, the party impugning it had the burden to prove
want of jurisdiction over his person. HERAS failed to discharge that
burden. He did not testify to state categorically and under oath that
he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City residence.
As to De la Vega's testimony regarding non-service of summons, the
same was hearsay and had no probative value.
As to HERAS' contention that the Hong Kong court judgment
violated the Constitution and the procedural laws of the Philippines
because it contained no statements of the facts and the law on which
it was based, the trial court ruled that since the issue relate to
procedural matters, the law of the forum, i.e., Hong Kong laws,
should govern. As testified by the expert witness Lousich, such
legalities were not required under Hong Kong laws. The trial Court
also debunked HERAS' contention that the principle of excussion
under Article 2058 of the Civil Code of the Philippines was violated.
It declared that matters of substance are subject to the law of the
place where the transaction occurred; in this case, Hong Kong laws
must govern.
The trial court concluded that the Hong Kong court judgment should
be recognized and given effect in this jurisdiction for failure of
HERAS to overcome the legal presumption in favor of the foreign
judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to
pay to the plaintiff the following sums or their equivalents in
Philippine currency at the time of payment: US$1,810,265.40 plus
interest on the sum of US$1,500,000.00 at 9.875% per annum from
October 31, 1984 to December 28, 1984, and HK$905 as fixed cost,
221
with legal interests on the aggregate amount from December 28,
1984, and to pay attorney's fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought
an award of judicial costs and an increase in attorney's fees in the
amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the
motion and instead appealed the decision to the Court of Appeals,
which docketed the appeal as CA-G.R. CV No. 29513.
In its order2 of 2 November 1990, the trial court granted
ASIAVEST's motion for reconsideration by increasing the award of
attorney's fees to "US$19,345.65 OR ITS EQUIVALENT IN
PHILIPPINE CURRENCY, AND TO PAY THE COSTS OF THIS
SUIT," provided that ASIAVEST would pay the corresponding filing
fees for the increase. ASIAVEST appealed the order requiring prior
payment of filing fees. However, it later withdrew its appeal and paid
the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its
decision3 reversing the decision of the trial court and dismissing
ASIAVEST's complaint without prejudice. It underscored the fact
that a foreign judgment does not of itself have any extraterritorial
application. For it to be given effect, the foreign tribunal should have
acquired jurisdiction over the person and the subject matter. If such
tribunal has not acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of
remedy and procedure, such as those relating to service of summons
upon the defendant are governed by the lex fori, which was, in this
case, the law of Hong Kong. Relative thereto, it gave weight to
Lousich's testimony that under the Hong Kong law, the substituted
service of summons upon HERAS effected in the Philippines by the
clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid
provided that it was done in accordance with Philippine laws. It then
stressed that where the action is in personam and the defendant is in
the Philippines, the summons should be personally served on the
defendant pursuant to Section 7, Rule 14 of the Rules of
Court.4 Substituted service may only be availed of where the
defendant cannot be promptly served in person, the fact of
impossibility of personal service should be explained in the proof of
service. It also found as persuasive HERAS' argument that instead of
directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan
law office, who was not authorized by the judge of the court issuing
the summons, ASIAVEST should have asked for leave of the local
courts to have the foreign summons served by the sheriff or other
court officer of the place where service was to be made, or for special
reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside
the state to a non-resident is unavailing to give jurisdiction in an
action against him personally for money recovery." Summons should
have been personally served on HERAS in Hong Kong, for, as
claimed by ASIAVEST, HERAS was physically present in Hong
Kong for nearly 14 years. Since there was not even an attempt to
serve summons on HERAS in Hong Kong, the Hong Kong Supreme
Court did not acquire jurisdiction over HERAS. Nonetheless it did
not totally foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious
defense against [ASIAVEST's] claims or that [HERAS] ought to be
absolved of any liability, nevertheless, in view of the foregoing
discussion, there is a need to deviate front the findings of the lower
court in the interest of justice and fair play. This, however, is without
prejudice to whatever action [ASIAVEST] might deem proper in
order to enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was
necessary that evidence supporting the validity of the foreign

judgment be submitted, and that our courts are not bound to give
effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court
of Appeals erred in ruling that
I.
. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT
EVIDENCE "SUPPORTING THE VALIDITY OF THE
JUDGMENT";
II.
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS
DEFECTIVE UNDER PHILIPPINES LAW;
III.
. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED
ON HERAS IN HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN
SERVED WITH LEAVE OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE
LAWS, THE PRINCIPLES OF SOUND MORALITY, AND THE
PUBLIC POLICY OF THE PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of
Court,5 which was the governing law at the time this case was
decided by the trial court and respondent Court of Appeals, a foreign
judgment against a person rendered by a court having jurisdiction to
pronounce the judgment is presumptive evidence of a right as
between the parties and their successors in interest by the subsequent
title. However, the judgment may be repelled by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence
provides that in the absence of proof to the contrary, a court, or judge
acting as such, whether in the Philippines or elsewhere, is presumed
to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the
burden to repel it on grounds provided for in paragraph (b) of Section
50, Rule 39 of the Rules of Court is on the party challenging the
foreign judgment — HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the
Hong Kong judgment. On the other hand, ASIAVEST presented
evidence to prove rendition, existence, and authentication of the
judgment by the proper officials. The judgment is thus presumed to
be valid and binding in the country from which it comes, until the
contrary is shown. 6 Consequently, the first ground relied upon by
ASIAVEST has merit. The presumption of validity accorded foreign
judgment would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that
the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of
remedy and procedure such as those relating to the service of process
upon the defendant are governed by the lex fori or the law of the
222
forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that
according to his witness Mr. Lousich, who was presented as an
expert on Hong Kong laws, there was no valid service of summons
on him.
In his counter-affidavit,8 which served as his direct testimony per
agreement of the parties,9 Lousich declared that the record of the
Hong Kong case failed to show that a writ of summons was served
upon HERAS in Hong Kong or that any such attempt was made.
Neither did the record show that a copy of the judgment of the court
was served on HERAS. He stated further that under Hong Kong laws
(a) a writ of summons could be served by the solicitor of the claimant
or plaintiff; and (b) where the said writ or claim was not contested,
the claimant or plaintiff was not required to present proof under oath
in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified
that the Hong Kong court authorized service of summons on HERAS
outside of its jurisdiction, particularly in the Philippines. He admitted
also the existence of an affidavit of one Jose R. Fernandez of the
Sycip Salazar Hernandez & Gatmaitan law firm stating that he
(Fernandez) served summons on HERAS on 13 November 1984 at
No. 6, 1st St., Quezon City, by leaving a copy with HERAS's
son-in-law Dionisio Lopez. 10 On redirect examination, Lousich
declared that such service of summons would be valid under Hong
Kong laws provided that it was in accordance with Philippine laws. 11
We note that there was no objection on the part of ASIAVEST on the
qualification of Mr. Lousich as an expert on the Hong Kong law.
Under Sections 24 and 25, Rule 132 of the New Rules of Evidence,
the record of public documents of a sovereign authority, tribunal,
official body, or public officer may be proved by (1) an official
publication thereof or (2) a copy attested by the officer having the
legal custody thereof, which must be accompanied, if the record is
not kept in the Philippines, with a certificate that such officer has the
custody. The certificate may be issued by a secretary of the embassy
or legation, consul general, consul, vice consul, or consular agent, or
any officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the
seal of his office. The attestation must state, in substance, that the
copy is a correct copy of the original, or a specific part thereof, as the
case may be, and must be under the official seal of the attesting
officer.
Nevertheless, the testimony of an expert witness may be allowed to
prove a foreign law. An authority 12 on private international law thus
noted:
Although it is desirable that foreign law be proved in accordance
with the above rule, however, the Supreme Court held in the case
of Willamette Iron and Steel Works v. Muzzal, 13 that Section 41,
Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does
not exclude the presentation of other competent evidence to prove the
existence of a foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-at-law of San
Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the
existence of said law. Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et
al., 14 upheld the Tax Court in considering the pertinent law of
California as proved by the respondents' witness. In that case, the
counsel for respondent "testified that as an active member of the
California Bar since 1951, he is familiar with the revenue and
taxation laws of the State of California. When asked by the lower
court to state the pertinent California law as regards exemption of
intangible personal properties, the witness cited Article 4, Sec. 13851
(a) & (b) of the California Internal and Revenue Code as published in

Derring's California Code, a publication of Bancroft-Whitney Co.,
Inc. And as part of his testimony, a full quotation of the cited section
was offered in evidence by respondents." Likewise, in several
naturalization cases, it was held by the Court that evidence of the law
of a foreign country on reciprocity regarding the acquisition of
citizenship, although not meeting the prescribed rule of practice, may
be allowed and used as basis for favorable action, if, in the light of all
the circumstances, the Court is "satisfied of the authenticity of the
written proof offered." 15 Thus, in, a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that
law. 16
There is, however, nothing in the testimony of Mr. Lousich that
touched on the specific law of Hong Kong in respect of service of
summons either in actions in rem or in personam, and where the
defendant is either a resident or nonresident of Hong Kong. In view
of the absence of proof of the Hong Kong law on this particular issue,
the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the
Hong Kong law on the matter is similar to the Philippine law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to
determine first whether the action is in personam,in rem, or quasi in
rem because the rules on service of summons under Rule 14 of the
Rules of Court of the Philippines apply according to the nature of the
action.
An action in personam is an action against a person on the basis of
his personal liability. An action in rem is an action against the thing
itself instead of against the person. 19 An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or lien
burdening the property. 20
In an action in personam, jurisdiction over the person of the
defendant is necessary for the court to validly try and decide the case.
Jurisdiction over the person of a resident defendant who does not
voluntarily appear in court can be acquired by personal service of
summons as provided under Section 7, Rule 14 of the Rules of Court.
If he cannot be personally served with summons within a reasonable
time, substituted service may be made in accordance with Section 8
of said Rule. If he is temporarily out of the country, any of the
following modes of service may be resorted to: (1) substituted
service set forth in Section 8; 21 (2) personal service outside the
country, with leave of court; (3) service by publication, also with
leave of court; 22 or (4) any other manner the court may deem
sufficient. 23
However, in an action in personam wherein the defendant is
a non-resident who does not voluntarily submit himself to the
authority of the court, personal service of summons within the state is
essential to the acquisition of jurisdiction over her person. 24 This
method of service is possible if such defendant is physically present
in the country. If he is not found therein, the court cannot acquire
jurisdiction over his person and therefore cannot validly try and
decide the case against him. 25 An exception was laid down
in Gemperle v. Schenker 26 wherein a non-resident was served with
summons through his wife, who was a resident of the Philippines and
who was his representatives and attorney-in-fact in a prior civil case
filed by him; moreover, the second case was a mere offshoot of the
first case.
On the other hand, in a proceeding in rem or quasi in rem,
jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires
jurisdiction over the res. Nonetheless summons must be served upon
the defendant not for the purpose of vesting the court with
223
jurisdiction but merely for satisfying the due process
requirements. 27 Thus, where the defendant is a non-resident who is
not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of
which is property in the Philippines in which the defendant has or
claims a lien or interest; (3) the action seeks the exclusion of the
defendant from any interest in the property located in the Philippines;
or (4) the property of the defendant has been attached in the
Philippines — service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also
with leave of court, or (c) any other manner the court may deem
sufficient. 28
In the case at bar, the action filed in Hong Kong against HERAS
was in personam, since it was based on his personal guarantee of the
obligation of the principal debtor. Before we can apply the foregoing
rules, we must determine first whether HERAS was a resident of
Hong Kong.
Fortunata de la Vega, HERAS's personal secretary in Hong Kong
since 1972 until 1985, 29 testified that HERAS was the President and
part owner of a shipping company in Hong Kong during all those
times that she served as his secretary. He had in his employ a staff of
twelve. 30 He had "business commitments, undertakings, conferences,
and appointments until October 1984 when [he] left Hong Kong for
good," 31 HERAS's other witness, Russel Warren Lousich, testified
that he had acted as counsel for HERAS "for a number of
commercial matters." 32 ASIAVEST then infers that HERAS was a
resident of Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his
Answer 34 to ASIAVEST's complaint for the enforcement of the
Hong Kong court judgment, HERAS maintained that the Hong Kong
court did not have jurisdiction over him because the fundamental rule
is that jurisdiction in personamover non-resident defendants, so as to
sustain a money judgment, must be based upon personal service of
summons within the state which renders the judgment. 35
For its part, ASIAVEST, in its Opposition to the Motion to
Dismiss 36 contended: "The question of Hong Kong court's 'want of
jurisdiction' is therefore a triable issue if it is to be pleaded by the
defendant to 'repel' the foreign judgment. Facts showing
jurisdictional lack (e.g. that the Hong Kong suit was in personam,
that defendant was not a resident of Hong Kong when the suit was
filed or that he did not voluntarily submit to the Hong Kong court's
jurisdiction) should be alleged and proved by the defendant." 37
In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS
argued that the lack of jurisdiction over his person was corroborated
by ASIAVEST's allegation in the complaint that he "has his
residence at No. 6, 1st St., New Manila, Quezon City, Philippines."
He then concluded that such judicial admission amounted to
evidence that he was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with
stipulations of facts, among which was that "the residence of
defendant, Antonio Heras, is New Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the
enforcement of the Hong Kong court judgment is concerned, was
never in issue. He never challenged the service of summons on him
through a security guard in his Quezon City residence and through a
lawyer in his office in that city. In his Motion to Dismiss, he did not
question the jurisdiction of the Philippine court over his person on
the ground of invalid service of summons. What was in issue was his
residence as far as the Hong Kong suit was concerned. We therefore
conclude that the stipulated fact that HERAS "is a resident of New
Manila, Quezon City, Philippines" refers to his residence at the time
jurisdiction over his person was being sought by the Hong Kong
 224

court. With that stipulation of fact, ASIAVEST cannot now claim

that HERAS was a resident of Hong Kong at the time.

Accordingly, since HERAS was not a resident of Hong Kong and the
action against him was, indisputably, one in personam, summons
should have been personally served on him in Hong Kong. The
extraterritorial service in the Philippines was therefore invalid and
did not confer on the Hong Kong court jurisdiction over his person. It
follows that the Hong Kong court judgment cannot be given force
and effect here in the Philippines for having been rendered without
jurisdiction.

Even assuming that HERAS was formerly a resident of Hong Kong,

he was no longer so in November 1984 when the extraterritorial
service of summons was attempted to be made on him. As declared
by his secretary, which statement was not disputed by ASIAVEST,
HERAS left Hong Kong in October 1984 "for good." 40 His absence
in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for
leave to effect service in the Philippines, and upon obtaining a
favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the
Philippines.

In Brown v. Brown, 41 the defendant was previously a resident of the

Philippines. Several days after a criminal action for concubinage was
filed against him, he abandoned the Philippines. Later, a
proceeding quasi in rem was instituted against him. Summons in the
latter case was served on the defendant's attorney-in-fact at the
latter's address. The Court held that under the facts of the case, it
could not be said that the defendant was "still a resident of the
Philippines because he ha[d] escaped to his country and [was]
therefore an absentee in the Philippines." As such, he should have
been "summoned in the same manner as one who does not reside and
is not found in the Philippines."

Similarly, HERAS, who was also an absentee, should have been

served with summons in the same manner as a non-resident not
found in Hong Kong. Section 17, Rule 14 of the Rules of Court
providing for extraterritorial service will not apply because the suit
against him was in personam. Neither can we apply Section 18,
which allows extraterritorial service on a resident defendant who is
temporarily absent from the country, because even if HERAS be
considered as a resident of Hong Kong, the undisputed fact remains
that he left Hong Kong not only "temporarily" but "for good."

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered

DENYING the petition in this case and AFFIRMING the assailed
judgment of the Court of Appeals in CA-G.R. CV No. 29513.

No costs.

SO ORDERED.

G.R. No. 125359 September 4, 2001
ROBERTO S. BENEDICTO and HECTOR T.
RIVERA, petitioners,
vs.
THE COURT OF APPEALS, HON. GUILLERMO L. LOJA,
SR., PRESIDING JUDGE, REGIONAL TRIAL COURT OF
MANILA, BRANCH 26, and PEOPLE OF THE
PHILIPPINES, respondents.
QUISUMBING, J.:
Assailed in this petition is the consolidated decision rendered on May
23, 1996, by the Court of Appeals in CA-G.R. SP No. 35928 and
CA-G.R. SP No. 35719. CA-G.R. SP No. 35928 had affirmed the
order dated September 6, 1994, of the Regional Trial Court, Manila,
Branch 26, insofar as it denied petitioners’ respective Motions to
Quash the Informations in twenty-five (25) criminal cases for
violation of Central Bank Circular No. 960. Therein included were
informations involving: (a) consolidated Criminal Cases Nos.
91-101879 to 91-101883 filed against Mrs. Imelda R. Marcos,
Roberto S. Benedicto, and Hector T. Rivera; (b) consolidated
Criminal Cases Nos. 91-101884 to 91-101892 filed against Mrs.
Marcos and Benedicto; and (c) Criminal Cases Nos. 92-101959 to
92-101969 also against Mrs. Marcos and Benedicto. Note, however,
that the Court of Appeals already dismissed Criminal Case No.
91-101884.
The factual antecedents of the instant petition are as follows:
On December 27, 1991, Mrs. Imelda Marcos and Messrs. Benedicto
and Rivera were indicted for violation of Section 10 of Circular No.
9601 relation to Section 342 of the Central Bank Act (Republic Act
No. 265, as amended) in five Informations filed with the Regional
Trial Court of Manila. Docketed as Criminal Cases Nos. 91-101879
to 91-101883, the charge sheets alleged that the trio failed to submit
reports of their foreign exchange earnings from abroad and/or failed
to register with the Foreign Exchange Department of the Central
Bank within the period mandated by Circular No. 960. Said Circular
prohibited natural and juridical persons from maintaining foreign
exchange accounts abroad without prior authorization from the
Central Bank.3 It also required all residents of the Philippines who
habitually earned or received foreign currencies from invisibles,
either locally or abroad, to report such earnings or receipts to the
Central Bank. Violations of the Circular were punishable as a
criminal offense under Section 34 of the Central Bank Act.
That same day, nine additional Informations charging Mrs. Marcos
and Benedicto with the same offense, but involving different
accounts, were filed with the Manila RTC, which docketed these as
Criminal Cases Nos. 91-101884 to 91-101892. The accusatory
portion of the charge sheet in Criminal Case No. 91-101888 reads:
That from September 1, 1983 up to 1987, both dates inclusive, and
for sometime thereafter, both accused, conspiring and confederating
with each other and with the late President Ferdinand E. Marcos, all
residents of Manila, Philippines, and within the jurisdiction of this
Honorable Court, did then and there wilfully, unlawfully and
feloniously fail to submit reports in the prescribed form and/or
register with the Foreign Exchange Department of the Central Bank
within 90 days from October 21, 1983 as required of them being
residents habitually/customarily earning, acquiring or receiving
foreign exchange from whatever source or from invisibles locally or
from abroad, despite the fact they actually earned interests regularly
every six (6) months for the first two years and then quarterly
thereafter for their investment of $50-million, later reduced to
$25-million in December 1985, in Philippine-issued dollar
denominated treasury notes with floating rates and in bearer form, in
the name of Bank Hofmann, AG, Zuring, Switzerland, for the benefit
225
of Avertina Foundation, their front organization established for
economic advancement purposes with secret foreign exchange
account Category (Rubric) C.A.R. No. 211925-02 in Swiss Credit
Bank (also known as SKA) in Zurich, Switzerland, which earned,
acquired or received for the accused Imelda Romualdez Marcos and
her late husband an interest of $2,267,892 as of December 16, 1985
which was remitted to Bank Hofmann, AG, through Citibank, New
York, United States of America, for the credit of said Avertina
account on December 19, 1985, aside from the redemption of $25
million (one-half of the original $50-M) as of December 16, 1985
and outwardly remitted from the Philippines in the amounts of
$7,495,297.49 and $17,489,062.50 on December 18, 1985 for further
investment outside the Philippine without first complying with the
Central Bank reporting/registering requirements.1âwphi1.nêt
CONTRARY TO LAW.4
The other charge sheets were similarly worded except the days of the
commission of the offenses, the name(s) of the alleged dummy or
dummies, the amounts in the foreign exchange accounts maintained,
and the names of the foreign banks where such accounts were held
by the accused.
On January 3, 1992, eleven more Informations accusing Mrs. Marcos
and Benedicto of the same offense, again in relation to different
accounts, were filed with the same court, docketed as Criminal Cases
Nos. 92-101959 to 92-101969. The Informations were similarly
worded as the earlier indictments, save for the details as to the dates
of the violations of Circular No. 960, the identities of the dummies
used, the balances and sources of the earnings, and the names of the
foreign banks where these accounts were maintained.
All of the aforementioned criminal cases were consolidated before
Branch 26 of the said trial court.
On the same day that Criminal Cases Nos. 92-101959 to 92-101969
were filed, the Central Bank issued Circular No. 13185 which revised
the rules governing non-trade foreign exchange transactions. It took
effect on January 20, 1992.
On August 24, 1992, the Central Bank, pursuant to the government’s
policy of further liberalizing foreign exchange transactions, came out
with Circular No. 1356,6 which amended Circular No. 1318. Circular
No. 1353 deleted the requirement of prior Central Bank approval for
foreign exchange-funded expenditures obtained from the banking
system.
Both of the aforementioned circulars, however, contained a saving
clause, excepting from their coverage pending criminal actions
involving violations of Circular No. 960 and, in the case of Circular
No. 1353, violations of both Circular No. 960 and Circular No. 1318.
On September 19, 1993, the government allowed petitioners
Benedicto and Rivera to return to the Philippines, on condition that
they face the various criminal charges instituted against them,
including the dollar-salting cases. Petitioners posted bail in the latter
cases.
On February 28, 1994, petitioners Benedicto and Rivera were
arraigned. Both pleaded not guilty to the charges of violating Central
Bank Circular No. 960. Mrs. Marcos had earlier entered a similar
plea during her arraignment for the same offense on February 12,
1992.
On August 11, 1994, petitioners moved to quash all the Informations
filed against them in Criminal Cases Nos. 91-101879 to 91-101883;
91-101884 to 91-101892, and 91-101959 to 91-101969. Their motion
was grounded on lack of jurisdiction, forum shopping, extinction of
criminal liability with the repeal of Circular No. 960, prescription,
exemption from the Central Bank’s reporting requirement, and the

grant of absolute immunity as a result of a compromise agreement
entered into with the government.
On September 6, 1994, the trial court denied petitioners’ motion. A
similar motion filed on May 23, 1994 by Mrs. Marcos seeking to
dismiss the dollar-salting cases against her due to the repeal of
Circular No. 960 had earlier been denied by the trial court in its order
dated June 9, 1994. Petitioners then filed a motion for
reconsideration, but the trial court likewise denied this motion on
October 18, 1994.
On November 21, 1994, petitioners moved for leave to file a second
motion for reconsideration. The trial court, in its order of November
23, 1994, denied petitioners’ motion and set the consolidated cases
for trial on January 5, 1995.
Two separate petitions for certiorari and prohibition, with similar
prayers for temporary restraining orders and/or writs of preliminary
injunction, docketed as CA-G.R. SP No. 35719 and CA-G.R. SP No.
35928, were respectively filed by Mrs. Marcos and petitioners with
the Court of Appeals. Finding that both cases involved violations of
Central Bank Circular No. 960, the appellate court consolidated the
two cases.
On May 23, 1996, the Court of Appeals disposed of the consolidated
cases as follows:
WHEREFORE, finding no grave abuse of discretion on the part of
respondent Judge in denying petitioners’ respective Motions to
Quash, except that with respect to Criminal Case No. 91-101884, the
instant petitions are hereby DISMISSED for lack of merit. The
assailed September 6, 1994 Order, in so far as it denied the Motion to
Quash Criminal Case No. 91-101884 is hereby nullified and set aside,
and said case is hereby dismissed. Costs against petitioners.
SO ORDERED.7
Dissatisfied with the said decision of the court a quo, except with
respect to the portion ordering the dismissal of Criminal Case No.
91-101884, petitioners filed the instant petition, attributing the
following errors to the appellate court:
THAT THE COURT ERRED IN NOT FINDING THAT THE
INFORMATIONS/CASES FILED AGAINST
PETITIONERS-APPELLANTS ARE QUASHABLE BASED ON
THE FOLLOWING GROUNDS:
(A) LACK OF JURISDICTION/FORUM SHOPPING/NO VALID
PRELIMINARY INVESTIGATION
(B) EXTINCTION OF CRIMINAL LIABILITY
1) REPEAL OF CB CIRCULAR NO. 960 BY CB CIRCULAR NO.
153;
2) REPEAL OF R.A. 265 BY R.A. 76538
(C) PRESCRIPTION
(D) EXEMPTION FROM CB REPORTING REQUIREMENT
GRANT OF ABSOLUTE IMMUNITY.9
Simply stated, the issues for our resolution are:
(1) Did the Court of Appeals err in denying the Motion to Quash for
lack of jurisdiction on the part of the trial court, forum shopping by
the prosecution, and absence of a valid preliminary investigation?
(2) Did the repeal of Central Bank Circular No. 960 and Republic
Act No. 265 by Circular No. 1353 and Republic Act No. 7653
respectively, extinguish the criminal liability of petitioners?
226
(3) Had the criminal cases in violation of Circular No. 960 already
prescribed?
(4) Were petitioners exempted from the application and coverage of
Circular No. 960?
(5) Were petitioners’ alleged violations of Circular No. 960 covered
by the absolute immunity granted in the Compromise Agreement of
November 3, 1990?
On the first issue, petitioners assail the jurisdiction of the Regional
Trial Court. They aver that the dollar-salting charges filed against
them were violations of the Anti-Graft Law or Republic Act No.
3019, and the Sandiganbayan has original and exclusive jurisdiction
over their cases.
Settled is the rule that the jurisdiction of a court to try a criminal case
is determined by the law in force at the time the action is
instituted.10 The 25 cases were filed in 1991-92. The applicable law
on jurisdiction then was Presidential Decree 1601.11 Under P.D. No.
1606, offenses punishable by imprisonment of not more than six
years fall within the jurisdiction of the regular trial courts, not the
Sandiganbayan.12
In the instant case, all the Informations are for violations of Circular
No. 960 in relation to Section 34 of the Central Bank Act and not, as
petitioners insist, for transgressions of Republic Act No. 3019.
Pursuant to Section 34 of Republic Act No. 265, violations of
Circular No. 960 are punishable by imprisonment of not more than
five years and a fine of not more than P20,000.00. Since under P.D.
No. 1606 the Sandiganbayan has no jurisdiction to try criminal cases
where the imposable penalty is less than six years of imprisonment,
the cases against petitioners for violations of Circular No. 960 are,
therefore cognizable by the trial court. No error may thus be charged
to the Court of Appeals when it held that the RTC of Manila had
jurisdiction to hear and try the dollar-salting cases.
Still on the first issue, petitioners next contend that the filing of the
cases for violations of Circular No. 960 before the RTC of Manila
Constitutes forum shopping. Petitioners argue that the prosecution, in
an attempt to seek a favorable verdict from more than one tribunal,
filed separate cases involving virtually the same offenses before the
regular trial courts and the Sandiganbayan. They fault the
prosecution with splitting the cases. Petitioners maintain that while
the RTC cases refer only to the failure to report interest earnings on
Treasury Notes, the Sandiganbayan cases seek to penalize the act of
receiving the same interest earnings on Treasury Notes in violation of
the Anti-Graft Law’s provisions on prohibited transactions.
Petitioners aver that the violation of Circular No. 960 is but an
element of the offense of prohibited transactions punished under
Republic Act No. 3019 and should, thus, be deemed absorbed by the
prohibited transactions cases pending before the Sandiganbayan.
For the charge of forum shopping to prosper, there must exist
between an action pending in one court and another action pending in
one court and another action before another court: (a) identity of
parties, or at least such parties as represent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity of the two
preceding particulars is such that any judgment rendered in the other
action will, regardless of which party is successful, amount to res
judicata in the action under consideration.13 Here, we find that the
single act of receiving unreported interest earnings on Treasury
Notes held abroad constitutes an offense against two or more distinct
and unrelated laws, Circular No. 960 and R.A. 3019. Said laws
define distinct offenses, penalize different acts, and can be applied
independently.14 Hence, no fault lies at the prosecution’s door for
having instituted separate cases before separate tribunals involving
the same subject matter.

With respect to the RTC cases, the receipt of the interest earnings
violate Circular No. 960 in relation to Republic Act No. 265 because
the same was unreported to the Central Bank. The act to be penalized
here is the failure to report the interest earnings from the foreign
exchange accounts to the proper authority. As to the anti-graft cases
before the Sandiganbayan involving the same interest earnings from
the same foreign exchange accounts, the receipt of the interest
earnings transgresses Republic Act No. 3019 because the act of
receiving such interest is a prohibited transaction prejudicial to the
government. What the State seeks to punish in these anti-graft cases
is the prohibited receipt of the interest earnings. In sum, there is no
identity of offenses charged, and prosecution under one law is not an
obstacle to a prosecution under the other law. There is no forum
shopping.
Finally, on the first issue, petitioners contend that the preliminary
investigation by the Department of Justice was invalid and in
violation of their rights to due process. Petitioners argue that
government’s ban on their travel effectively prevented them from
returning home and personally appearing at the preliminary
investigation. Benedicto and Rivera further point out that the joint
preliminary investigation by the Department of Justice, resulted to
the charges in one set of cases before the Sandiganbayan for
violations of Republic Act No. 3019 and another set before the RTC
for violation of Circular No. 960.
Preliminary investigation is not part of the due process guaranteed by
the Constitution.15 It is an inquiry to determine whether there is
sufficient ground to engender a well-founded belief that a crime has
been committed and the respondent is probably guilty
thereof.16 Instead, the right to a preliminary investigation is personal.
It is afforded to the accused by statute, and can be waived, either
expressly or by implication.17 The waiver extends to any irregularity
in the preliminary investigation, where one was conducted.
The petition in the present case contains the following admissions:
1. Allowed to return to the Philippines on September 19, 1993 … on
the condition that he face the criminal charges pending in courts,
petitioner-appellant Benedicto, joined by his co-petitioner Rivera,
lost no time in attending to the pending criminal charges by posting
bail in the above-mentioned cases.
2. Not having been afforded a real opportunity of attending the
preliminary investigation because of their forced absence from the
Philippines then, petitioners-appellants invoked their right to due
process thru motions for preliminary investigation … Upon denial of
their demands for preliminary investigation, the petitioners intended
to elevate the matter to the Honorable Court of Appeals and actually
caused the filing of a petition for certiorari/prohibition sometime
before their arraignment but immediately caused the withdrawal
thereof … in view of the prosecution’s willingness to go to pre-trial
wherein petitioner would be allowed access to the records of
preliminary investigation which they could use for purposes of filing
a motion to quash if warranted.
3. Thus, instead of remanding the Informations to the Department of
Justice … respondent Judge set the case for pre-trial in order to
afford all the accused access to the records of prosecution…
xxx
5. On the basis of disclosures at the pre-trial, the
petitioners-appellants Benedicto and Rivera moved for the quashing
of the informations/cases…18
The foregoing admissions lead us to conclude that petitioners have
expressly waived their right to question any supposed irregularity in
the preliminary investigation or to ask for a new preliminary
227
investigation. Petitioners, in the above excerpts from this petition,
admit posting bail immediately following their return to the country,
entered their respective pleas to the charges, and filed various
motions and pleadings. By so doing, without simultaneously
demanding a proper preliminary investigation, they have waived any
and all irregularities in the conduct of a preliminary
investigation.19 The trial court did not err in denying the motion to
quash the informations on the ground of want of or improperly
conducted preliminary investigation. The absence of a preliminary
investigation is not a ground to quash the information.20
On the second issue, petitioners contend that they are being
prosecuted for acts punishable under laws that have already been
repealed. They point to the express repeal of Central Bank Circular
No. 960 by Circular Nos. 1318 and 1353 as well as the express repeal
of Republic Act No. 265 by Republic Act No. 7653. Petitioners,
relying on Article 22 of the Revised Penal Code,21 contend that
repeal has the effect of extinguishing the right to prosecute or punish
the offense committed under the old laws.22
As a rule, an absolute repeal of a penal law has the effect of
depriving a court of its authority to punish a person charged with
violation of the old law prior to its repeal.23 This is because an
unqualified repeal of a penal law constitutes a legislative act of
rendering legal what had been previously declared as illegal, such
that the offense no longer exists and it is as if the person who
committed it never did so. There are, however, exceptions to the rule.
One is the inclusion of a saving clause in the repealing statute that
provides that the repeal shall have no effect on pending
actions.24 Another exception is where the repealing act reenacts the
former statute and punishes the act previously penalized under the
old law. In such instance, the act committed before the reenactment
continues to be an offense in the statute books and pending cases are
not affected, regardless of whether the new penalty to be imposed is
more favorable to the accused.25
In the instant case, it must be noted that despite the repeal of Circular
No. 960, Circular No. 1353 retained the same reportorial requirement
for residents receiving earnings or profits from non-trade foreign
exchange transactions.26Second, even the most cursory glance at the
repealing circulars, Circular Nos. 1318 and 1353 shows that both
contain a saving clause, expressly providing that the repeal of
Circular No. 960 shall have no effect on pending actions for violation
of the latter Circular.27 A saving clause operates to except from the
effect of the repealing law what would otherwise be lost under the
new law.28 In the present case, the respective saving clauses of
Circular Nos. 1318 and 1353 clearly manifest the intent to reserve the
right of the State to prosecute and punish offenses for violations of
the repealed Circular No. 960, where the cases are either pending or
under investigation.
Petitioners, however, insist that the repeal of Republic Act No. 265,
particularly Section 34,29 by Republic Act No. 7653, removed the
applicability of any special sanction for violations of any non-trade
foreign exchange transactions previously penalized by Circular No.
960. Petitioners posit that a comparison of the two provisions shows
that Section 3630 of Republic Act No. 7653 neither retained nor
reinstated Section 34 of Republic Act No. 265. Since, in creating
the Bangko Sentral ng Pilipinas, Congress did not include in its
charter a clause providing for the application of Section 34 of
Republic Act No. 265 to pending cases, petitioners’ pending
dollar-salting cases are now bereft of statutory penalty, the saving
clause in Circular No. 1353 notwithstanding. In other words, absent a
provision in Republic Act No. 7653 expressly reviving the
applicability of any penal sanction for the repealed mandatory
foreign exchange reporting regulations formerly required under
Circular No. 960, violations of aforesaid repealed Circular can no
longer be prosecuted criminally.

A comparison of the old Central Bank Act and the new Bangko
Sentral’s charter repealing the former show that in consonance with
the general objective of the old law and the new law "to maintain
internal and external monetary stability in the Philippines and
preserve the international value of the peso,"31 both the repealed law
and the repealing statute contain a penal cause which sought to
penalize in general, violations of the law as well as orders,
instructions, rules, or regulations issued by the Monetary Board. In
the case of the Bangko Sentral, the scope of the penal clause was
expanded to include violations of "other pertinent banking laws
enforced or implemented by the Bangko Sentral." In the instant case,
the acts of petitioners sought to be penalized are violations of rules
and regulations issued by the Monetary Board. These acts are
proscribed and penalized in the penal clause of the repealed law and
this proviso for proscription and penalty was reenacted in the
repealing law. We find, therefore, that while Section 34 of Republic
Act No. 265 was repealed, it was nonetheless, simultaneously
reenacted in Section 36 of Republic Act No. 7653. Where a clause or
provision or a statute for the matter is simultaneously repealed and
reenacted, there is no effect, upon the rights and liabilities which
have accrued under the original statute, since the reenactment, in
effect "neutralizes" the repeal and continues the law in force without
interruption.32 The rule applies to penal laws and statutes with penal
provisions. Thus, the repeal of a penal law or provision, under which
a person is charged with violation thereof and its simultaneous
reenactment penalizing the same act done by him under the old law,
will neither preclude the accused’s prosecution nor deprive the court
of its jurisdiction to hear and try his case.33 As pointed out earlier, the
act penalized before the reenactment continues to remain an offense
and pending cases are unaffected. Therefore, the repeal of Republic
Act No. 265 by Republic Act No. 7653 did not extinguish the
criminal liability of petitioners for transgressions of Circular No. 960
and cannot, under the circumstances of this case, be made a basis for
quashing the indictments against petitioners.
Petitioners, however, point out that Section 36 of Republic Act No.
7653, in reenacting Section 34 of the old Central Act, increased the
penalty for violations of rules and regulations issued by the Monetary
Board. They claim that such increase in the penalty would give
Republic Act No. 7653 an ex post facto application, violating the Bill
of Rights.34
Is Section 36 of Republic Act No. 7653 and ex post facto legislation?
An ex post facto law is one which: (1) makes criminal an act done
before the passage of the law and which was innocent when done,
and punishes such an act; (2) aggravates a crime, or makes it greater
than it was when committed; (3) changes the punishment and inflicts
a greater punishment than the law annexed to the crime when
committed; (4) alters the legal rules of evidence, and authorizes
conviction upon less or different testimony than the law required at
the time of the commission of the offense; (5) assuming to regulate
civil rights, and remedies only, in effect imposes penalty or
deprivation of a right for something which when done was lawful;
and (6) deprives a person accused of a crime of some lawful
protection to which he has become entitled such as the protection of a
former conviction or acquittal, or a proclamation of amnesty. 35
The test whether a penal law runs afoul of the ex post facto clause of
the Constitution is: Does the law sought to be applied retroactively
take "from an accused any right that was regarded at the time of the
adoption of the constitution as vital for the protection of life and
liberty and which he enjoyed at the time of the commission of the
offense charged against him."36
The crucial words in the test are "vital for the protection of life and
liberty."37 We find, however, the test inapplicable to the penal clause
of Republic Act No. 7653. Penal laws and laws which, while not
228
penal in nature, nonetheless have provisions defining offenses and
prescribing penalties for their violation operate prospectively.38 Penal
laws cannot be given retroactive effect, except when they are
favorable to the accused.39 Nowhere in Republic Act No. 7653, and
in particular Section 36, is there any indication that the increased
penalties provided therein were intended to operate retroactively.
There is, therefore, no ex post facto law in this case.
On the third issue, petitioners ask us to note that the dollar interest
earnings subject of the criminal cases instituted against them were
remitted to foreign banks on various dates between 1983 to 1987.
They maintain that given the considerable lapse of time from the
dates of the commission of the offenses to the institution of the
criminal actions in 1991 and 1992, the State’s right to prosecute them
for said offenses has already prescribed. Petitioners assert that the
Court of Appeals erred in computing the prescriptive period from
February 1986. Petitioners theorize that since the remittances were
made through the Central Bank as a regulatory authority, the dates of
the alleged violations are known, and prescription should thus be
counted from these dates.
In ruling that the dollar-salting cases against petitioners have not yet
prescribed, the court a quo quoted with approval the trial court’s
finding that:
[T]he alleged violations of law were discovered only after the EDSA
Revolution in 1986 when the dictatorship was toppled down. The
date of the discovery of the offense, therefore, should be the basis in
computing the prescriptive period. Since (the) offenses charged are
punishable by imprisonment of not more than five (5) years, they
prescribe in eight (8) years. Thus, only a little more than four (4)
years had elapsed from the date of discovery in 1986 when the cases
were filed in 1991.40
The offenses for which petitioners are charged are penalized by
Section 34 of Republic Act No. 265 "by a fine of not more than
Twenty Thousand Pesos (P20,000.00) and by imprisonment of not
more than five years." Pursuant to Act No. 3326, which mandates the
periods of prescription for violations of special laws, the prescriptive
period for violations of Circular No. 960 is eight (8) years.41 The
period shall commence "to run from the day of the commission of the
violation of the law, and if the same be not known at the time, from
the discovery thereof and institution of judicial proceedings for its
investigation and punishment."42 In the instant case, the indictments
against petitioners charged them with having conspired with the late
President Ferdinand E. Marcos in transgressing Circular No. 960.
Petitioners’ contention that the dates of the commission of the
alleged violations were known and prescription should be counted
from these dates must be viewed in the context of the political
realities then prevailing. Petitioners, as close associates of Mrs.
Marcos, were not only protected from investigation by their influence
and connections, but also by the power and authority of a Chief
Executive exercising strong-arm rule. This Court has taken judicial
notice of the fact that Mr. Marcos, his family, relations, and close
associates "resorted to all sorts of clever schemes and manipulations
to disguise and hide their illicit acquisitions."43 In the instant case,
prescription cannot, therefore, be made to run from the dates of the
commission of those offenses were not known as of those dates. It
was only after the EDSA Revolution of February, 1986, that the
recovery of ill-gotten wealth became a highly prioritized state
policy,44 pursuant to the explicit command of the Provisional
Constitution.45 To ascertain the relevant facts to recover "ill-gotten
properties amassed by the leaders and supporters of the (Marcos)
regime"46 various government agencies were tasked by the Aquino
administration to investigate, and as the evidence on hand may reveal,
file and prosecute the proper cases. Applying the presumption "that
official duty has been regularly performed",47 we are more inclined
to believe that the violations for which petitioners are charged were

discovered only during the post-February 1986 investigations and the
tolling of the prescriptive period should be counted from the dates of
discovery of their commission. The criminal actions against
petitioners, which gave rise to the instant case, were filed in 1991 and
1992, or well within the eight-year prescriptive period counted from
February 1986.
The fourth issue involves petitioners’ claim that they incurred no
criminal liability for violations of Circular No. 960 since they were
exempted from its coverage.
Petitioners postulate that since the purchases of treasury notes were
done through the Central Bank’s Securities Servicing Department
and payments of the interest were coursed through its Securities
Servicing Department/Foreign Exchange Department, their filing of
reports would be surplusage, since the requisite information were
already with the Central Bank. Furthermore, they contend that the
foreign currency investment accounts in the Swiss banks were
subject to absolute confidentiality as provided for by Republic Act
No. 6426,48 as amended by Presidential Decree Nos. 1035, 1246, and
1453, and fell outside the ambit of the reporting requirements
imposed by Circular No. 960. Petitioners further rely on the
exemption from reporting provided for in Section 10(q), 49 Circular
No. 960, and the confidentiality granted to Swiss bank accounts by
the laws of Switzerland.
Petitioners correctly point out that Section 10(q) of Circular No. 960
exempts from the reporting requirement foreign currency eligible for
deposit under the Philippine Foreign Exchange Currency Deposit
System, pursuant to Republic Act No. 6426, as amended. But, in
order to avail of the aforesaid exemption, petitioners must show that
they fall within its scope. Petitioners must satisfy the requirements
for eligibility imposed by Section 2, Republic Act No. 6426. 50 Not
only do we find the record bare of any proof to support petitioners’
claim of falling within the coverage of Republic Act No. 6426, we
likewise find from a reading of Section 2 of the Foreign Currency
Deposit Act that said law is inapplicable to the foreign currency
accounts in question. Section 2, Republic Act No. 6426 speaks of
"deposit with such Philippine banks in good standing, as may…be
designated by the Central Bank for the purpose."51 The criminal
cases filed against petitioners for violation of Circular No. 960
involve foreign currency accounts maintained in foreign banks, not
Philippine banks. By invoking the confidentiality guarantees
provided for by Swiss banking laws, petitioners admit such reports
made. The rule is that exceptions are strictly construed and apply
only so far as their language fairly warrants, with all doubts being
resolved in favor of the general proviso rather than the
exception.52 Hence, petitioners may not claim exemption under
Section 10(q).
With respect to the banking laws of Switzerland cited by petitioners,
the rule is that Philippine courts cannot take judicial notice of foreign
laws.53 Laws of foreign jurisdictions must be alleged and
proved.54 Petitioners failed to prove the Swiss law relied upon, either
by: (1) an official publication thereof; or (2) a copy attested by the
officer having the legal custody of the record, or by his deputy, and
accompanied by a certification from the secretary of the Philippine
embassy or legation in such country or by the Philippine consul
general, consul, vice-consul, or consular agent stationed in such
country, or by any other authorized officer in the Philippine foreign
service assigned to said country that such officer has
custody.55 Absent such evidence, this Court cannot take judicial
cognizance of the foreign law invoked by Benedicto and Rivera.
Anent the fifth issue, petitioners insist that the government granted
them absolute immunity under the Compromise Agreement they
entered into with the government on November 3, 1990. Petitioners
cite our decision in Republic v. Sandiganbayan, 226 SCRA 314
229
(1993), upholding the validity of the said Agreement and directing
the various government agencies to be consistent with it. Benedicto
and Rivera now insist that the absolute immunity from criminal
investigation or prosecution granted to petitioner Benedicto, his
family, as well as to officers and employees of firms owned or
controlled by Benedicto under the aforesaid Agreement covers the
suits filed for violations of Circular No. 960, which gave rise to the
present case.
The pertinent provisions of the Compromise Agreement read:
WHEREAS, this Compromise Agreement covers the remaining
claims and the cases of the Philippine Government against Roberto S.
Benedicto including his associates and nominees, namely, Julita C.
Benedicto, Hector T. Rivera, x x x
WHEREAS, specifically these claims are the subject matter of the
following cases (stress supplied):
1. Sandiganbayan Civil Case No. 9
2. Sandiganbayan Civil Case No. 24
3. Sandiganbayan Civil Case No. 34
4. Tanodbayan (Phil-Asia)
5. PCGG I.S. No. 1.
xxx
WHEREAS, following the termination of the United States and
Swiss cases, and also without admitting the merits of their respective
claims and counterclaims presently involved in uncertain, protracted
and expensive litigation, the Republic of the Philippines, solely
motivated by the desire for the immediate accomplishment of its
recovery mission and Mr. Benedicto being interested to lead a
peaceful and normal pursuit of his endeavors, the parties have
decided to withdraw and/or dismiss their mutual claims and
counterclaims under the cases pending in the Philippines, earlier
referred to (underscoring supplied);
xxx
II. Lifting of Sequestrations, Extension of Absolute Immunity and
Recognition of the Freedom to Travel
a) The Government hereby lifts the sequestrations over the assets
listed in Annex "C" hereof, the same being within the capacity of Mr.
Benedicto to acquire from the exercise of his profession and conduct
of business, as well as all the haciendas listed in his name in Negro
Occidental, all of which were inherited by him or acquired with
income from his inheritance…and all the other sequestered assets
that belong to Benedicto and his corporation/nominees which are not
listed in Annex "A" as ceded or to be ceded to the Government.
Provided, however, (that) any asset(s) not otherwise settled or
covered by this Compromise Agreement, hereinafter found and
clearly established with finality by proper competent court as being
held by Mr. Roberto S. Benedicto in trust for the family of the late
Ferdinand E. Marcos, shall be returned or surrendered to the
Government for appropriate custody and disposition.
b) The Government hereby extends absolute immunity, as authorized
under the pertinent provisions of Executive Orders Nos. 1, 2, 14 and
14-A, to Benedicto, the members of his family, officers and
employees of his corporations above mentioned, who are included in
past, present and future cases and investigations of the Philippine
Government, such that there shall be no criminal investigation or
prosecution against said persons for acts (or) omissions committed
prior to February 25, 1986, that may be alleged to have violated any
 230

laws, including but not limited to Republic Act No. 3019, in relation
to the acquisition of any asset treated, mentioned or included in this
Agreement.lawphil.net
x x x56
In construing contracts, it is important to ascertain the intent of the
parties by looking at the words employed to project their intention. In
the instant case, the parties clearly listed and limited the applicability
of the Compromise Agreement to the cases listed or identified therein.
We have ruled in another case involving the same Compromise
Agreement that:
is AFFIRMED WITH MODIFICATION that the charges against
deceased petitioner, Roberto S. Benedicto, particularly in Criminal
Cases Nos. 91-101879 to 91-101883, 91-101884 to 101892, and
92-101959 to 92-101969, pending before the Regional Trial Court of
Manila, Branch 26, are ordered dropped and that any criminal as well
as civil liability ex delicto that might be attributable to him in the
aforesaid cases are declared extinguished by reason of his death on
May 15, 2000.lawphil.net No pronouncement as to costs.
SO ORDERED.

[T]he subject matters of the disputed compromise agreement are

Sandiganbayan Civil Case No. 0009, Civil Case No. 00234, Civil
Case No. 0034, the Phil-Asia case before the Tanodbayan and PCGG
I.S. No. 1. The cases arose from complaints for reconveyance,
reversion, accounting, restitution, and damages against former
President Ferdinand E. Marcos, members of his family, and alleged
cronies, one of whom was respondent Roberto S. Benedicto. 57

Nowhere is there a mention of the criminal cases filed against

petitioners for violations of Circular No. 960. Conformably with
Article 1370 of the Civil Code,58 the Agreement relied upon by
petitioners should include only cases specifically mentioned therein.
Applying the parol evidence rule,59 where the parties have reduced
their agreement into writing, the contents of the writing constitute the
sole repository of the terms of the agreement between the
parties.60 Whatever is not found in the text of the Agreement should
thus be construed as waived and abandoned.61 Scrutiny of the
Compromise Agreement will reveal that it does not include all cases
filed by the government against Benedicto, his family, and
associates.

Additionally, the immunity covers only "criminal investigation or

prosecution against said persons for acts (or) omissions committed
prior to February 25, 1986 that may be alleged to have violated any
penal laws, including but not limited to Republic Act No. 3019, in
relation to the acquisition of any asset treated, mentioned, or included
in this Agreement."62 It is only when the criminal investigation or
case involves the acquisition of any ill-gotten wealth "treated
mentioned, or included in this Agreement"63 that petitioners may
invoke immunity. The record is bereft of any showing that the
interest earnings from foreign exchange deposits in banks abroad,
which is the subject matter of the present case, are "treated,
mentioned, or included" in the Compromise Agreement. The
phraseology of the grant of absolute immunity in the Agreement
precludes us from applying the same to the criminal charges faced by
petitioners for violations of Circular No. 960. A contract cannot be
construed to include matters distinct from those with respect to which
the parties intended to contract.64

In sum, we find that no reversible error of law may be attributed to

the Court of Appeals in upholding the orders of the trial court
denying petitioners’ Motion to Quash the Informations in Criminal
Case Nos. 91-101879 to 91-101883, 91-101884 to 91-101892, and
92-101959 to 92-101969. In our view, none of the grounds provided
for in the Rules of Court65 upon which petitioners rely, finds
applications in this case.

On final matter. During the pendency of this petition, counsel for

petitioner Roberto S. Benedicto gave formal notice to the Court that
said petitioner died on May 15, 2000. The death of an accused prior
to final judgment terminates his criminal liability as well as the civil
liability based solely thereon.66

WHEREFORE, the instant petition is DISMISSED. The assailed

consolidated Decision of the Court of Appeals dated May 23, 1996,
in CA-G.R. SP No. 35928 and CA G.R. SP No. 35719,

G.R. No. 136804 February 19, 2003
MANUFACTURERS HANOVER TRUST CO. and/or
CHEMICAL BANK, petitioners,
vs.
RAFAEL MA. GUERRERO, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review under Rule 45 of the Rules of Court to
set aside the Court of Appeals’1 Decision of August 24, 1998 and
Resolution of December 14, 1998 in CA-G.R. SP No.
423102 affirming the trial court’s denial of petitioners’ motion for
partial summary judgment.
The Antecedents
On May 17, 1994, respondent Rafael Ma. Guerrero ("Guerrero" for
brevity) filed a complaint for damages against petitioner
Manufacturers Hanover Trust Co. and/or Chemical Bank ("the Bank"
for brevity) with the Regional Trial Court of Manila ("RTC" for
brevity). Guerrero sought payment of damages allegedly for (1)
illegally withheld taxes charged against interests on his checking
account with the Bank; (2) a returned check worth US$18,000.00 due
to signature verification problems; and (3) unauthorized conversion
of his account. Guerrero amended his complaint on April 18, 1995.
On September 1, 1995, the Bank filed its Answer alleging, inter
alia, that by stipulation Guerrero’s account is governed by New York
law and this law does not permit any of Guerrero’s claims except
actual damages. Subsequently, the Bank filed a Motion for Partial
Summary Judgment seeking the dismissal of Guerrero’s claims for
consequential, nominal, temperate, moral and exemplary damages as
well as attorney’s fees on the same ground alleged in its Answer. The
Bank contended that the trial should be limited to the issue of actual
damages. Guerrero opposed the motion.
The affidavit of Alyssa Walden, a New York attorney, supported the
Bank’s Motion for Partial Summary Judgment. Alyssa Walden’s
affidavit ("Walden affidavit" for brevity) stated that Guerrero’s New
York bank account stipulated that the governing law is New York
law and that this law bars all of Guerrero’s claims except actual
damages. The Philippine Consular Office in New York authenticated
the Walden affidavit.
The RTC denied the Bank’s Motion for Partial Summary Judgment
and its motion for reconsideration on March 6, 1996 and July 17,
1996, respectively. The Bank filed a petition for certiorari and
prohibition with the Court of Appeals assailing the RTC Orders. In
its Decision dated August 24, 1998, the Court of Appeals dismissed
the petition. On December 14, 1998, the Court of Appeals denied the
Bank’s motion for reconsideration.
Hence, the instant petition.
The Ruling of the Court of Appeals
The Court of Appeals sustained the RTC orders denying the motion
for partial summary judgment. The Court of Appeals ruled that the
Walden affidavit does not serve as proof of the New York law and
jurisprudence relied on by the Bank to support its motion. The Court
of Appeals considered the New York law and jurisprudence as public
documents defined in Section 19, Rule 132 of the Rules on Evidence,
as follows:
"SEC. 19. Classes of Documents. – For the purpose of their
presentation in evidence, documents are either public or private.
231
Public documents are:
(a) The written official acts, or records of the official acts of the
sovereign authority, official bodies and tribunals, and public officers,
whether of the Philippines, or of a foreign country;
x x x."
The Court of Appeals opined that the following procedure outlined in
Section 24, Rule 132 should be followed in proving foreign law:
"SEC. 24. Proof of official record. – The record of public documents
referred to in paragraph (a) of Section 19, when admissible for any
purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or
by his deputy, and accompanied, if the record is not kept in the
Philippines, with a certificate that such officer has the custody. If the
office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation,
consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the
seal of his office."
The Court of Appeals likewise rejected the Bank’s argument that
Section 2, Rule 34 of the old Rules of Court allows the Bank to move
with the supporting Walden affidavit for partial summary judgment
in its favor. The Court of Appeals clarified that the Walden affidavit
is not the supporting affidavit referred to in Section 2, Rule 34 that
would prove the lack of genuine issue between the parties. The Court
of Appeals concluded that even if the Walden affidavit is used for
purposes of summary judgment, the Bank must still comply with the
procedure prescribed by the Rules to prove the foreign law.
The Issues
The Bank contends that the Court of Appeals committed reversible
error in -
"x x x HOLDING THAT [THE BANK’S] PROOF OF FACTS TO
SUPPORT ITS MOTION FOR SUMMARY JUDGMENT MAY
NOT BE GIVEN BY AFFIDAVIT;
x x x HOLDING THAT [THE BANK’S] AFFIDAVIT, WHICH
PROVES FOREIGN LAW AS A FACT, IS "HEARSAY" AND
THEREBY ‘CANNOT SERVE AS PROOF OF THE NEW YORK
LAW RELIED UPON BY PETITIONERS IN THEIR MOTION
FOR SUMMARY JUDGMENT x x x’."3
First, the Bank argues that in moving for partial summary judgment,
it was entitled to use the Walden affidavit to prove that the stipulated
foreign law bars the claims for consequential, moral, temperate,
nominal and exemplary damages and attorney’s fees. Consequently,
outright dismissal by summary judgment of these claims is
warranted.
Second, the Bank claims that the Court of Appeals mixed up the
requirements of Rule 35 on summary judgments and those of a trial
on the merits in considering the Walden affidavit as "hearsay." The
Bank points out that the Walden affidavit is not hearsay since Rule
35 expressly permits the use of affidavits.
Lastly, the Bank argues that since Guerrero did not submit any
opposing affidavit to refute the facts contained in the Walden
affidavit, he failed to show the need for a trial on his claims for
damages other than actual.
The Court’s Ruling
The petition is devoid of merit.

The Bank filed its motion for partial summary judgment pursuant to
Section 2, Rule 34 of the old Rules of Court which reads:
"Section 2. Summary judgment for defending party. – A party against
whom a claim, counterclaim, or cross-claim is asserted or a
declaratory relief is sought may, at any time, move with supporting
affidavits for a summary judgment in his favor as to all or any part
thereof."
A court may grant a summary judgment to settle expeditiously a case
if, on motion of either party, there appears from the pleadings,
depositions, admissions, and affidavits that no important issues of
fact are involved, except the amount of damages. In such event, the
moving party is entitled to a judgment as a matter of law. 4
In a motion for summary judgment, the crucial question is: are the
issues raised in the pleadings genuine, sham or fictitious, as shown
by affidavits, depositions or admissions accompanying the motion?5
A genuine issue means an issue of fact which calls for the
presentation of evidence as distinguished from an issue which
is fictitious or contrived so as not to constitute a genuine issue for
trial.6
A perusal of the parties’ respective pleadings would show that there
are genuine issues of fact that necessitate formal trial. Guerrero’s
complaint before the RTC contains a statement of the ultimate facts
on which he relies for his claim for damages. He is seeking damages
for what he asserts as "illegally withheld taxes charged against
interests on his checking account with the Bank, a returned check
worth US$18,000.00 due to signature verification problems, and
unauthorized conversion of his account." In its Answer, the Bank set
up its defense that the agreed foreign law to govern their contractual
relation bars the recovery of damages other than actual. Apparently,
facts are asserted in Guerrero’s complaint while specific denials and
affirmative defenses are set out in the Bank’s answer.
True, the court can determine whether there are genuine issues in a
case based merely on the affidavits or counter-affidavits submitted
by the parties to the court. However, as correctly ruled by the Court
of Appeals, the Bank’s motion for partial summary judgment as
supported by the Walden affidavit does not demonstrate that
Guerrero’s claims are sham, fictitious or contrived. On the contrary,
the Walden affidavit shows that the facts and material allegations as
pleaded by the parties are disputed and there are substantial triable
issues necessitating a formal trial.
There can be no summary judgment where questions of fact are in
issue or where material allegations of the pleadings are in
dispute.7 The resolution of whether a foreign law allows only the
recovery of actual damages is a question of fact as far as the trial
court is concerned since foreign laws do not prove themselves in our
courts.8Foreign laws are not a matter of judicial notice.9 Like any
other fact, they must be alleged and proven. Certainly, the conflicting
allegations as to whether New York law or Philippine law applies to
Guerrero’s claims present a clear dispute on material allegations
which can be resolved only by a trial on the merits.
Under Section 24 of Rule 132, the record of public documents of a
sovereign authority or tribunal may be proved by (1) an official
publication thereof or (2) a copy attested by the officer having the
legal custody thereof. Such official publication or copy must be
accompanied, if the record is not kept in the Philippines, with a
certificate that the attesting officer has the legal custody thereof. The
certificate may be issued by any of the authorized Philippine
embassy or consular officials stationed in the foreign country in
which the record is kept, and authenticated by the seal of his office.
The attestation must state, in substance, that the copy is a correct
232
copy of the original, or a specific part thereof, as the case may be,
and must be under the official seal of the attesting officer.
Certain exceptions to this rule were recognized in Asiavest Limited v.
Court of Appeals10 which held that:
"x x x:
Although it is desirable that foreign law be proved in accordance
with the above rule, however, the Supreme Court held in the case
of Willamette Iron and Steel Works v. Muzzal, that Section 41, Rule
123 (Section 25, Rule 132 of the Revised Rules of Court) does not
exclude the presentation of other competent evidence to prove the
existence of a foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-at-law of San
Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the
existence of said law.Accordingly, in line with this view, the
Supreme Court in the Collector of Internal Revenue v. Fisher et al.,
upheld the Tax Court in considering the pertinent law of California
as proved by the respondents’ witness. In that case, the counsel for
respondent "testified that as an active member of the California Bar
since 1951, he is familiar with the revenue and taxation laws of the
State of California. When asked by the lower court to state the
pertinent California law as regards exemption of intangible personal
properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the
California Internal and Revenue Code as published in Derring’s
California Code, a publication of Bancroft-Whitney Co., Inc. And as
part of his testimony, a full quotation of the cited section was offered
in evidence by respondents."Likewise, in several naturalization cases,
it was held by the Court that evidence of the law of a foreign country
on reciprocity regarding the acquisition of citizenship, although not
meeting the prescribed rule of practice, may be allowed and used as
basis for favorable action, if, in the light of all the circumstances, the
Court is "satisfied of the authenticity of the written proof offered."
Thus, in a number of decisions, mere authentication of the Chinese
Naturalization Law by the Chinese Consulate General of Manila was
held to be competent proof of that law." (Emphasis supplied)
The Bank, however, cannot rely on Willamette Iron and Steel Works
v. Muzzal or Collector of Internal Revenue v. Fisher to support its
cause. These cases involved attorneys testifying in open court during
the trial in the Philippines and quoting the particular foreign laws
sought to be established. On the other hand, the Walden affidavit was
taken abroad ex parte and the affiant never testified in open
court.1a\^/phi1.net The Walden affidavit cannot be considered as
proof of New York law on damages not only because it is
self-serving but also because it does not state the specific New York
law on damages. We reproduce portions of the Walden affidavit as
follows:
"3. In New York, "[n]ominal damages are damages in name only,
trivial sums such as six cents or $1. Such damages are awarded both
in tort and contract cases when the plaintiff establishes a cause of
action against the defendant, but is unable to prove" actual damages.
Dobbs, Law of Remedies, § 3.32 at 294 (1993). Since Guerrero is
claiming for actual damages, he cannot ask for nominal damages.
4. There is no concept of temperate damages in New York law. I
have reviewed Dobbs, a well-respected treatise, which does not use
the phrase "temperate damages" in its index. I have also done a
computerized search for the phrase in all published New York cases,
and have found no cases that use it. I have never heard the phrase
used in American law.
5. The Uniform Commercial Code ("UCC") governs many aspects of
a Bank’s relationship with its depositors. In this case, it governs
Guerrero’s claim arising out of the non-payment of the $18,000

check. Guerrero claims that this was a wrongful dishonor. However,
the UCC states that "justifiable refusal to pay or accept" as opposed
to dishonor, occurs when a bank refuses to pay a check for reasons
such as a missing indorsement, a missing or illegible signature or a
forgery, § 3-510, Official Comment 2. ….. to the Complaint, MHT
returned the check because it had no signature card on …. and could
not verify Guerrero’s signature. In my opinion, consistent with the
UCC, that is a legitimate and justifiable reason not to pay.
6. Consequential damages are not available in the ordinary case of a
justifiable refusal to pay. UCC 1-106 provides that "neither
consequential or special or punitive damages may be had except as
specifically provided in the Act or by other rule of law". UCC 4-103
further provides that consequential damages can be recovered only
where there is bad faith. This is more restrictive than the New York
common law, which may allow consequential damages in a breach of
contract case (as does the UCC where there is a wrongful dishonor).
7. Under New York law, requests for lost profits, damage to
reputation and mental distress are considered consequential
damages. Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312, 319,
540 N.Y.S.2d 1, 4-5 (1989) (lost profits); Motif Construction Corp. v.
Buffalo Savings Bank, 50 A.D.2d 718, 374 N.Y.S..2d 868, 869-70
(4th Dep’t 1975) damage to reputation); Dobbs, Law of Remedies
§12.4(1) at 63 (emotional distress).
8. As a matter of New York law, a claim for emotional distress
cannot be recovered for a breach of contract. Geler v. National
Westminster Bank U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y.
1991); Pitcherello v. Moray Homes, Ltd., 150 A.D.2d 860,540
N.Y.S.2d 387, 390 (3d Dep’t 1989) Martin v. Donald Park Acres, 54
A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dep’t 1976). Damage to
reputation is also not recoverable for a contract. Motif Construction
Corp. v. Buffalo Savings Bank, 374 N.Y.S.2d at 869-70.1a\^/phi1.net
9. In cases where the issue is the breach of a contract to purchase
stock, New York courts will not take into consideration the
performance of the stock after the breach. Rather, damages will be
based on the value of the stock at the time of the breach, Aroneck v.
Atkin, 90 A.D.2d 966, 456 N.Y.S.2d 558, 559 (4th Dep’t 1982), app.
den. 59 N.Y.2d 601, 449 N.E.2d 1276, 463 N.Y.S.2d 1023 (1983).
10. Under New York law, a party can only get consequential
damages if they were the type that would naturally arise from the
breach and if they were "brought within the contemplation of parties
as the probable result of the breach at the time of or prior to
contracting." Kenford Co., Inc. v. Country of Erie, 73 N.Y.2d 312,
319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman v. Fargo, 223 N.Y.
32, 36 (1918).
11. Under New York law, a plaintiff is not entitled to attorneys’ fees
unless they are provided by contract or statute. E.g., Geler v.
National Westminster Bank, 770 F. Supp. 210, 213 (S.D.N.Y.
1991); Camatron Sewing Mach, Inc. v. F.M. Ring Assocs., Inc., 179
A.D.2d 165, 582 N.Y.S.2d 396 (1st Dep’t 1992); Stanisic v. Soho
Landmark Assocs., 73 A.D.2d 268, 577 N.Y.S.2d 280, 281 (1st
Dep’t 1991). There is no statute that permits attorney’s fees in a case
of this type.
12. Exemplary, or punitive damages are not allowed for a breach of
contract, even where the plaintiff claims the defendant acted with
malice. Geler v. National Westminster Bank, 770 F.Supp. 210, 215
(S.D.N.Y. 1991); Catalogue Service of …chester11 _v. Insurance Co.
of North America, 74 A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d
Dep’t 1980); Senior v. Manufacturers Hanover Trust Co., 110
A.D.2d 833, 488 N.Y.S.2d 241, 242 (2d Dep’t 1985).
13. Exemplary or punitive damages may be recovered only where it
is alleged and proven that the wrong supposedly committed by
233
defendant amounts to a fraud aimed at the public generally and
involves a high moral culpability. Walker v. Sheldon, 10 N.Y.2d 401,
179 N.E.2d 497, 223 N.Y.S.2d 488 (1961).
14. Furthermore, it has been consistently held under New York law
that exemplary damages are not available for a mere breach of
contract for in such a case, as a matter of law, only a private wrong
and not a public right is involved. Thaler v. The North Insurance
Company, 63 A.D.2d 921, 406 N.Y.S.2d 66 (1st Dep’t 1978)."12
The Walden affidavit states conclusions from the affiant’s personal
interpretation and opinion of the facts of the case vis a vis the alleged
laws and jurisprudence without citing any law in particular. The
citations in the Walden affidavit of various U.S. court decisions do
not constitute proof of the official records or decisions of the U.S.
courts. While the Bank attached copies of some of the U.S. court
decisions cited in the Walden affidavit, these copies do not comply
with Section 24 of Rule 132 on proof of official records or decisions
of foreign courts.
The Bank’s intention in presenting the Walden affidavit is to prove
New York law and jurisprudence. However, because of the failure to
comply with Section 24 of Rule 132 on how to prove a foreign law
and decisions of foreign courts, the Walden affidavit did not prove
the current state of New York law and jurisprudence. Thus, the Bank
has only alleged, but has not proved, what New York law and
jurisprudence are on the matters at issue.
Next, the Bank makes much of Guerrero’s failure to submit an
opposing affidavit to the Walden affidavit. However, the pertinent
provision of Section 3, Rule 35 of the old Rules of Court did not
make the submission of an opposing affidavit mandatory, thus:
"SEC. 3. Motion and proceedings thereon. – The motion shall be
served at least ten (10) days before the time specified for the hearing.
The adverse party prior to the day of hearing may serve opposing
affidavits. After the hearing, the judgment sought shall be rendered
forthwith if the pleadings, depositions and admissions on file,
together with the affidavits, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law." (Emphasis
supplied)
It is axiomatic that the term "may" as used in remedial law, is only
permissive and not mandatory.13
Guerrero cannot be said to have admitted the averments in the
Bank’s motion for partial summary judgment and the Walden
affidavit just because he failed to file an opposing affidavit. Guerrero
opposed the motion for partial summary judgment, although he did
not present an opposing affidavit. Guerrero may not have presented
an opposing affidavit, as there was no need for one, because the
Walden affidavit did not establish what the Bank intended to prove.
Certainly, Guerrero did not admit, expressly or impliedly, the
veracity of the statements in the Walden affidavit. The Bank still had
the burden of proving New York law and jurisprudence even if
Guerrero did not present an opposing affidavit. As the party moving
for summary judgment, the Bank has the burden of clearly
demonstrating the absence of any genuine issue of fact and that any
doubt as to the existence of such issue is resolved against the
movant.14
Moreover, it would have been redundant and pointless for Guerrero
to submit an opposing affidavit considering that what the Bank seeks
to be opposed is the very subject matter of the complaint. Guerrero
need not file an opposing affidavit to the Walden affidavit because
his complaint itself controverts the matters set forth in the Bank’s
motion and the Walden affidavit. A party should not be made to deny
matters already averred in his complaint.
 234

There being substantial triable issues between the parties, the

courts a quo correctly denied the Bank’s motion for partial summary
judgment. There is a need to determine by presentation of evidence
in a regular trial if the Bank is guilty of any wrongdoing and if it is
liable for damages under the applicable laws.

This case has been delayed long enough by the Bank’s resort to a
motion for partial summary judgment. Ironically, the Bank has
successfully defeated the very purpose for which summary
judgments were devised in our rules, which is, to aid parties in
avoiding the expense and loss of time involved in a trial.

WHEREFORE, the petition is DENIED for lack of merit. The

Decision dated August 24, 1998 and the Resolution dated December
14, 1998 of the Court of Appeals in CA-G.R. SP No. 42310 is
AFFIRMED.

SO ORDERED.

G.R. No. 112573 February 9, 1995
NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY
INC., respondents.
PADILLA, JR., J.:
This petition for review on certiorari seeks to set aside the decision
of the Court of Appeals affirming the dismissal of the petitioner's
complaint to enforce the judgment of a Japanese court. The principal
issue here is whether a Japanese court can acquire jurisdiction over a
Philippine corporation doing business in Japan by serving summons
through diplomatic channels on the Philippine corporation at its
principal office in Manila after prior attempts to serve summons in
Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST),
a corporation organized under the laws of the State of Minnesota,
U.S.A., sought to enforce in Civil Case No. 83-17637 of the Regional
Trial Court (RTC), Branch 54, Manila, a judgment rendered in its
favor by a Japanese court against private respondent C.F. Sharp &
Company, Inc., (hereinafter SHARP), a corporation incorporated
under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10
November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F.
Sharp & Company, through its Japan branch, entered into an
International Passenger Sales Agency Agreement, whereby the
former authorized the latter to sell its air transportation tickets.
Unable to remit the proceeds of the ticket sales made by defendant on
behalf of the plaintiff under the said agreement, plaintiff on March 25,
1980 sued defendant in Tokyo, Japan, for collection of the
unremitted proceeds of the ticket sales, with claim for damages.
On April 11, 1980, a writ of summons was issued by the 36th Civil
Department, Tokyo District Court of Japan against defendant at its
office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho,
Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the
summons was unsuccessful because the bailiff was advised by a
person in the office that Mr. Dinozo, the person believed to be
authorized to receive court processes was in Manila and would be
back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve
the summons. Mr. Dinozo refused to accept the same claiming that
he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the
Tokyo District Court decided to have the complaint and the writs of
summons served at the head office of the defendant in Manila. On
July 11, 1980, the Director of the Tokyo District Court requested the
Supreme Court of Japan to serve the summons through diplomatic
channels upon the defendant's head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff
Rolando Balingit the writ of summons (p. 276, Records). Despite
receipt of the same, defendant failed to appear at the scheduled
hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's
complaint and on [January 29, 1981], rendered judgment ordering the
defendant to pay the plaintiff the sum of 83,158,195 Yen and
damages for delay at the rate of 6% per annum from August 28, 1980
up to and until payment is completed (pp. 12-14, Records).
235
On March 24, 1981, defendant received from Deputy Sheriff Balingit
copy of the judgment. Defendant not having appealed the judgment,
the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May
20, 1983, a suit for enforcement of the judgment was filed by
plaintiff before the Regional Trial Court of Manila Branch 54.2
On July 16, 1983, defendant filed its answer averring that the
judgment of the Japanese Court sought to be enforced is null and
void and unenforceable in this jurisdiction having been rendered
without due and proper notice to the defendant and/or with collusion
or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
Rec.).
Unable to settle the case amicably, the case was tried on the merits.
After the plaintiff rested its case, defendant on April 21, 1989, filed a
Motion for Judgment on a Demurrer to Evidence based on two
grounds:
(1) the foreign judgment sought to be enforced is null and void for
want of jurisdiction and (2) the said judgment is contrary to
Philippine law and public policy and rendered without due process of
law. Plaintiff filed its opposition after which the court a quo rendered
the now assailed decision dated June 21, 1989 granting the demurrer
motion and dismissing the complaint (Decision, pp. 376-378,
Records). In granting the demurrer motion, the trial court held that:
The foreign judgment in the Japanese Court sought in this action is
null and void for want of jurisdiction over the person of the
defendant considering that this is an action in personam; the Japanese
Court did not acquire jurisdiction over the person of the defendant
because jurisprudence requires that the defendant be served with
summons in Japan in order for the Japanese Court to acquire
jurisdiction over it, the process of the Court in Japan sent to the
Philippines which is outside Japanese jurisdiction cannot confer
jurisdiction over the defendant in the case before the Japanese Court
of the case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff
contends that the Japanese Court acquired jurisdiction because the
defendant is a resident of Japan, having four (4) branches doing
business therein and in fact had a permit from the Japanese
government to conduct business in Japan (citing the exhibits
presented by the plaintiff); if this is so then service of summons
should have been made upon the defendant in Japan in any of these
alleged four branches; as admitted by the plaintiff the service of the
summons issued by the Japanese Court was made in the Philippines
thru a Philippine Sheriff. This Court agrees that if the defendant in a
foreign court is a resident in the court of that foreign court such court
could acquire jurisdiction over the person of the defendant but it
must be served upon the defendant in the territorial jurisdiction of the
foreign court. Such is not the case here because the defendant was
served with summons in the Philippines and not in Japan.
Unable to accept the said decision, plaintiff on July 11, 1989 moved
for reconsideration of the decision, filing at the same time a
conditional Notice of Appeal, asking the court to treat the said notice
of appeal "as in effect after and upon issuance of the court's denial of
the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply
dated August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court disregarded the Motion for
Reconsideration and gave due course to the plaintiff's Notice of
Appeal. 3
In its decision, the Court of Appeals sustained the trial court. It
agreed with the latter in its reliance upon Boudard vs.Tait 4 wherein
it was held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by

serving him beyond the boundaries of the state." To support its
position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case, personal
service of summons within the forum is required for the court to
acquire jurisdiction over the defendant (Magdalena Estate Inc. vs.
Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal
or substituted service of summons on the defendant not
extraterritorial service is necessary (Dial Corp vs. Soriano, 161
SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is
an action in personam, it is its theory that a distinction must be made
between an action in personam against a resident defendant and an
action in personam against a non-resident defendant. Jurisdiction is
acquired over a non-resident defendant only if he is served personally
within the jurisdiction of the court and over a resident defendant if by
personal, substituted or constructive service conformably to statutory
authorization. Plaintiff-appellant argues that since the
defendant-appellee maintains branches in Japan it is considered a
resident defendant. Corollarily, personal, substituted or constructive
service of summons when made in compliance with the procedural
rules is sufficient to give the court jurisdiction to render judgment in
personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be
served outside the territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and this
is regardless of the residence or citizenship of the party thus served
(Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292,
Am. Case 1912 D680). There must be actual service within the
proper territorial limits on defendant or someone authorized to accept
service for him. Thus, a defendant, whether a resident or not in the
forum where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant and
non-resident defendant were to be adopted, such distinction applies
only to natural persons and not in the corporations. This finds support
in the concept that "a corporation has no home or residence in the
sense in which those terms are applied to natural persons" (Claude
Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited
by the defendant-appellee in its brief:
Residence is said to be an attribute of a natural person, and can be
predicated on an artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a corporation can have no local
residence or habitation. It has been said that a corporation is a mere
ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy no
space, and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p.
693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v.
Hartfold F. Ins. Co., 13 Conn 202)
Jurisprudence so holds that the foreign or domestic character of a
corporation is to be determined by the place of its origin where its
charter was granted and not by the location of its business activities
(Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101), A
corporation is a "resident" and an inhabitant of the state in which it is
incorporated and no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under
the Philippine laws. Clearly, its residence is the Philippines, the place
of its incorporation, and not Japan. While defendant-appellee
maintains branches in Japan, this will not make it a resident of Japan.
A corporation does not become a resident of another by engaging in
business there even though licensed by that state and in terms given
236
all the rights and privileges of a domestic corporation (Galveston H.
& S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As
such, court processes must be served upon it at a place within the
state in which the action is brought and not elsewhere (St. Clair vs.
Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354). 5
It then concluded that the service of summons effected in Manila or
beyond the territorial boundaries of Japan was null and did not confer
jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST
elevated the case to this Court contending that the respondent court
erred in holding that SHARP was not a resident of Japan and that
summons on SHARP could only be validly served within that
country.
A foreign judgment is presumed to be valid and binding in the
country from which it comes, until the contrary is shown. It is also
proper to presume the regularity of the proceedings and the giving of
due notice therein.6
Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right
as between the parties and their successors-in-interest by a
subsequent title. The judgment may, however, be assailed by
evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. Also, under Section
3 of Rule 131, a court, whether of the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of
jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden
of overcoming the presumption of its validity.7Being the party
challenging the judgment rendered by the Japanese court, SHARP
had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial
service of summons effected at its home office in the Philippines was
not only ineffectual but also void, and the Japanese Court did not,
therefore acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those
relating to the service of process upon a defendant are governed by
the lex fori or the internal law of the forum.8 In this case, it is the
procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on
SHARP. As to what this law is is a question of fact, not of law. It
may not be taken judicial notice of and must be pleaded and proved
like any other fact.9 Sections 24 and 25, Rule 132 of the Rules of
Court provide that it may be evidenced by an official publication or
by a duly attested or authenticated copy thereof. It was then
incumbent upon SHARP to present evidence as to what that Japanese
procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the
presumption of validity and regularity of the service of summons and
the decision thereafter rendered by the Japanese court must stand.
Alternatively in the light of the absence of proof regarding Japanese
law, the presumption of identity or similarity or the so-called
processual presumption 10 may be invoked. Applying it, the Japanese
law on the matter is presumed to be similar with the Philippine law
on service of summons on a private foreign corporation doing
business in the Philippines. Section 14, Rule 14 of the Rules of Court
provides that if the defendant is a foreign corporation doing business
in the Philippines, service may be made: (1) on its resident agent
designated in accordance with law for that purpose, or, (2) if there is

no such resident agent, on the government official designated by law
to that effect; or (3) on any of its officers or agents within the
Philippines.
If the foreign corporation has designated an agent to receive
summons, the designation is exclusive, and service of summons is
without force and gives the court no jurisdiction unless made upon
him. 11
Where the corporation has no such agent, service shall be made on
the government official designated by law, to wit: (a) the Insurance
Commissioner in the case of a foreign insurance company; (b) the
Superintendent of Banks, in the case of a foreign banking corporation;
and (c) the Securities and Exchange Commission, in the case of other
foreign corporations duly licensed to do business in the Philippines.
Whenever service of process is so made, the government office or
official served shall transmit by mail a copy of the summons or other
legal proccess to the corporation at its home or principal office. The
sending of such copy is a necessary part of the service. 12
SHARP contends that the laws authorizing service of process upon
the Securities and Exchange Commission, the Superintendent of
Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing
business in the country no longer has any branches or offices within
the Philippines. Such contention is belied by the pertinent provisions
of the said laws. Thus, Section 128 of the Corporation Code 13 and
Section 190 of the Insurance Code 14 clearly contemplate two
situations: (1) if the corporation had left the Philippines or had
ceased to transact business therein, and (2) if the corporation has no
designated agent. Section 17 of the General Banking Act 15 does not
even speak a corporation which had ceased to transact business in the
Philippines.
Nowhere in its pleadings did SHARP profess to having had a
resident agent authorized to receive court processes in Japan. This
silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official or on any
of SHARP's officers or agents in Japan could be availed of. The
respondent, however, insists that only service of any of its officers or
employees in its branches in Japan could be resorted to. We do not
agree. As found by the respondent court, two attempts at service
were made at SHARP's Yokohama branch. Both were unsuccessful.
On the first attempt, Mr. Dinozo, who was believed to be the person
authorized to accept court process, was in Manila. On the second, Mr.
Dinozo was present, but to accept the summons because, according
to him, he was no longer an employee of SHARP. While it may be
true that service could have been made upon any of the officers or
agents of SHARP at its three other branches in Japan, the availability
of such a recourse would not preclude service upon the proper
government official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court
which ordered that summons for SHARP be served at its head office
in the Philippine's after the two attempts of service had failed. 16 The
Tokyo District Court requested the Supreme Court of Japan to cause
the delivery of the summons and other legal documents to the
Philippines. Acting on that request, the Supreme Court of Japan sent
the summons together with the other legal documents to the Ministry
of Foreign Affairs of Japan which, in turn, forwarded the same to the
Japanese Embassy in Manila . Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of the
Philippines, then to the Executive Judge of the Court of First Instance
(now Regional Trial Court) of Manila, who forthwith ordered Deputy
Sheriff Rolando Balingit to serve the same on SHARP at its principal
office in Manila. This service is equivalent to service on the proper
government official under Section 14, Rule 14 of the Rules of Court,
in relation to Section 128 of the Corporation Code. Hence, SHARP's
237
contention that such manner of service is not valid under Philippine
laws holds no water.17
In deciding against the petitioner, the respondent court sustained the
trial court's reliance on Boudard vs. Tait 18where this Court held:
The fundamental rule is that jurisdiction in personam over
nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment.
xxx xxx xxx
The process of a court, has no extraterritorial effect, and no
jurisdiction is acquired over the person of the defendant by serving
him beyond the boundaries of the state. Nor has a judgment of a
court of a foreign country against a resident of this country having no
property in such foreign country based on process served here, any
effect here against either the defendant personally or his property
situated here.
Process issuing from the courts of one state or country cannot run
into another, and although a nonresident defendant may have been
personally served with such process in the state or country of his
domicile, it will not give such jurisdiction as to authorize a personal
judgment against him.
It further availed of the ruling in Magdalena Estate,
Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle
laid down by the Iowa Supreme Court in the 1911 case of Raher
vs. Raher. 21
The first three cases are, however, inapplicable. Boudard involved
the enforcement of a judgment of the civil division of the Court of
First Instance of Hanoi, French Indo-China. The trial court dismissed
the case because the Hanoi court never acquired jurisdiction over the
person of the defendant considering that "[t]he, evidence adduced at
the trial conclusively proves that neither the appellee [the defendant]
nor his agent or employees were ever in Hanoi, French Indo-China;
and that the deceased Marie Theodore Jerome Boudard had never, at
any time, been his employee." In Magdalena Estate, what was
declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in
personam was the service of summons through publication against
non-appearing resident defendants. It was claimed that the latter
concealed themselves to avoid personal service of summons upon
them. In Dial, the defendants were foreign corporations which were
not, domiciled and licensed to engage in business in the Philippines
and which did not have officers or agents, places of business, or
properties here. On the other hand, in the instant case, SHARP was
doing business in Japan and was maintaining four branches therein.
Insofar as to the Philippines is concerned, Raher is a thing of the past.
In that case, a divided Supreme Court of Iowa declared that the
principle that there can be no jurisdiction in a court of a territory to
render a personal judgment against anyone upon service made
outside its limits was applicable alike to cases of residents and
non-residents. The principle was put at rest by the United States
Supreme Court when it ruled in the 1940 case of Milliken
vs. Meyer 22 that domicile in the state is alone sufficient to bring an
absent defendant within the reach of the state's jurisdiction for
purposes of a personal judgment by means of appropriate substituted
service or personal service without the state. This principle is
embodied in section 18, Rule 14 of the Rules of Court which allows
service of summons on residents temporarily out of the Philippines to
be made out of the country. The rationale for this rule was explained
in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by
the mere fact of his absence from the state. The state which accords

him privileges and affords protection to him and his property by
virtue of his domicile may also exact reciprocal duties. "Enjoyment
of the privileges of residence within the state, and the attendant right
to invoke the protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that citizenship
arise out of the relationship to the state which domicile creates. That
relationship is not dissolved by mere absence from the state. The
attendant duties, like the rights and privileges incident to domicile,
are not dependent on continuous presence in the state. One such
incident of domicile is amenability to suit within the state even
during sojourns without the state, where the state has provided and
employed a reasonable method for apprising such an absent party of
the proceedings against him. 23
The domicile of a corporation belongs to the state where it was
incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can
have only one domicile which is the state of its creation. 25
Nonetheless, a corporation formed in one-state may, for certain
purposes, be regarded a resident in another state in which it has
offices and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated
in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:
The issue is whether these Philippine branches or units may be
considered "residents of the Philippine Islands" as that term is used
in Section 20 of the Insolvency Law . . . or residents of the state
under the laws of which they were respectively incorporated. The
answer cannot be found in the Insolvency Law itself, which contains
no definition of the term, resident, or any clear indication of its
meaning. There are however other statutes, albeit of subsequent
enactment and effectivity, from which enlightening notions of the
term may be derived.
The National Internal Revenue Code declares that the term "'resident
foreign corporation' applies to a foreign corporation engaged in trade
or business within the Philippines," as distinguished from a
"'non-resident foreign corporation' . . . (which is one) not engaged in
trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states
"that branches, subsidiaries, affiliation, extension offices or any other
units of corporation or juridical person organized under the laws of
any foreign country operating in the Philippines shall be considered
residents of the Philippines. [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches
and agencies in the Philippines of foreign banks . . . (which are)
called Philippine branches," in the same category as "commercial
banks, savings associations, mortgage banks, development banks,
rural banks, stock savings and loan associations" (which have been
formed and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms "banking
institutions" and "bank" are used in the Act [Sec. 2], declaring on the
contrary that in "all matters not specifically covered by special
provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, said foreign banks or their branches and
agencies lawfully doing business in the Philippines "shall be bound
by all laws, rules, and regulations applicable to domestic banking
corporations of the same class, except such laws, rules and
regulations as provided for the creation, formation, organization, or
dissolution of corporations or as fix the relation, liabilities,
responsibilities, or duties of members, stockholders or officers of
corporation. [Sec. 18].
This court itself has already had occasion to hold [Claude Neon
Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that
a foreign corporation licitly doing business in the Philippines, which
238
is a defendant in a civil suit, may not be considered
a non-resident within the scope of the legal provision authorizing
attachment against a defendant not residing in the Philippine Islands;
[Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil
Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57,
Rules of 1964] in other words, a preliminary attachment may not be
applied for and granted solely on the asserted fact that the defendant
is a foreign corporation authorized to do business in the Philippines
— and is consequently and necessarily, "a party who resides out of
the Philippines." Parenthetically, if it may not be considered as a
party not residing in the Philippines, or as a party who resides out of
the country, then, logically, it must be considered a party who does
reside in the Philippines, who is a resident of the country. Be this as
it may, this Court pointed out that:
. . . Our laws and jurisprudence indicate a purpose to assimilate
foreign corporations, duly licensed to do business here, to the status
of domestic corporations. (Cf. Section 73, Act No. 1459, and
Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu
Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be
entirely out of line with this policy should we make a discrimination
against a foreign corporation, like the petitioner, and subject its
property to the harsh writ of seizure by attachment when it has
complied not only with every requirement of law made specially of
foreign corporations, but in addition with every requirement of law
made of domestic corporations. . . .
Obviously, the assimilation of foreign corporations authorized to do
business in the Philippines "to the status of domestic corporations,
subsumes their being found and operating as corporations,
hence, residing, in the country.
The same principle is recognized in American law: that the residence
of a corporation, if it can be said to have a residence, is necessarily
where it exercises corporate functions . . .;" that it is considered as
dwelling "in the place where its business is done . . .," as being
"located where its franchises are exercised . . .," and as being
"present where it is engaged in the prosecution of the corporate
enterprise;" that a "foreign corporation licensed to do business in a
state is a resident of any country where it maintains an office or agent
for transaction of its usual and customary business for venue
purposes;" and that the "necessary element in its signification is
locality of existence." [Words and Phrases, Permanent Ed., vol. 37,
pp. 394, 412, 493].
In as much as SHARP was admittedly doing business in Japan
through its four duly registered branches at the time the collection
suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of Japan, and, as
such, was amenable to the jurisdiction of the courts therein and may
be deemed to have assented to the said courts' lawful methods of
serving process. 27
Accordingly, the extraterritorial service of summons on it by the
Japanese Court was valid not only under the processual presumption
but also because of the presumption of regularity of performance of
official duty.
We find NORTHWEST's claim for attorney's fees, litigation
expenses, and exemplary damages to be without merit. We find no
evidence that would justify an award for attorney's fees and litigation
expenses under Article 2208 of the Civil Code of the Philippines.
Nor is an award for exemplary damages warranted. Under Article
2234 of the Civil Code, before the court may consider the question of
whether or not exemplary damages should be awarded, the plaintiff
must show that he is entitled to moral, temperate, or compensatory
damaged. There being no such proof presented by NORTHWEST,
no exemplary damages may be adjudged in its favor.
 239

WHEREFORE, the instant petition is partly GRANTED, and the

challenged decision is AFFIRMED insofar as it denied
NORTHWEST's claims for attorneys fees, litigation expenses, and
exemplary damages but REVERSED insofar as in sustained the trial
court's dismissal of NORTHWEST's complaint in Civil Case No.
83-17637 of Branch 54 of the Regional Trial Court of Manila, and
another in its stead is hereby rendered ORDERING private
respondent C.F. SHARP L COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment
subject of said case, with interest thereon at the legal rate from the
filing of the complaint therein until the said foreign judgment is fully
satisfied.

Costs against the private respondent.

SO ORDERED.

G.R. No. 114776. February 2, 2000]
MENANDRO B. LAUREANO, petitioner, vs. COURT OF
APPEALS AND SINGAPORE AIRLINES
LIMITED, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari under Rule 45 of the Rules of
Court seeks to reverse the Decision of the Court of Appeals, dated
October 29, 1993, in C.A. G.R. No. CV 34476, as well as its
Resolution dated February 28, 1994, which denied the motion for
reconsideration.
The facts of the case as summarized by the respondent appellate
court are as follows:
"Sometime in 1978, plaintiff [Menandro B. Laureano, herein
petitioner], then Director of Flight Operations and Chief Pilot of Air
Manila, applied for employment with defendant company [herein
private respondent] through its Area Manager in Manila.
On September 30, 1978, after the usual personal interview, defendant
wrote to plaintiff, offering a contract of employment as an expatriate
B-707 captain for an original period of two (2) years commencing on
January 21, 1978, Plaintiff accepted the offer and commenced
working on January 20, 1979. After passing the six-month probation
period, plaintiff's appointment was confirmed effective July 21, 1979.
(Annex "B", p. 30, Rollo).
On July 21, 1979, defendant offered plaintiff an extension of his
two-year contract to five (5) years effective January 21, 1979 to
January 20, 1984 subject to the terms and conditions set forth in the
contract of employment, which the latter accepted (Annex "C", p. 31,
Rec.).
During his service as B-707 captain, plaintiff on August 24, 1980,
while in command of a flight, committed a noise violation offense at
the Zurich Airport, for which plaintiff apologized. (Exh. "3", p. 307,
Rec.).
Sometime in 1980, plaintiff featured in a tail scraping incident
wherein the tail of the aircraft scraped or touched the runway during
landing. He was suspended for a few days until he was investigated
by a board headed by Capt. Choy. He was reprimanded. Scjuris
On September 25, 1981, plaintiff was invited to take a course of
A-300 conversion training at Aeroformacion, Toulouse, France at
defendant's expense. Having successfully completed and passed the
training course, plaintiff was cleared on April 7, 1981 for solo duty
as captain of the Airbus A-300 and subsequently appointed as captain
of the A-300 fleet commanding an Airbus A-300 in flights over
Southeast Asia. (Annexes "D", "E" and "F", pp. 34-38, Rec.).
Sometime in 1982, defendant, hit by a recession, initiated
cost-cutting measures. Seventeen (17) expatriate captains in the
Airbus fleet were found in excess of the defendant's requirement
(t.s.n., July 6, 1988. p. 11). Consequently, defendant informed its
expatriate pilots including plaintiff of the situation and advised them
to take advance leaves. (Exh. "15", p. 466, Rec.).
Realizing that the recession would not be for a short time, defendant
decided to terminate its excess personnel (t.s.n., July 6, 1988, p. 17).
It did not, however, immediately terminate it's A-300 pilots. It
reviewed their qualifications for possible promotion to the B-747
fleet. Among the 17 excess Airbus pilots reviewed, twelve were
found qualified. Unfortunately, plaintiff was not one of the
twelve. Jurissc
240
On October 5, 1982, defendant informed plaintiff of his termination
effective November 1, 1982 and that he will be paid three (3) months
salary in lieu of three months notice (Annex "I", pp. 41-42, Rec.).
Because he could not uproot his family on such short notice, plaintiff
requested a three-month notice to afford him time to exhaust all
possible avenues for reconsideration and retention. Defendant gave
only two (2) months notice and one (1) month salary. (t.s.n., Nov. 12,
1987. p. 25).
Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal
dismissal before the Labor Arbiter. Defendant moved to dismiss on
jurisdictional grounds. Before said motion was resolved, the
complaint was withdrawn. Thereafter, plaintiff filed the instant case
for damages due to illegal termination of contract of services before
the court a quo (Complaint, pp. 1-10, Rec.).
Again, defendant on February 11, 1987 filed a motion to dismiss
alleging inter alia: (1) that the court has no jurisdiction over the
subject matter of the case, and (2) that Philippine courts have no
jurisdiction over the instant case. Defendant contends that the
complaint is for illegal dismissal together with a money claim arising
out of and in the course of plaintiff's employment "thus it is the
Labor Arbiter and the NLRC who have the jurisdiction pursuant to
Article 217 of the Labor Code" and that, since plaintiff was
employed in Singapore, all other aspects of his employment contract
and/or documents executed in Singapore. Thus, defendant postulates
that Singapore laws should apply and courts thereat shall have
jurisdiction. (pp. 50-69, Rec.). Misjuris
In traversing defendant's arguments, plaintiff claimed that: (1) where
the items demanded in a complaint are the natural consequences
flowing from a breach of an obligation and not labor benefits, the
case is intrinsically a civil dispute; (2) the case involves a question
that is beyond the field of specialization of labor arbiters; and (3) if
the complaint is grounded not on the employee's dismissal per se but
on the manner of said dismissal and the consequence thereof, the
case falls under the jurisdiction of the civil courts. (pp. 70-73, Rec.)
On March 23, 1987, the court a quo denied defendant's motion to
dismiss (pp. 82-84, Ibid). The motion for reconsideration was
likewise denied. (p. 95 ibid)
On September 16, 1987, defendant filed its answer reiterating the
grounds relied upon in its motion to dismiss and further arguing that
plaintiff is barred by laches, waiver, and estoppel from instituting the
complaint and that he has no cause of action. (pp. 102-115)"[1]
On April 10, 1991, the trial court handed down its decision in favor
of plaintiff. The dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff
Menandro Laureano and against defendant Singapore Airlines
Limited, ordering defendant to pay plaintiff the amounts of -
SIN$396,104.00, or its equivalent in Philippine currency at the
current rate of exchange at the time of payment, as and for unearned
compensation with legal interest from the filing of the complaint
until fully paid; Jjlex
SIN$154,742.00, or its equivalent in Philippine currency at the
current rate of exchange at the time of payment; and the further
amounts of P67,500.00 as consequential damages with legal interest
from the filing of the complaint until fully paid;
P1,000,000.00 as and for moral damages; P1,000,000.00 as and for
exemplary damages; and P100,000.00 as and for attorney's fees.
Costs against defendant.
SO ORDERED."[2]

Singapore Airlines timely appealed before the respondent court and
raised the issues of jurisdiction, validity of termination, estoppel, and
damages.
On October 29, 1993, the appellate court set aside the decision of the
trial court, thus,
"...In the instant case, the action for damages due to illegal
termination was filed by plaintiff-appellee only on January 8, 1987 or
more than four (4) years after the effectivity date of his dismissal on
November 1, 1982. Clearly, plaintiff-appellee's action has already
prescribed.
WHEREFORE, the appealed decision is hereby REVERSED and
SET ASIDE. The complaint is hereby dismissed.
SO ORDERED."[3] Newmiso
Petitioner's and Singapore Airlines' respective motions for
reconsideration were denied.
Now, before the Court, petitioner poses the following queries:
1. IS THE PRESENT ACTION ONE BASED ON CONTRACT
WHICH PRESCRIBES IN TEN YEARS UNDER ARTICLE 1144
OF THE NEW CIVIL CODE OR ONE FOR DAMAGES ARISING
FROM AN INJURY TO THE RIGHTS OF THE PLAINTIFF
WHICH PRESCRIBES IN FOUR YEARS UNDER ARTICLE 1146
OF THE NEW CIVIL CODE?
2. CAN AN EMPLOYEE WITH A FIXED PERIOD OF
EMPLOYMENT BE RETRENCHED BY HIS EMPLOYER?
3. CAN THERE BE VALID RETRENCHMENT IF AN
EMPLOYER MERELY FAILS TO REALIZE THE EXPECTED
PROFITS EVEN IF IT WERE NOT, IN FACT, INCURRING
LOSSES?
At the outset, we find it necessary to state our concurrence on the
assumption of jurisdiction by the Regional Trial Court of Manila,
Branch 9. The trial court rightly ruled on the application of
Philippine law, thus: Acctmis
"Neither can the Court determine whether the termination of the
plaintiff is legal under the Singapore Laws because of the defendant's
failure to show which specific laws of Singapore Laws apply to this
case. As substantially discussed in the preceding paragraphs, the
Philippine Courts do not take judicial notice of the laws of Singapore.
The defendant that claims the applicability of the Singapore Laws to
this case has the burden of proof. The defendant has failed to do so.
Therefore, the Philippine law should be applied."[4]
Respondent Court of Appeals acquired jurisdiction when defendant
filed its appeal before said court.[5] On this matter, respondent court
was correct when it barred defendant-appellant below from raising
further the issue of jurisdiction.[6]
Petitioner now raises the issue of whether his action is one based on
Article 1144 or on Article 1146 of the Civil Code. According to him,
his termination of employment effective November 1, 1982, was
based on an employment contract which is under Article 1144, so his
action should prescribe in 10 years as provided for in said article.
Thus he claims the ruling of the appellate court based on Article
1146 where prescription is only four (4) years, is an error. The
appellate court concluded that the action for illegal dismissal
originally filed before the Labor Arbiter on June 29, 1983, but which
was withdrawn, then filed again in 1987 before the Regional Trial
Court, had already prescribed.
241
In our view, neither Article 1144[7] nor Article 1146[8] of the Civil
Code is here pertinent. What is applicable is Article 291 of the Labor
Code, viz:
"Article 291. Money claims. - All money claims arising from
employee-employer relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of
action accrued; otherwise they shall be forever barred.
x x x" Misact
What rules on prescription should apply in cases like this one has
long been decided by this Court. In illegal dismissal, it is settled, that
the ten-year prescriptive period fixed in Article 1144 of the Civil
Code may not be invoked by petitioners, for the Civil Code is a law
of general application, while the prescriptive period fixed in Article
292 of the Labor Code [now Article 291] is a SPECIAL LAW
applicable to claims arising from employee-employer relations.[9]
More recently in De Guzman. vs. Court of Appeals,[10] where the
money claim was based on a written contract, the Collective
Bargaining Agreement, the Court held:
"...The language of Art. 291 of the Labor Code does not limit its
application only to 'money claims specifically recoverable under said
Code' but covers all money claims arising from an
employee-employer relations" (Citing Cadalin v. POEA
Administrator, 238 SCRA 721, 764 [1994]; and Uy v. National
Labor Relations Commission, 261 SCRA 505, 515 [1996]). ...
It should be noted further that Article 291 of the Labor Code is a
special law applicable to money claims arising from
employer-employee relations; thus, it necessarily prevails over
Article 1144 of the Civil Code, a general law. Basic is the rule in
statutory construction that 'where two statutes are of equal theoretical
application to a particular case, the one designed therefore should
prevail.' (Citing Leveriza v. Intermediate Appellate Court, 157 SCRA
282, 294.) Generalia specialibus non derogant."[11]
In the light of Article 291, aforecited, we agree with the appellate
court's conclusion that petitioner's action for damages due to illegal
termination filed again on January 8, 1987 or more than four (4)
years after the effective date of his dismissal on November 1, 1982
has already prescribed.
"In the instant case, the action for damages due to illegal termination
was filed by plaintiff-appellee only on January 8, 1987 or more than
four (4) years after the effectivity date of his dismissal on November
1, 1982. Clearly, plaintiff-appellee's action has already prescribed."
We base our conclusion not on Article 1144 of the Civil Code but on
Article 291 of the Labor Code, which sets the prescription period at
three (3) years and which governs under this jurisdiction.
Petitioner claims that the running of the prescriptive period was
tolled when he filed his complaint for illegal dismissal before the
Labor Arbiter of the National Labor Relations Commission.
However, this claim deserves scant consideration; it has no legal leg
to stand on. In Olympia International, Inc. vs. Court of Appeals, we
held that "although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or
voluntary abandonment by plaintiff leaves the parties in exactly the
same position as though no action had been commenced at all."[12]
Now, as to whether petitioner's separation from the company due to
retrenchment was valid, the appellate court found that the
employment contract of petitioner allowed for pre-termination of
employment. We agree with the Court of Appeals when it said, Sdjad
 242

"It is a settled rule that contracts have the force of law between the
parties. From the moment the same is perfected, the parties are bound
not only to the fulfillment of what has been expressly stipulated but
also to all consequences which, according to their nature, may be in
keeping with good faith, usage and law. Thus, when
plaintiff-appellee accepted the offer of employment, he was bound by
the terms and conditions set forth in the contract, among others, the
right of mutual termination by giving three months written notice or
by payment of three months salary. Such provision is clear and
readily understandable, hence, there is no room for interpretation."

xxx

Further, plaintiff-appellee's contention that he is not bound by the

provisions of the Agreement, as he is not a signatory thereto,
deserves no merit. It must be noted that when plaintiff-appellee's
employment was confirmed, he applied for membership with the
Singapore Airlines Limited (Pilots) Association, the signatory to the
aforementioned Agreement. As such, plaintiff-appellee is estopped
from questioning the legality of the said agreement or any proviso
contained therein."[13]

Moreover, the records of the present case clearly show that

respondent court's decision is amply supported by evidence and it did
not err in its findings, including the reason for the retrenchment:

"When defendant-appellant was faced with the world-wide recession

of the airline industry resulting in a slow down in the company's
growth particularly in the regional operation (Asian Area) where the
Airbus 300 operates. It had no choice but to adopt cost cutting
measures, such as cutting down services, number of frequencies of
flights, and reduction of the number of flying points for the A-300
fleet (t.s.n., July 6, 1988, pp. 17-18). As a result, defendant-appellant
had to layoff A-300 pilots, including plaintiff-appellee, which it
found to be in excess of what is reasonably needed."[14]

All these considered, we find sufficient factual and legal basis to

conclude that petitioner's termination from employment was for an
authorized cause, for which he was given ample notice and
opportunity to be heard, by respondent company. No error nor grave
abuse of discretion, therefore, could be attributed to respondent
appellate court. Sppedsc

ACCORDINGLY, the instant petition is DISMISSED. The decision

of the Court of Appeals in C.A. CV No. 34476 is AFFIRMED.

SO ORDERED.

G.R. No. 140047 July 13, 2004
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION, petitioner,
vs.
V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX
INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD
C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA SANTOS;
AND FIRST INTEGRATED BONDING AND INSURANCE
COMPANY, INC., respondents.
DECISION
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a
Filipino construction firm with the Iraqi Government for the
construction of the Institute of Physical Therapy-Medical Center,
Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was
ongoing.
In a complaint filed with the Regional Trial Court of Makati City,
docketed as Civil Case No. 91-1906 and assigned to Branch 58,
petitioner Philippine Export and Foreign Loan Guarantee
Corporation1 (hereinafter Philguarantee) sought reimbursement from
the respondents of the sum of money it paid to Al Ahli Bank of
Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB),
Ministry of Housing and Construction, Baghdad, Iraq, awarded the
construction of the Institute of Physical Therapy–Medical
Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the
Project) to Ajyal Trading and Contracting Company (hereinafter
Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce
for a total contract price of ID5,416,089/046 (or about
US$18,739,668).2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos,
in behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex),
a local contractor engaged in construction business, entered into a
joint venture agreement with Ajyal wherein the former undertook the
execution of the entire Project, while the latter would be entitled to a
commission of 4% of the contract price.3 Later, or on 8 April 1981,
respondent 3-Plex, not being accredited by or registered with the
Philippine Overseas Construction Board (POCB), assigned and
transferred all its rights and interests under the joint venture
agreement to VPECI, a construction and engineering firm duly
registered with the POCB.4 However, on 2 May 1981, 3-Plex and
VPECI entered into an agreement that the execution of the Project
would be under their joint management.5
The SOB required the contractors to submit (1) a performance bond
of ID271,808/610 representing 5% of the total contract price and (2)
an advance payment bond of ID541,608/901 representing 10% of the
advance payment to be released upon signing of the contract. 6 To
comply with these requirements, respondents 3-Plex and VPECI
applied for the issuance of a guarantee with petitioner Philguarantee,
a government financial institution empowered to issue guarantees for
qualified Filipino contractors to secure the performance of approved
service contracts abroad.7
243
Petitioner Philguarantee approved respondents' application.
Subsequently, letters of guarantee8 were issued by Philguarantee to
the Rafidain Bank of Baghdad covering 100% of the performance
and advance payment bonds, but they were not accepted by SOB.
What SOB required was a letter-guarantee from Rafidain Bank, the
government bank of Iraq. Rafidain Bank then issued a performance
bond in favor of SOB on the condition that another foreign bank, not
Philguarantee, would issue a counter-guarantee to cover its exposure.
Al Ahli Bank of Kuwait was, therefore, engaged to provide a
counter-guarantee to Rafidain Bank, but it required a similar
counter-guarantee in its favor from the petitioner. Thus, three layers
of guarantees had to be arranged.9
Upon the application of respondents 3-Plex and VPECI, petitioner
Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of
Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the
amount of ID271,808/610 and Letter of Guarantee No.
81-195-F11 (Advance Payment Guarantee) in the amount of
ID541,608/901, both for a term of eighteen months from 25 May
1981. These letters of guarantee were secured by (1) a Deed of
Undertaking12executed by respondents VPECI, Spouses Vicente P.
Eusebio and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E.
Santos and Iluminada Santos; and (2) a surety bond 13 issued by
respondent First Integrated Bonding and Insurance Company, Inc.
(FIBICI). The Surety Bond was later amended on 23 June 1981 to
increase the amount of coverage from P6.4 million to P6.967 million
and to change the bank in whose favor the petitioner's guarantee was
issued, from Rafidain Bank to Al Ahli Bank of Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal
executed the service contract15 for the construction of the Institute of
Physical Therapy – Medical Rehabilitation Center, Phase II, in
Baghdad, Iraq, wherein the joint venture contractor undertook to
complete the Project within a period of 547 days or 18 months.
Under the Contract, the Joint Venture would supply manpower and
materials, and SOB would refund to the former 25% of the project
cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of
1 Dinar to 3.37777 US Dollars.16
The construction, which was supposed to start on 2 June 1981,
commenced only on the last week of August 1981. Because of this
delay and the slow progress of the construction work due to some
setbacks and difficulties, the Project was not completed on 15
November 1982 as scheduled. But in October 1982, upon foreseeing
the impossibility of meeting the deadline and upon the request of Al
Ahli Bank, the joint venture contractor worked for the renewal or
extension of the Performance Bond and Advance Payment Guarantee.
Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond)
and 81-195-F (Advance Payment Bond) with expiry date of 25
November 1982 were then renewed or extended to 9 February 1983
and 9 March 1983, respectively.17 The surety bond was also extended
for another period of one year, from 12 May 1982 to 12 May
1983.18 The Performance Bond was further extended twelve times
with validity of up to 8 December 1986,19 while the Advance
Payment Guarantee was extended three times more up to 24 May
1984 when the latter was cancelled after full refund or
reimbursement by the joint venture contractor.20 The surety bond was
likewise extended to 8 May 1987.21
As of March 1986, the status of the Project was 51% accomplished,
meaning the structures were already finished. The remaining 47%
consisted in electro-mechanical works and the 2%, sanitary works,
which both required importation of equipment and materials.22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the
petitioner demanding full payment of its performance bond
counter-guarantee.

Upon receiving a copy of that telex message on 27 October 1986,
respondent VPECI requested Iraq Trade and Economic Development
Minister Mohammad Fadhi Hussein to recall the telex call on the
performance guarantee for being a drastic action in contravention of
its mutual agreement with the latter that (1) the imposition of penalty
would be held in abeyance until the completion of the project; and (2)
the time extension would be open, depending on the developments
on the negotiations for a foreign loan to finance the completion of the
project.23 It also wrote SOB protesting the call for lack of factual or
legal basis, since the failure to complete the Project was due to (1)
the Iraqi government's lack of foreign exchange with which to pay its
(VPECI's) accomplishments and (2) SOB's noncompliance for the
past several years with the provision in the contract that 75% of the
billings would be paid in US dollars.24 Subsequently, or on 19
November 1986, respondent VPECI advised the petitioner not to pay
yet Al Ahli Bank because efforts were being exerted for the amicable
settlement of the Project.25
On 14 April 1987, the petitioner received another telex message from
Al Ahli Bank stating that it had already paid to Rafidain Bank the
sum of US$876,564 under its letter of guarantee, and demanding
reimbursement by the petitioner of what it paid to the latter bank plus
interest thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the
assistance of some government agencies of the Philippines. On 10
August 1987, VPECI requested the Central Bank to hold in abeyance
the payment by the petitioner "to allow the diplomatic machinery to
take its course, for otherwise, the Philippine government , through
the Philguarantee and the Central Bank, would become instruments
of the Iraqi Government in consummating a clear act of injustice and
inequity committed against a Filipino contractor."27
On 27 August 1987, the Central Bank authorized the remittance for
its account of the amount of US$876,564 (equivalent to ID271,
808/610) to Al Ahli Bank representing full payment of the
performance counter-guarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would
remit US$876,564 to Al Ahli Bank, and reiterated the joint and
solidary obligation of the respondents to reimburse the petitioner for
the advances made on its counter-guarantee.29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank
of Kuwait on 21 January 1988.30 Then, on 6 May 1988, the petitioner
paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest
and penalty charges demanded by the latter bank.31
On 19 June 1991, the petitioner sent to the respondents separate
letters demanding full payment of the amount of P47,872,373.98 plus
accruing interest, penalty charges, and 10% attorney's fees pursuant
to their joint and solidary obligations under the deed of undertaking
and surety bond.32 When the respondents failed to pay, the petitioner
filed on 9 July 1991 a civil case for collection of a sum of money
against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held
that the latter had no valid cause of action against the respondents. It
opined that at the time the call was made on the guarantee which was
executed for a specific period, the guarantee had already lapsed or
expired. There was no valid renewal or extension of the guarantee for
failure of the petitioner to secure respondents' express consent thereto.
The trial court also found that the joint venture contractor incurred no
delay in the execution of the Project. Considering the Project owner's
violations of the contract which rendered impossible the joint venture
contractor's performance of its undertaking, no valid call on the
guarantee could be made. Furthermore, the trial court held that no
valid notice was first made by the Project owner SOB to the joint
venture contractor before the call on the guarantee. Accordingly, it
244
dismissed the complaint, as well as the counterclaims and
cross-claim, and ordered the petitioner to pay attorney's fees
of P100,000 to respondents VPECI and Eusebio Spouses
and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial
court's decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the
status of project implementation as well as the problems besetting the
contractors, between 1982 to 1985, having sent some of its people to
Baghdad during that period. The successive renewals/extensions of
the guarantees in fact, was prompted by delays, not solely
attributable to the contractors, and such extension understandably
allowed by the SOB (project owner) which had not anyway complied
with its contractual commitment to tender 75% of payment in US
Dollars, and which still retained overdue amounts collectible by
VPECI.
…
Second, appellant was very much aware of the violations committed
by the SOB of its contractual undertakings with VPECI, principally,
the payment of foreign currency (US$) for 75% of the total contract
price, as well as of the complications and injustice that will result
from its payment of the full amount of the performance guarantee, as
evident in PHILGUARANTEE's letter dated 13 May 1987 ….
…
Third, appellant was fully aware that SOB was in fact still obligated
to the Joint Venture and there was still an amount collectible from
and still being retained by the project owner, which amount can be
set-off with the sum covered by the performance guarantee.
…
Fourth, well-apprised of the above conditions obtaining at the Project
site and cognizant of the war situation at the time in Iraq, appellant,
though earlier has made representations with the SOB regarding a
possible amicable termination of the Project as suggested by VPECI,
made a complete turn-around and insisted on acting in favor of the
unjustified "call" by the foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of
Court claiming that the Court of Appeals erred in affirming the trial
court's ruling that
I
…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF
UNDERTAKING THEY EXECUTED IN FAVOR OF
PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF
ITS COUNTER-GUARANTEE AND THAT PETITIONER
CANNOT PASS ON TO RESPONDENTS WHAT IT HAD PAID
UNDER THE SAID COUNTER-GUARANTEE.
II
…PETITIONER CANNOT CLAIM SUBROGATION.
III
…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO
HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF
UNDERTAKING.36
The main issue in this case is whether the petitioner is entitled to
reimbursement of what it paid under Letter of Guarantee No.
81-194-F it issued to Al Ahli Bank of Kuwait based on the deed of
undertaking and surety bond from the respondents.

The petitioner asserts that since the guarantee it issued was absolute,
unconditional, and irrevocable the nature and extent of its liability
are analogous to those of suretyship. Its liability accrued upon the
failure of the respondents to finish the construction of the Institute of
Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so. If a person binds himself solidarily with
the principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of
the principles are common to both. In both contracts, there is a
promise to answer for the debt or default of another. However, in this
jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same
instrument executed at the same time and on the same consideration.
On the other hand, the contract of guaranty is the guarantor's own
separate undertaking often supported by a consideration separate
from that supporting the contract of the principal; the original
contract of his principal is not his contract.
2. A surety assumes liability as a regular party to the undertaking;
while the liability of a guarantor is conditional depending on the
failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor is
secondary.
4. A surety is an original promissor and debtor from the beginning,
while a guarantor is charged on his own undertaking.
5. A surety is, ordinarily, held to know every default of his principal;
whereas a guarantor is not bound to take notice of the
non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere
indulgence of the creditor to the principal or by want of notice of the
default of the principal, no matter how much he may be injured
thereby. A guarantor is often discharged by the mere indulgence of
the creditor to the principal, and is usually not liable unless notified
of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of
Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance
guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you
on your first written or telex demand Iraq Dinars Two Hundred
Seventy One Thousand Eight Hundred Eight and fils six hundred ten
(ID271,808/610) representing 100% of the performance bond
required of V.P. EUSEBIO for the construction of the Physical
Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other
incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100%
of the obligation unpaid but in no case shall such amount exceed
Iraq Dinars (ID) 271,808/610 plus interest and other incidental
expenses…. (Emphasis supplied)39
Guided by the abovementioned distinctions between a surety and a
guaranty, as well as the factual milieu of this case, we find that the
Court of Appeals and the trial court were correct in ruling that the
petitioner is a guarantor and not a surety. That the guarantee issued
by the petitioner is unconditional and irrevocable does not make the
petitioner a surety. As a guaranty, it is still characterized by its
subsidiary and conditional quality because it does not take effect
until the fulfillment of the condition, namely, that the principal
245
obligor should fail in his obligation at the time and in the form he
bound himself.40 In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default in his
obligation first before resort to the guarantor could be had. A
conditional guaranty, as opposed to an unconditional guaranty, is one
which depends upon some extraneous event, beyond the mere default
of the principal, and generally upon notice of the principal's default
and reasonable diligence in exhausting proper remedies against the
principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that
in the event of default by respondent VPECI the petitioner shall pay,
the obligation assumed by the petitioner was simply that of an
unconditional guaranty, not conditional guaranty. But as earlier ruled
the fact that petitioner's guaranty is unconditional does not make it a
surety. Besides, surety is never presumed. A party should not be
considered a surety where the contract itself stipulates that he is
acting only as a guarantor. It is only when the guarantor binds
himself solidarily with the principal debtor that the contract becomes
one of suretyship.42
Having determined petitioner's liability as guarantor, the next
question we have to grapple with is whether the respondent
contractor has defaulted in its obligations that would justify resort to
the guaranty. This is a mixed question of fact and law that is better
addressed by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial
court and the Court of Appeals are binding or conclusive upon this
Court unless they are not supported by the evidence or unless strong
and cogent reasons dictate otherwise.43 The factual findings of the
Court of Appeals are normally not reviewable by us under Rule 45 of
the Rules of Court except when they are at variance with those of the
trial court. 44 The trial court and the Court of Appeals were in unison
that the respondent contractor cannot be considered to have defaulted
in its obligations because the cause of the delay was not primarily
attributable to it.
A corollary issue is what law should be applied in determining
whether the respondent contractor has defaulted in the performance
of its obligations under the service contract. The question of whether
there is a breach of an agreement, which
includes default or mora,45 pertains to the essential or intrinsic
validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly
provided for in our laws. The rule followed by most legal systems,
however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as
substantial connection with the transaction, or the nationality or
domicile of the parties.47 Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the
limitation that it is not against the law, morals, or public policy of
the forum and that the chosen law must bear a substantive
relationship to the transaction. 48
It must be noted that the service contract between SOB and VPECI
contains no express choice of the law that would govern it. In the
United States and Europe, the two rules that now seem to have
emerged as "kings of the hill" are (1) the parties may choose the
governing law; and (2) in the absence of such a choice, the applicable
law is that of the State that "has the most significant relationship to
the transaction and the parties."49 Another authority proposed that all
matters relating to the time, place, and manner of performance and

valid excuses for non-performance are determined by the law of the
place of performance or lex loci solutionis, which is useful because it
is undoubtedly always connected to the contract in a significant
way.50
In this case, the laws of Iraq bear substantial connection to the
transaction, since one of the parties is the Iraqi Government and the
place of performance is in Iraq. Hence, the issue of whether
respondent VPECI defaulted in its obligations may be determined by
the laws of Iraq. However, since that foreign law was not properly
pleaded or proved, the presumption of identity or similarity,
otherwise known as the processual presumption, comes into play.
Where foreign law is not pleaded or, even if pleaded, is not proved,
the presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code,
provides: "In reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper
manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the
fulfillment of the prestation by reason of a cause imputable to the
former. 52 It is the non-fulfillment of an obligation with respect to
time.53
It is undisputed that only 51.7% of the total work had been
accomplished. The 48.3% unfinished portion consisted in the
purchase and installation of electro-mechanical equipment and
materials, which were available from foreign suppliers, thus
requiring US Dollars for their importation. The monthly billings and
payments made by SOB54 reveal that the agreement between the
parties was a periodic payment by the Project owner to the contractor
depending on the percentage of accomplishment within the
period. 55 The payments were, in turn, to be used by the contractor to
finance the subsequent phase of the work. 56 However, as explained
by VPECI in its letter to the Department of Foreign Affairs (DFA),
the payment by SOB purely in Dinars adversely affected the
completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the
accomplishment billings of the Contractor purely in Iraqi Dinars and
which payment came only after some delays.
5. SOB is fully aware of the following:
… As found by both the Court of Appeals and the trial court, the delay
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would
need foreign currency (US$), to finance the purchase of various
equipment, materials, supplies, tools and to pay for the cost of project
management, supervision and skilled labor not available in Iraq and
therefore have to be imported and or obtained from the Philippines
and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines
requires the remittance into the Philippines of 70% of the salaries of
Filipino workers working abroad in US Dollars;
…
5.5 That the Iraqi Dinar is not a freely convertible currency such that
the same cannot be used to purchase equipment, materials, supplies,
etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT
are not available in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local
currency (Iraqui Dinars) out of Iraq and hence, imported materials,
246
equipment, etc., cannot be purchased or obtained using Iraqui Dinars
as medium of acquisition.
…
8. Following the approved construction program of the CONTRACT,
upon completion of the civil works portion of the installation of
equipment for the building, should immediately follow, however, the
CONTRACT specified that these equipment which are to be installed
and to form part of the PROJECT have to be procured outside Iraq
since these are not being locally manufactured. Copy f the relevant
portion of the Technical Specification is hereto attached as Annex
"C" and made an integral part hereof;
…
10. Due to the lack of Foreign currency in Iraq for this purpose, and
if only to assist the Iraqi government in completing the PROJECT,
the Contractor without any obligation on its part to do so but with the
knowledge and consent of SOB and the Ministry of Housing &
Construction of Iraq, offered to arrange on behalf of SOB, a foreign
currency loan, through the facilities of Circle International S.A., the
Contractor's Sub-contractor and SACE MEDIO CREDITO which
will act as the guarantor for this foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation
started in June 1985. SOB is informed of the developments of this
negotiation, attached is a copy of the draft of the loan Agreement
between SOB as the Borrower and Agent. The Several Banks, as
Lender, and counter-guaranteed by Istituto Centrale Per II Credito A
Medio Termine (Mediocredito) Sezione Speciale Per
L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations
went on and continued until it suddenly collapsed due to the reported
default by Iraq in the payment of its obligations with Italian
government, copy of the news clipping dated June 18, 1986 is hereto
attached as Annex "D" to form an integral part hereof;
15. On September 15, 1986, Contractor received information from
Circle International S.A. that because of the news report that Iraq
defaulted in its obligations with European banks, the approval by
Banco di Roma of the loan to SOB shall be deferred indefinitely, a
copy of the letter of Circle International together with the news
clippings are hereto attached as Annexes "F" and "F-1",
respectively.57
or the non-completion of the Project was caused by factors not
imputable to the respondent contractor. It was rather due mainly to
the persistent violations by SOB of the terms and conditions of the
contract, particularly its failure to pay 75% of the accomplished
work in US Dollars. Indeed, where one of the parties to a contract
does not perform in a proper manner the prestation which he is bound
to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the
other party fails to perform the obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the
monthly billings in purely Iraqi Dinars did not render impossible the
performance of the Project by VPECI. Such posture is quite contrary
to its previous representations. In his 26 March 1987 letter to the
Office of the Middle Eastern and African Affairs (OMEAA), DFA,
Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated
that while VPECI had taken every possible measure to complete the
Project, the war situation in Iraq, particularly the lack of foreign
exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the
project but the war situation in Iraq particularly the lack of foreign
exchange is proving to be a great obstacle. Our performance

counterguarantee was called last 26 October 1986 when the
negotiations for a foreign currency loan with the Italian government
through Banco de Roma bogged down following news report that
Iraq has defaulted in its obligation with major European banks.
Unless the situation in Iraq is improved as to allay the bank's
apprehension, there is no assurance that the project will ever be
completed. 58
In order that the debtor may be in default it is necessary that the
following requisites be present: (1) that the obligation be demandable
and already liquidated; (2) that the debtor delays performance; and (3)
that the creditor requires the performance because it must appear that
the tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance
from VPECI because it has not yet itself performed its obligation in a
proper manner, particularly the payment of the 75% of the cost of the
Project in US Dollars. The VPECI cannot yet be said to have
incurred in delay. Even assuming that there was delay and that the
delay was attributable to VPECI, still the effects of that delay ceased
upon the renunciation by the creditor, SOB, which could be implied
when the latter granted several extensions of time to the
former. 60 Besides, no demand has yet been made by SOB against the
respondent contractor. Demand is generally necessary even if a
period has been fixed in the obligation. And default generally begins
from the moment the creditor demands judicially or extra-judicially
the performance of the obligation. Without such demand, the effects
of default will not arise.61
Moreover, the petitioner as a guarantor is entitled to the benefit of
excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all
legal remedies against the said debtor have been resorted to by the
creditor.62 It could also set up compensation as regards what the
creditor SOB may owe the principal debtor VPECI.63 In this case,
however, the petitioner has clearly waived these rights and remedies
by making the payment of an obligation that was yet to be shown to
be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the
joint venture contractor had collectibles from SOB which could be
set off with the amount covered by the performance guarantee. In
February 1987, the OMEAA transmitted to the petitioner a copy of a
telex dated 10 February 1987 of the Philippine Ambassador in
Baghdad, Iraq, informing it of the note verbale sent by the Iraqi
Ministry of Foreign Affairs stating that the past due obligations of
the joint venture contractor from the petitioner would "be deducted
from the dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA
dated 26 March 1987, the petitioner raised as among the arguments
to be presented in support of the cancellation of the
counter-guarantee the fact that the amount of ID281,414/066 retained
by SOB from the Project was more than enough to cover the
counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the
counterguarantee:
· The Iraqi Government does not have the foreign exchange to fulfill
its contractual obligations of paying 75% of progress billings in US
dollars.
… of the debtor VPECI, the debtor VPECI may set up against it
· It could also be argued that the amount of ID281,414/066 retained
by SOB from the proposed project is more than the amount of the
outstanding counterguarantee.65
247
In a nutshell, since the petitioner was aware of the contractor's
outstanding receivables from SOB, it should have set up
compensation as was proposed in its project situationer.
Moreover, the petitioner was very much aware of the predicament of
the respondents. In fact, in its 13 May 1987 letter to the OMEAA,
DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project
was mainly due to SOB's violation of contract terms and as such, call
on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment
under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a Filipino
contractor. It is for this reason that we are constrained to seek your
assistance not only in ascertaining the veracity of Al Ahli Bank's
claim that it has paid Rafidain Bank but possibly averting such an
event. As any payment effected by the banks will complicate matters,
we cannot help underscore the urgency of VPECI's bid for
government intervention for the amicable termination of the contract
and release of the performance guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the
service contract and VPECI's outstanding receivables from SOB, as
well as the situation obtaining in the Project site compounded by the
Iran-Iraq war, the petitioner opted to pay the second layer guarantor
not only the full amount of the performance bond counter-guarantee
but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor
secure reimbursement from the respondents for what it has paid
under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified
by the latter67 and would be legally subrogated to the rights which the
creditor has against the debtor.68 However, a person who makes
payment without the knowledge or against the will of the debtor has
the right to recover only insofar as the payment has been beneficial to
the debtor.69 If the obligation was subject to defenses on the part of
the debtor, the same defenses which could have been set up against
the creditor can be set up against the paying guarantor.70
From the findings of the Court of Appeals and the trial court, it is
clear that the payment made by the petitioner guarantor did not in
any way benefit the principal debtor, given the project status and the
conditions obtaining at the Project site at that time. Moreover, the
respondent contractor was found to have valid defenses against SOB,
which are fully supported by evidence and which have been
meritoriously set up against the paying guarantor, the petitioner in
this case. And even if the deed of undertaking and the surety bond
secured petitioner's guaranty, the petitioner is precluded from
enforcing the same by reason of the petitioner's undue payment on
the guaranty. Rights under the deed of undertaking and the surety
bond do not arise because these contracts depend on the validity of
the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of
guaranty: the debtor VPECI should have, in the first place, defaulted
in its obligation and that the creditor SOB should have first made a
demand from the principal debtor. It is only when the debtor does not
or cannot pay, in whole or in part, that the guarantor should
pay.71 When the petitioner guarantor in this case paid against the will
defenses available against the creditor SOB at the time of payment.
This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the
necessary support and assistance in order to enable … [Filipino
 248

exporters and contractors to operate viably under the prevailing

economic and business conditions,"72 the petitioner should have
exercised prudence and caution under the circumstances. As aptly put
by the Court of Appeals, it would be the height of inequity to allow
the petitioner to pass on its losses to the Filipino contractor VPECI
which had sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project
implementation.

WHEREFORE, the petition for review on certiorari is hereby

DENIED for lack of merit, and the decision of the Court of appeals
in CA-G.R. CV No. 39302 is AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 145587 October 26, 2007
EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
ELEAZAR S. GRAN, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari1 seeks to set aside the October
18, 2000 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No.
56120 which affirmed the January 15, 1999 Decision 3 and September
30, 1999 Resolution4 rendered by the National Labor Relations
Commission (NLRC) (Third Division) in POEA ADJ (L) 94-06-2194,
ordering Expertise Search International (ESI), EDI-Staffbuilders
International, Inc. (EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB)
jointly and severally to pay Eleazar S. Gran (Gran) the amount of
USD 16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement
of Overseas Filipino Workers (OFWs).5 ESI is another recruitment
agency which collaborated with EDI to process the documentation
and deployment of private respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and
deployed by ESI to work for OAB, in Riyadh, Kingdom of Saudi
Arabia.6
It appears that OAB asked EDI through its October 3, 1993 letter
for curricula vitae of qualified applicants for the position of
"Computer Specialist."7 In a facsimile transmission dated November
29, 1993, OAB informed EDI that, from the applicants' curricula
vitae submitted to it for evaluation, it selected Gran for the position
of "Computer Specialist." The faxed letter also stated that if Gran
agrees to the terms and conditions of employment contained in it, one
of which was a monthly salary of SR (Saudi Riyal) 2,250.00 (USD
600.00), EDI may arrange for Gran's immediate dispatch.8
After accepting OAB's offer of employment, Gran signed an
employment contract9 that granted him a monthly salary of USD
850.00 for a period of two years. Gran was then deployed to Riyadh,
Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his
monthly salary—his employment contract stated USD 850.00; while
his Philippine Overseas Employment Agency (POEA) Information
Sheet indicated USD 600.00 only. However, through the assistance
of the EDI office in Riyadh, OAB agreed to pay Gran USD 850.00 a
month.10
After Gran had been working for about five months for OAB, his
employment was terminated through OAB's July 9, 1994 letter, 11 on
the following grounds:
1. Non-compliance to contract requirements by the recruitment
agency primarily on your salary and contract duration.
2. Non-compliance to pre-qualification requirements by the
recruitment agency[,] vide OAB letter ref. F-5751-93, dated October
3, 1993.12
3. Insubordination or disobedience to Top Management Order and/or
instructions (non-submittal of daily activity reports despite several
instructions).
249
On July 11, 1994, Gran received from OAB the total amount of SR
2,948.00 representing his final pay, and on the same day, he executed
a Declaration13 releasing OAB from any financial obligation or
otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on
July 21, 1994, against ESI/EDI, OAB, Country Bankers Insurance
Corporation, and Western Guaranty Corporation with the NLRC,
National Capital Region, Quezon City, which was docketed as POEA
ADJ (L) 94-06-2194 for underpayment of wages/salaries and illegal
dismissal.
The Ruling of the Labor Arbiter
In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday,
to whom Gran's case was assigned, ruled that there was neither
underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of
salaries since according to the POEA-Overseas Contract Worker
(OCW) Information Sheet, Gran's monthly salary was USD 600.00,
and in his Confirmation of Appointment as Computer Specialist, his
monthly basic salary was fixed at SR 2,500.00, which was equivalent
to USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to justify
that Gran had no claim for unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found
that Gran failed to refute EDI's allegations; namely, (1) that Gran did
not submit a single activity report of his daily activity as dictated by
company policy; (2) that he was not qualified for the job as computer
specialist due to his insufficient knowledge in programming and lack
of knowledge in ACAD system; (3) that Gran refused to follow
management's instruction for him to gain more knowledge of the job
to prove his worth as computer specialist; (4) that Gran's
employment contract had never been substituted; (5) and that Gran
was paid a monthly salary of USD 850.00, and USD 350.00 monthly
as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly
dismissed from his work due to insubordination, disobedience, and
his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's
complaint for lack of merit.
Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC,
Third Division. However, it appears from the records that Gran failed
to furnish EDI with a copy of his Appeal Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of Gran's
contract to ESI is actually "reprocessing," which is a prohibited
transaction under Article 34 (b) of the Labor Code. This scheme
constituted misrepresentation through the conspiracy between EDI
and ESI in misleading Gran and even POEA of the actual terms and
conditions of the OFW's employment. In addition, it was found that
Gran did not commit any act that constituted a legal ground for
dismissal. The alleged non-compliance with contractual stipulations
relating to Gran's salary and contract duration, and the absence of
pre-qualification requirements cannot be attributed to Gran but to
EDI, which dealt directly with OAB. In addition, the charge of
insubordination was not substantiated, and Gran was not even
afforded the required notice and investigation on his alleged offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and rendered
a new one, the dispositive portion of which reads:

WHEREFORE, the assailed decision is SET ASIDE. Respondents
Expertise Search International, Inc., EDI Staffbuilders Int'l., Inc. and
Omar Ahmed Ali Bin Bechr Est. (OAB) are hereby ordered jointly
and severally liable to pay the complainant Eleazar Gran the
Philippine peso equivalent at the time of actual payment of
SIXTEEN THOUSAND ONE HUNDRED FIFTY US DOLLARS
(US$16,150.00) representing his salaries for the unexpired portion of
his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment17 on March 29,
1999 with the NLRC and petitioner receiving a copy of this motion
on the same date.18
To prevent the execution, petitioner filed an Opposition 19 to Gran's
motion arguing that the Writ of Execution cannot issue because it
was not notified of the appellate proceedings before the NLRC and
was not given a copy of the memorandum of appeal nor any
opportunity to participate in the appeal.
Seeing that the NLRC did not act on Gran's motion after EDI had
filed its Opposition, petitioner filed, on August 26, 1999, a Motion
for Reconsideration of the NLRC Decision after receiving a copy of
the Decision on August 16, 1999.20
The NLRC then issued a Resolution21 denying petitioner's Motion for
Reconsideration, ratiocinating that the issues and arguments raised in
the motion "had already been amply discussed, considered, and ruled
upon" in the Decision, and that there was "no cogent reason or patent
or palpable error that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for
Certiorari before the CA. Petitioner claimed in its petition that the
NLRC committed grave abuse of discretion in giving due course to
the appeal despite Gran's failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues
of EDI's petition.
On the procedural issue, the appellate court held that "Gran's failure
to furnish a copy of his appeal memorandum [to EDI was] a mere
formal lapse, an excusable neglect and not a jurisdictional defect
which would justify the dismissal of his appeal."22 The court also
held that petitioner EDI failed to prove that private respondent was
terminated for a valid cause and in accordance with due process; and
that Gran's Declaration releasing OAB from any monetary obligation
had no force and effect. The appellate court ratiocinated that EDI had
the burden of proving Gran's incompetence; however, other than the
termination letter, no evidence was presented to show how and why
Gran was considered to be incompetent. The court held that since the
law requires the recruitment agencies to subject OFWs to trade tests
before deployment, Gran must have been competent and qualified;
otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's
failure to submit a "Daily Activity Report," the appellate court found
that EDI failed to show that the submission of the "Daily Activity
Report" was a part of Gran's duty or the company's policy. The court
also held that even if Gran was guilty of insubordination, he should
have just been suspended or reprimanded, but not dismissed.
The CA also held that Gran was not afforded due process, given that
OAB did not abide by the twin notice requirement. The court found
that Gran was terminated on the same day he received the
termination letter, without having been apprised of the bases of his
dismissal or afforded an opportunity to explain his side.
250
Finally, the CA held that the Declaration signed by Gran did not bar
him from demanding benefits to which he was entitled. The appellate
court found that the Declaration was in the form of a quitclaim, and
as such is frowned upon as contrary to public policy especially where
the monetary consideration given in the Declaration was very much
less than what he was legally entitled to—his backwages amounting
to USD 16,150.00.
As a result of these findings, on October 18, 2000, the appellate court
denied the petition to set aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues
Petitioner raises the following issues for our consideration:
I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY
OF HIS APPEAL MEMORANDUM TO PETITIONER EDI
WOULD CONSTITUTE A JURISDICTIONAL DEFECT AND A
DEPRIVATION OF PETITIONER EDI'S RIGHT TO DUE
PROCESS AS WOULD JUSTIFY THE DISMISSAL OF GRAN'S
APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY
OF SUBSTANTIAL EVIDENCE THAT GRAN'S TERMINATION
WAS JUSTIFIABLE BY REASON OF INCOMPETENCE.
COROLLARY HERETO, WHETHER THE PRIETO VS. NLRC
RULING, AS APPLIED BY THE COURT OF APPEALS, IS
APPLICABLE IN THE INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF
SUBSTANTIAL EVIDENCE THAT GRAN'S TERMINATION
WAS JUSTIFIABLE BY REASON OF INSUBORDINATION
AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR
TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR
THE UNEXPIRED PORTION OF HIS CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to
furnish EDI with his Appeal Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to Provide
Petitioner a Copy of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the
Appeal Memorandum constitutes a jurisdictional defect and a
deprivation of due process that would warrant a rejection of the
appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish
a copy of the appeal to the adverse party is not fatal to the
appeal.
In Estrada v. National Labor Relations Commission,24 this Court set
aside the order of the NLRC which dismissed an appeal on the sole
ground that the appellant did not furnish the appellee a memorandum
of appeal contrary to the requirements of Article 223 of the New
Labor Code and Section 9, Rule XIII of its Implementing Rules and
Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order
of dismissal of an appeal to the NLRC based on the ground that
"there is no showing whatsoever that a copy of the appeal was served

by the appellant on the appellee"25was annulled. The Court
ratiocinated as follows:
The failure to give a copy of the appeal to the adverse party was a
mere formal lapse, an excusable neglect. Time and again We have
acted on petitions to review decisions of the Court of Appeals even in
the absence of proof of service of a copy thereof to the Court of
Appeals as required by Section 1 of Rule 45, Rules of Court. We act
on the petitions and simply require the petitioners to comply with
the rule.26 (Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines
Employees Labor Union-FFW v. National Labor Relations
Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise Manning
Agency, Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to
furnish the adverse party with a copy of the appeal is treated only as
a formal lapse, an excusable neglect, and hence, not a jurisdictional
defect. Accordingly, in such a situation, the appeal should not be
dismissed; however, it should not be given due course either. As
enunciated in J.D. Magpayo, the duty that is imposed on the
NLRC, in such a case, is to require the appellant to comply with
the rule that the opposing party should be provided with a copy
of the appeal memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal
Memorandum is excusable, the abject failure of the NLRC to order
Gran to furnish EDI with the Appeal Memorandum constitutes grave
abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to
furnish EDI a copy of the Appeal Memorandum. The NLRC then
ordered Gran to present proof of service. In compliance with the
order, Gran submitted a copy of Camp Crame Post Office's list of
mail/parcels sent on April 7, 1998.30 The post office's list shows that
private respondent Gran sent two pieces of mail on the same date:
one addressed to a certain Dan O. de Guzman of Legaspi Village,
Makati; and the other appears to be addressed to Neil B. Garcia (or
Gran),31 of Ermita, Manila—both of whom are not connected with
petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed
received a copy of the Appeal Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof
and completeness of service in proceedings before the NLRC:
Section 5.32 Proof and completeness of service.—The return is prima
facie proof of the facts indicated therein. Service by registered mail
is complete upon receipt by the addressee or his agent; but if the
addressee fails to claim his mail from the post office within five (5)
days from the date of first notice of the postmaster, service shall take
effect after such time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only
deemed complete when the addressee or his agent received the mail
or after five (5) days from the date of first notice of the postmaster.
However, the NLRC Rules do not state what would constitute proper
proof of service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.—Proof of personal service shall consist
of a written admission of the party served or the official return of the
server, or the affidavit of the party serving, containing a full
statement of the date, place and manner of service. If the service is
by ordinary mail, proof thereof shall consist of an affidavit of the
person mailing of facts showing compliance with section 7 of this
Rule. If service is made by registered mail, proof shall be made
251
by such affidavit and registry receipt issued by the mailing
office. The registry return card shall be filed immediately upon
its receipt by the sender, or in lieu thereof the unclaimed letter
together with the certified or sworn copy of the notice given by
the postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted
by Gran is not conclusive proof that he had served a copy of his
appeal memorandum to EDI, nor is it conclusive proof that EDI
received its copy of the Appeal Memorandum. He should have
submitted an affidavit proving that he mailed the Appeal
Memorandum together with the registry receipt issued by the post
office; afterwards, Gran should have immediately filed the registry
return card.
Hence, after seeing that Gran failed to attach the proof of service, the
NLRC should not have simply accepted the post office's list of mail
and parcels sent; but it should have required Gran to properly
furnish the opposing parties with copies of his Appeal
Memorandum as prescribed in J.D. Magpayo and the other cases.
The NLRC should not have proceeded with the adjudication of the
case, as this constitutes grave abuse of discretion.
The glaring failure of NLRC to ensure that Gran should have
furnished petitioner EDI a copy of the Appeal Memorandum before
rendering judgment reversing the dismissal of Gran's complaint
constitutes an evasion of the pertinent NLRC Rules and established
jurisprudence. Worse, this failure deprived EDI of procedural due
process guaranteed by the Constitution which can serve as basis for
the nullification of proceedings in the appeal before the NLRC. One
can only surmise the shock and dismay that OAB, EDI, and ESI
experienced when they thought that the dismissal of Gran's complaint
became final, only to receive a copy of Gran's Motion for Execution
of Judgment which also informed them that Gran had obtained a
favorable NLRC Decision. This is not level playing field and
absolutely unfair and discriminatory against the employer and the job
recruiters. The rights of the employers to procedural due process
cannot be cavalierly disregarded for they too have rights assured
under the Constitution.
However, instead of annulling the dispositions of the NLRC and
remanding the case for further proceedings we will resolve the
petition based on the records before us to avoid a protracted
litigation.33
The second and third issues have a common matter—whether there
was just cause for Gran's dismissal—hence, they will be discussed
jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable
by reason of incompetence, insubordination, and disobedience
In cases involving OFWs, the rights and obligations among and
between the OFW, the local recruiter/agent, and the foreign
employer/principal are governed by the employment contract. A
contract freely entered into is considered law between the parties;
and hence, should be respected. In formulating the contract, the
parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.34
In the present case, the employment contract signed by Gran
specifically states that Saudi Labor Laws will govern matters not
provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties
(lex loci intentiones) to apply to the contract, Saudi Labor Laws
should govern all matters relating to the termination of the
employment of Gran.

In international law, the party who wants to have a foreign law
applied to a dispute or case has the burden of proving the foreign law.
The foreign law is treated as a question of fact to be properly pleaded
and proved as the judge or labor arbiter cannot take judicial notice of
a foreign law. He is presumed to know only domestic or forum law. 35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws
on the matter; thus, the International Law doctrine
of presumed-identity approach or processual presumption comes
into play.36 Where a foreign law is not pleaded or, even if pleaded, is
not proved, the presumption is that foreign law is the same as
ours.37 Thus, we apply Philippine labor laws in determining the
issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally
dismissed due to incompetence and insubordination or disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine law
and jurisprudence that the employer should prove that the dismissal
of employees or personnel is legal and just.
Section 33 of Article 277 of the Labor Code38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39
(b) Subject to the constitutional right of workers to security of tenure
and their right to be protected against dismissal except for a just and
authorized cause and without prejudice to the requirement of notice
under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford
the latter ample opportunity to be heard and to defend himself with
the assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to guidelines
set by the Department of Labor and Employment. Any decision taken
by the employer shall be without prejudice to the right of the workers
to contest the validity or legality of his dismissal by filing a
complaint with the regional branch of the National Labor Relations
Commission. The burden of proving that the termination was for
a valid or authorized cause shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or illegal
dismissal cases, the employer has the burden of proving that the
dismissal is for just and valid causes; and failure to do so would
necessarily mean that the dismissal was not justified and therefore
illegal.40 Taking into account the character of the charges and the
penalty meted to an employee, the employer is bound to adduce clear,
accurate, consistent, and convincing evidence to prove that the
dismissal is valid and legal.41 This is consistent with the principle
of security of tenure as guaranteed by the Constitution and reinforced
by Article 277 (b) of the Labor Code of the Philippines.42
In the instant case, petitioner claims that private respondent Gran was
validly dismissed for just cause, due to incompetence and
insubordination or disobedience. To prove its allegations, EDI
submitted two letters as evidence. The first is the July 9, 1994
termination letter,43 addressed to Gran, from Andrea E. Nicolaou,
Managing Director of OAB. The second is an unsigned April 11,
1995 letter44 from OAB addressed to EDI and ESI, which outlined
the reasons why OAB had terminated Gran's employment.
Petitioner claims that Gran was incompetent for the Computer
Specialist position because he had "insufficient knowledge in
programming and zero knowledge of [the] ACAD
system."45 Petitioner also claims that Gran was justifiably dismissed
due to insubordination or disobedience because he continually failed
to submit the required "Daily Activity Reports."46However, other
than the abovementioned letters, no other evidence was presented to
252
show how and why Gran was considered incompetent, insubordinate,
or disobedient. Petitioner EDI had clearly failed to overcome the
burden of proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent due to
his "insufficient knowledge in programming and zero knowledge of
the ACAD system" based only on the above mentioned letters,
without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation.
Incompetence may be shown by weighing it against a standard,
benchmark, or criterion. However, EDI failed to establish any such
bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of
insubordination or willful disobedience to prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the
following twin elements must concur: (1) the employee's assailed
conduct must have been willful, that is, characterized by a wrongful
and perverse attitude; and (2) the order violated must have been
reasonable, lawful, made known to the employee and must pertain to
the duties which he had been engaged to discharge.47
EDI failed to discharge the burden of proving Gran's insubordination
or willful disobedience. As indicated by the second requirement
provided for in Micro Sales Operation Network, in order to justify
willful disobedience, we must determine whether the order violated
by the employee is reasonable, lawful, made known to the employee,
and pertains to the duties which he had been engaged to discharge. In
the case at bar, petitioner failed to show that the order of the
company which was violated—the submission of "Daily Activity
Reports"—was part of Gran's duties as a Computer Specialist. Before
the Labor Arbiter, EDI should have provided a copy of the company
policy, Gran's job description, or any other document that would
show that the "Daily Activity Reports" were required for submission
by the employees, more particularly by a Computer Specialist.
Even though EDI and/or ESI were merely the local employment or
recruitment agencies and not the foreign employer, they should have
adduced additional evidence to convincingly show that Gran's
employment was validly and legally terminated. The burden
devolves not only upon the foreign-based employer but also on the
employment or recruitment agency for the latter is not only an agent
of the former, but is also solidarily liable with the foreign principal
for any claims or liabilities arising from the dismissal of the
worker.48
Thus, petitioner failed to prove that Gran was justifiably
dismissed due to incompetence, insubordination, or willful
disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the
CA in its Decision, is not applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their
deployment, the petitioners were subjected to trade tests required by
law to be conducted by the recruiting agency to insure employment
of only technically qualified workers for the foreign principal."50 The
CA, using the ruling in the said case, ruled that Gran must have
passed the test; otherwise, he would not have been hired. Therefore,
EDI was at fault when it deployed Gran who was allegedly
"incompetent" for the job.
According to petitioner, the Prieto ruling is not applicable because in
the case at hand, Gran misrepresented himself in his curriculum
vitae as a Computer Specialist; thus, he was not qualified for the job
for which he was hired.

We disagree.
The CA is correct in applying Prieto. The purpose of the required
trade test is to weed out incompetent applicants from the pool of
available workers. It is supposed to reveal applicants with false
educational backgrounds, and expose bogus qualifications. Since
EDI deployed Gran to Riyadh, it can be presumed that Gran had
passed the required trade test and that Gran is qualified for the job.
Even if there was no objective trade test done by EDI, it was still
EDI's responsibility to subject Gran to a trade test; and its failure to
do so only weakened its position but should not in any way prejudice
Gran. In any case, the issue is rendered moot and academic because
Gran's incompetency is unproved.
Fourth Issue: Gran was not Afforded Due Process
As discussed earlier, in the absence of proof of Saudi laws,
Philippine Labor laws and regulations shall govern the relationship
between Gran and EDI. Thus, our laws and rules on the requisites of
due process relating to termination of employment shall apply.
Petitioner EDI claims that private respondent Gran was afforded due
process, since he was allowed to work and improve his capabilities
for five months prior to his termination.51 EDI also claims that the
requirements of due process, as enunciated in Santos, Jr. v.
NLRC,52 and Malaya Shipping Services, Inc. v. NLRC,53 cited by the
CA in its Decision, were properly observed in the present case.
This position is untenable.
In Agabon v. NLRC,54 this Court held that:
Procedurally, (1) if the dismissal is based on a just cause under
Article 282, the employer must give the employee two written
notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to
be heard and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized
causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written
notices 30 days prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be given two
(2) notices before their employment could be terminated: (1) a first
notice to apprise the employees of their fault, and (2) a second notice
to communicate to the employees that their employment is being
terminated. In between the first and second notice, the employees
should be given a hearing or opportunity to defend themselves
personally or by counsel of their choice.55
A careful examination of the records revealed that, indeed, OAB's
manner of dismissing Gran fell short of the two notice requirement.
While it furnished Gran the written notice informing him of his
dismissal, it failed to furnish Gran the written notice apprising him of
the charges against him, as prescribed by the Labor
Code.56 Consequently, he was denied the opportunity to respond to
said notice. In addition, OAB did not schedule a hearing or
conference with Gran to defend himself and adduce evidence in
support of his defenses. Moreover, the July 9, 1994 termination letter
was effective on the same day. This shows that OAB had already
condemned Gran to dismissal, even before Gran was furnished the
termination letter. It should also be pointed out that OAB failed to
give Gran the chance to be heard and to defend himself with the
assistance of a representative in accordance with Article 277 of the
Labor Code. Clearly, there was no intention to provide Gran with due
process. Summing up, Gran was notified and his employment
arbitrarily terminated on the same day, through the same letter, and
253
for unjustified grounds. Obviously, Gran was not afforded due
process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable
to pay nominal damages as indemnity for violating the employee's
right to statutory due process. Since OAB was in breach of the due
process requirements under the Labor Code and its regulations, OAB,
ESI, and EDI, jointly and solidarily, are liable to Gran in the amount
of PhP 30,000.00 as indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed
period of employment, in cases arising before the effectivity of R.A.
No. 804258 (Migrant Workers and Overseas Filipinos Act) on August
25, 1995, that when the contract is for a fixed term and the
employees are dismissed without just cause, they are entitled to the
payment of their salaries corresponding to the unexpired portion of
their contract.59 On the other hand, for cases arising after the
effectivity of R.A. No. 8042, when the termination of employment is
without just, valid or authorized cause as defined by law or contract,
the worker shall be entitled to the full reimbursement of his
placement fee with interest of twelve percent (12%) per annum, plus
his salaries for the unexpired portion of his employment contract or
for three (3) months for every year of the unexpired term whichever
is less.60
In the present case, the employment contract provides that the
employment contract shall be valid for a period of two (2) years from
the date the employee starts to work with the employer.61 Gran
arrived in Riyadh, Saudi Arabia and started to work on February 7,
1994;62 hence, his employment contract is until February 7, 1996.
Since he was illegally dismissed on July 9, 1994, before the
effectivity of R.A. No. 8042, he is therefore entitled to backwages
corresponding to the unexpired portion of his contract, which was
equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and
mainly relies on the Declaration which is claimed to have been freely
and voluntarily executed by Gran. The relevant portions of the
Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER
RECEIVING MY FINAL SETTLEMENT ON THIS DATE THE
AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION)
FOR THE SERVICES I RENDERED TO OAB
ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL
OBLIGATION IN MY FAVOUR AFTER RECEIVING THE
ABOVE MENTIONED AMOUNT IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION
TOWARDS ME IN WHATEVER FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY
AFFIXING MY SIGNATURE VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of
quitclaims or waivers, more particularly those executed by
employees. This requirement was clearly articulated by Chief Justice

Artemio V. Panganiban in Land and Housing Development
Corporation v. Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or
contracts in favor of workers should be strictly scrutinized to protect
the weak and the disadvantaged. The waivers should be carefully
examined, in regard not only to the words and terms used, but
also the factual circumstances under which they have been
executed.63 (Emphasis supplied.)
This Court had also outlined in Land and Housing Development
Corporation, citing Periquet v. NLRC,64 the parameters for valid
compromise agreements, waivers, and quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If
the agreement was voluntarily entered into and represents a
reasonable settlement, it is binding on the parties and may not later
be disowned simply because of a change of mind. It is only where
there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person
making the waiver did so voluntarily, with full understanding of
what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a
valid and binding undertaking. (Emphasis supplied.)
Is the waiver and quitclaim labeled a Declaration valid? It is not.
The Court finds the waiver and quitclaim null and void for the
following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR
2,948.00, is unreasonably low. As correctly pointed out by the
court a quo, the payment of SR 2,948.00 is even lower than his
monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also
very much less than the USD 16,150.00 which is the amount Gran is
legally entitled to get from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is
actually the payment for Gran's salary for the services he rendered to
OAB as Computer Specialist. If the Declaration is a quitclaim, then
the consideration should be much much more than the monthly salary
of SR 3,190.00 (USD 850.00)—although possibly less than the
estimated Gran's salaries for the remaining duration of his contract
and other benefits as employee of OAB. A quitclaim will
understandably be lower than the sum total of the amounts and
benefits that can possibly be awarded to employees or to be earned
for the remainder of the contract period since it is a compromise
where the employees will have to forfeit a certain portion of the
amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such
amount is unconscionably low or unreasonable although the
employee voluntarily agreed to it. In the case of the Declaration, the
amount is unreasonably small compared to the future wages of Gran.
3. The factual circumstances surrounding the execution of the
Declaration would show that Gran did not voluntarily and freely
execute the document. Consider the following chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and
required to pay his plane ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
254
The foregoing events readily reveal that Gran was "forced" to sign
the Declaration and constrained to receive the amount of SR 2,948.00
even if it was against his will—since he was told on July 10, 1994 to
leave Riyadh on July 12, 1994. He had no other choice but to sign the
Declaration as he needed the amount of SR 2,948.00 for the payment
of his ticket. He could have entertained some apprehensions as to the
status of his stay or safety in Saudi Arabia if he would not sign the
quitclaim.
4. The court a quo is correct in its finding that the Declaration is a
contract of adhesion which should be construed against the employer,
OAB. An adhesion contract is contrary to public policy as it leaves
the weaker party—the employee—in a "take-it-or-leave-it" situation.
Certainly, the employer is being unjust to the employee as there is no
meaningful choice on the part of the employee while the terms are
unreasonably favorable to the employer.66
Thus, the Declaration purporting to be a quitclaim and waiver is
unenforceable under Philippine laws in the absence of proof of the
applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of
quitclaims and waivers of employees under Philippine laws, said
agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding
amounts, which the employees are giving up in consideration of the
fixed compromise amount;
3. A statement that the employer has clearly explained to the
employee in English, Filipino, or in the dialect known to the
employees—that by signing the waiver or quitclaim, they are
forfeiting or relinquishing their right to receive the benefits which are
due them under the law; and
4. A statement that the employees signed and executed the document
voluntarily, and had fully understood the contents of the document
and that their consent was freely given without any threat, violence,
duress, intimidation, or undue influence exerted on their person.
It is advisable that the stipulations be made in English and Tagalog or
in the dialect known to the employee. There should be two (2)
witnesses to the execution of the quitclaim who must also sign the
quitclaim. The document should be subscribed and sworn to under
oath preferably before any administering official of the Department
of Labor and Employment or its regional office, the Bureau of Labor
Relations, the NLRC or a labor attaché in a foreign country. Such
official shall assist the parties regarding the execution of the
quitclaim and waiver.67 This compromise settlement becomes final
and binding under Article 227 of the Labor Code which provides
that:
[A]ny compromise settlement voluntarily agreed upon with the
assistance of the Bureau of Labor Relations or the regional office of
the DOLE, shall be final and binding upon the parties and the NLRC
or any court "shall not assume jurisdiction over issues involved
therein except in case of non-compliance thereof or if there is prima
facieevidence that the settlement was obtained through fraud,
misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall
apply only to labor contracts of OFWs in the absence of proof of the
laws of the foreign country agreed upon to govern said contracts.
Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000
Decision in CA-G.R. SP No. 56120 of the Court of Appeals
 255

affirming the January 15, 1999 Decision and September 30, 1999
Resolution of the NLRC

is AFFIRMED with the MODIFICATION that petitioner

EDI-Staffbuilders International, Inc. shall pay the amount of PhP
30,000.00 to respondent Gran as nominal damages for
non-compliance with statutory due process.

No costs.

SO ORDERED.

G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL,
DONATO B. EVANGELISTA, and the rest of 1,767
NAMED-COMPLAINANTS, thru and by their Attorney-in-fact,
Atty. GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION'S ADMINISTRATOR, NATIONAL
LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL
BUILDERS CORPORATION, respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law
Offices for BRII/AIBC.
Florante M. De Castro for private respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et.
al. v. Philippine Overseas Employment Administration's
Administrator, et. al.," was filed under Rule 65 of the Revised Rules
of Court:
(1) to modify the Resolution dated September 2, 1991 of the National
Labor Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to
render a new decision: (i) declaring private respondents as in default;
(ii) declaring the said labor cases as a class suit; (iii) ordering Asia
International Builders Corporation (AIBC) and Brown and Root
International Inc. (BRII) to pay the claims of the 1,767 claimants in
said labor cases; (iv) declaring Atty. Florante M. de Castro guilty of
forum-shopping; and (v) dismissing POEA Case No. L-86-05-460;
and
(3) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M.
Cadalin, et. al., v. Hon. National Labor Relations Commission, et.
al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive
period under the Labor Code of the Philippines instead of the
ten-year prescriptive period under the Civil Code of the Philippines;
and (ii) denied the
"three-hour daily average" formula in the computation of petitioners'
overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC,
denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International
Builders Corporation, et. al., v. National Labor Relations
Commission, et. al." was filed under Rule 65 of the Revised Rules of
Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
256
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar
as it denied the motions for reconsideration of AIBC and BRII (Rollo,
pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified
the decision of POEA in four labor cases: (1) awarded monetary
benefits only to 149 claimants and (2) directed Labor Arbiter Fatima
J. Franco to conduct hearings and to receive evidence on the claims
dismissed by the POEA for lack of substantial evidence or proof of
employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third
Division while G.R. Nos. 104911-14 were raffled to the Second
Division. In the Resolution dated July 26, 1993, the Second Division
referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos.
104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division
granted the motion filed in G.R. Nos. 104911-14 for the
consolidation of said cases with G.R. Nos. 104776 and 105029-32,
which were assigned to the First Division (G.R. Nos.
104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp.
369-377, 426-432). In the Resolution dated October 27, 1993, the
First Division granted the motion to consolidate G.R. Nos.
104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p.
1109; G.R. Nos. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and
Donato B. Evangelista, in their own behalf and on behalf of 728
other overseas contract workers (OCWs) instituted a class suit by
filing an "Amended Complaint" with the Philippine Overseas
Employment Administration (POEA) for money claims arising from
their recruitment by AIBC and employment by BRII (POEA Case No.
L-84-06-555). The claimants were represented by Atty. Gerardo del
Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas,
and is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy
Filipino workers for overseas employment on behalf of its foreign
principals.
The amended complaint principally sought the payment of the
unexpired portion of the employment contracts, which was
terminated prematurely, and secondarily, the payment of the interest
of the earnings of the Travel and Reserved Fund, interest on all the
unpaid benefits; area wage and salary differential pay; fringe benefits;
refund of SSS and premium not remitted to the SSS; refund of
withholding tax not remitted to the BIR; penalties for committing
prohibited practices; as well as the suspension of the license of AIBC
and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the
complaint and was given, together with BRII, up to July 5, 1984 to
file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and
BRII, ordered the claimants to file a bill of particulars within ten
days from receipt of the order and the movants to file their answers
within ten days from receipt of the bill of particulars. The POEA
Administrator also scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and
Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike
Out of the Records", the "Complaint" and the "Compliance and
Manifestation." On July 25, 1984, the claimants filed their

"Rejoinder and Comments," averring, among other matters, the
failure of AIBC and BRII to file their answers and to attend the
pre-trial conference on July 25, 1984. The claimants alleged that
AIBC and BRII had waived their right to present evidence and had
defaulted by failing to file their answers and to attend the pre-trial
conference.
On October 2, 1984, the POEA Administrator denied the "Motion to
Strike Out of the Records" filed by AIBC but required the claimants
to correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to
comply with the Order of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA Administrator direct the
parties to submit simultaneously their position papers, after which the
case should be deemed submitted for decision. On the same day, Atty.
Florante de Castro filed another complaint for the same money
claims and benefits in behalf of several claimants, some of whom
were also claimants in POEA Case No. L-84-06-555 (POEA Case
No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the
Order dated October 2, 1984 and an "Urgent Manifestation," praying
that the POEA direct the parties to submit simultaneously their
position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment
on the "Compliance" and "Urgent Manifestation" of claimants. On
November 6, 1984, it filed a second motion for extension of time to
file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that
its motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions
for extension of time and asked that AIBC and BRII be declared in
default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying,
among other reliefs, that claimants should be ordered to amend their
complaint.
On December 27, 1984, the POEA Administrator issued an order
directing AIBC and BRII to file their answers within ten days from
receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking
the reversal of the said order of the POEA Administrator. Claimants
opposed the appeal, claiming that it was dilatory and praying that
AIBC and BRII be declared in default.
On April 2, 1985, the original claimants filed an "Amended
Complaint and/or Position Paper" dated March 24, 1985, adding new
demands: namely, the payment of overtime pay, extra night work pay,
annual leave differential pay, leave indemnity pay, retirement and
savings benefits and their share of forfeitures (G.R. No.
104776, Rollo, pp. 14-16). On April 15, 1985, the POEA
Administrator directed AIBC to file its answer to the amended
complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary
Judgment." On the same day, the POEA issued an order directing
AIBC and BRII to file their answers to the "Amended Complaint,"
otherwise, they would be deemed to have waived their right to
present evidence and the case would be resolved on the basis of
complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as
Improper Class Suit and Motion for Bill of Particulars Re: Amended
Complaint dated March 24, 1985." Claimants opposed the motions.
257
On September 4, 1985, the POEA Administrator reiterated his
directive to AIBC and BRII to file their answers in POEA Case No.
L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC,
together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from
hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to
include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a
complaint (POEA Case No. L-85-10-777) against AIBC and BRII
with the POEA, demanding monetary claims similar to those subject
of POEA Case No. L-84-06-555. In the same month, Solomon Reyes
also filed his own complaint (POEA Case No. L-85-10-779) against
AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro &
Associates asked for the substitution of the original counsel of record
and the cancellation of the special powers of attorney given the
original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of
the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money
claims (POEA Case No. 86-05-460) in behalf of 11 claimants
including Bienvenido Cadalin, a claimant in POEA Case No.
84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed
on February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA
Administrator, it is not amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely — G.R. No. 72132 on
September 26, 1985 and Administrative Case No. 2858 on March 18,
1986. On May 13, 1987, the Supreme Court issued a resolution in
Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in
POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the
labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489),
questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing
AIBC that all its technical objections may properly be resolved in the
hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was
filed on September 22, 1988 by claimant Hermie Arguelles and 18
co-claimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to
the Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on
April 28, 1989 by claimants Emigdio P. Bautista and Rolando R.
Lobeta charging AIBC and BRII for violation of labor and social
legislations. The third was filed by Jose R. Santos, Maximino N.
Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the
NLRC Resolution dated December 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA
Administrator its motion for suspension of the period for filing an
answer or motion for extension of time to file the same until the
resolution of its motion for reconsideration of the order of the NLRC
dismissing the two appeals. On April 28, 1987, NLRC en
banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the
complaint. At the same hearing, the parties were given a period of 15
days from said date within which to submit their respective position
papers. On June 24, 1987 claimants filed their "Urgent Motion to
Strike Out Answer," alleging that the answer was filed out of time.
On June 29, 1987, claimants filed their "Supplement to Urgent
Manifestational Motion" to comply with the POEA Order of June 19,
1987. On February 24, 1988, AIBC and BRII submitted their
position paper. On March 4, 1988, claimants filed their
"Ex-Parte Motion to Expunge from the Records" the position paper
of AIBC and BRII, claiming that it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro
filed their memorandum in POEA Case No. L-86-05-460. On
September 6, 1988, AIBC and BRII submitted their Supplemental
Memorandum. On September 12, 1988, BRII filed its "Reply to
Complainant's Memorandum." On October 26, 1988, claimants
submitted their "Ex-Parte Manifestational Motion and
Counter-Supplemental Motion," together with 446 individual
contracts of employments and service records. On October 27, 1988,
AIBC and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision
in POEA Case No. L-84-06-555 and the other consolidated cases,
which awarded the amount of $824,652.44 in favor of only 324
complainants.
On February 10, 1989, claimants submitted their "Appeal
Memorandum For Partial Appeal" from the decision of the POEA.
On the same day, AIBC also filed its motion for reconsideration
and/or appeal in addition to the "Notice of Appeal" filed earlier on
February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal,"
praying for the dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to
Complainants' Appeal Memorandum," together with their "newly
discovered evidence" consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their
"Manifestation," stating among other matters that there were only
728 named claimants. On April 20, 1989, the claimants filed their
"Counter-Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for
Execution" of the Decision dated January 30, 1989 on the grounds
that BRII had failed to appeal on time and AIBC had not posted the
supersedeas bond in the amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the
labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion,"
praying that all the 1,767 claimants be awarded their monetary
claims for failure of private respondents to file their answers within
the reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing
as follows:
258
WHEREFORE, premises considered, the Decision of the POEA in
these consolidated cases is modified to the extent and in accordance
with the following dispositions:
1. The claims of the 94 complainants identified and listed in Annex
"A" hereof are dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered, jointly
and severally, to pay the 149 complainants, identified and listed in
Annex "B" hereof, the peso equivalent, at the time of payment, of the
total amount in US dollars indicated opposite their respective names;
3. The awards given by the POEA to the 19 complainants classified
and listed in Annex "C" hereof, who appear to have worked
elsewhere than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including
those for overtime work and favorably granted by the POEA, are
hereby dismissed for lack of substantial evidence in support thereof
or are beyond the competence of this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and
authority under Article 218(c) of the Labor Code, as amended by
R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this
Commission to summon parties, conduct hearings and receive
evidence, as expeditiously as possible, and thereafter submit a
written report to this Commission (First Division) of the proceedings
taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and
made an integral part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23 of
the decision of POEA, subject of the appeals) and,
(b) complainants identified and listed in Annex "E" attached and
made an integral part of this Resolution, whose awards decreed by
the POEA, to Our mind, are not supported by substantial evidence"
(G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp.
85-87; G.R. Nos. 105029-31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a
petition for certiorari with the Supreme Court (G.R. Nos.
120741-44). The petition was dismissed in a resolution dated January
27, 1992.
Three motions for reconsideration of the September 2, 1991
Resolution of the NLRC were filed. The first, by the claimants
represented by Atty. Del Mundo; the second, by the claimants
represented by Atty. De Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the
motions for reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del
Mundo (G.R. No. 104776), the claimants represented by Atty. De
Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos.
105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and
AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of
their respective petitions insofar as the claimants-parties to the
compromise agreements were concerned (See Annex A for list of
claimants who signed quitclaims).

Thus the following manifestations that the parties had arrived at a
compromise agreement and the corresponding motions for the
approval of the agreements were filed by the parties and approved by
the Court:
1) Joint Manifestation and Motion involving claimant Emigdio
Abarquez and 47 co-claimants dated September 2, 1992 (G.R. Nos.
104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving petitioner Bienvenido
Cadalin and 82 co-petitioners dated September 3, 1992 (G.R. No.
104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos.
105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-626;
G.R. Nos. 104911-14, Rollo, pp. 407-516);
4) Joint Manifestation and Motion involving claimant Antonio T.
Anglo and 17 co-claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713;
G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio
Bobongo and 6 co-claimants dated January 15, 1993 (G.R. No.
104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp.
629-652);
6) Joint Manifestation and Motion involving claimant Valerio A.
Evangelista and 4 co-claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp.
1815-1829);
7) Joint Manifestation and Motion involving claimants Palconeri
Banaag and 5 co-claimants dated March 17, 1993 (G.R. No.
104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp.
655-675);
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R. Nos.
105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp.
679-729; G.R. No. 104776, Rollo, pp. 1773-1814);
9) Joint Manifestation and Motion involving Valerio Evangelista and
3 co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp.
1815-1829);
10) Joint Manifestation and Motion involving petitioner Quiterio R.
Agudo and 36 co-claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp.
748-864; G.R. No. 104776, Rollo, pp. 1066-1183);
11) Joint Manifestation and Motion involving claimant Arnaldo J.
Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp.
1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);
12) Joint Manifestation and Motion involving claimant Ricardo C.
Dayrit and 2 co-claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp.
1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante C.
Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp.
987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);
14) Joint Manifestation and Motion involving Vivencio V. Abella
and 27 co-claimants dated January 10, 1994 (G.R. Nos.
105029-32, Rollo, Vol. II);
259
15) Joint Manifestation and Motion involving Domingo B. Solano
and six co-claimants dated August 25, 1994 (G.R. Nos. 105029-32;
G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than fifty
volumes now comprising the records of these cases. From the records,
it appears that the complainants-appellants allege that they were
recruited by respondent-appellant AIBC for its accredited foreign
principal, Brown & Root, on various dates from 1975 to 1983. They
were all deployed at various projects undertaken by Brown & Root in
several countries in the Middle East, such as Saudi Arabia, Libya,
United Arab Emirates and Bahrain, as well as in Southeast Asia, in
Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the
Philippine Government, all the individual complainants signed
standard overseas employment contracts (Records, Vols. 25-32.
Hereafter, reference to the records would be sparingly made,
considering their chaotic arrangement) with AIBC before their
departure from the Philippines. These overseas employment contracts
invariably contained the following relevant terms and conditions.
PART B —
(1) Employment Position Classification :—————————
(Code) :—————————
(2) Company Employment Status :—————————
(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly rate and overtime rate as
set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer, and
Employer may, at his sole option, change or adjust such hours as
maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this agreement,
the Employer may, at his sole discretion, terminate employee's
service with cause, under this agreement at any time. If the Employer
terminates the services of the Employee under this Agreement
because of the completion or termination, or suspension of the work
on which the Employee's services were being utilized, or because of
a reduction in force due to a decrease in scope of such work, or by
change in the type of construction of such work. The Employer will
be responsible for his return transportation to his country of origin.
Normally on the most expeditious air route, economy class
accommodation.
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory
completion of contract, employee shall be entitled to 12-days
vacation leave with pay. This shall be computed at the basic wage
rate. Fractions of a year's service will be computed on
a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for every
year of service for non-work connected injuries or illness. If the
employee failed to avail of such leave benefits, the same shall be
forfeited at the end of the year in which said sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be accrued
and payable only upon satisfactory completion of this contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of rest with 8
hours regular pay. If work is performed on this day, all hours work
shall be paid at the premium rate. However, this offday pay provision
is applicable only when the laws of the Host Country require
payments for rest day.
In the State of Bahrain, where some of the individual complainants
were deployed, His Majesty Isa Bin Salman Al Kaifa, Amir of
Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise
known as the Labour Law for the Private Sector (Records, Vol. 18).
This decree took effect on August 16, 1976. Some of the provisions
of Amiri Decree No. 23 that are relevant to the claims of the
complainants-appellants are as follows (italics supplied only for
emphasis):
Art. 79: . . . A worker shall receive payment for each extra hour
equivalent to his wage entitlement increased by a minimum of
twenty-five per centum thereof for hours worked during the day;
and by a minimum of fifty per centum thereof for hours worked
during the night which shall be deemed to being from seven o'clock
in the evening until seven o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a weekly day of rest on full
pay.
. . . an employer may require a worker, with his consent, to work on
his weekly day of restif circumstances so require and in respect of
which an additional sum equivalent to 150% of his normal wage
shall be paid to him. . . .
Art. 81: . . . When conditions of work require the worker to work on
any official holiday, he shall be paid an additional sum equivalent to
150% of his normal wage.
Art. 84: Every worker who has completed one year's continuous
service with his employer shall be entitled to leave on full pay for a
period of not less than 21 days for each year increased to a period
not less than 28 days after five continuous years of service.
A worker shall be entitled to such leave upon a quantum meruit in
respect of the proportion of his service in that year.
Art. 107: A contract of employment made for a period of indefinite
duration may be terminated by either party thereto after giving the
other party thirty days' prior notice before such termination, in
writing, in respect of monthly paid workers and fifteen days' notice
in respect of other workers. The party terminating a contract without
giving the required notice shall pay to the other party compensation
equivalent to the amount of wages payable to the worker for the
period of such notice or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to such worker, upon
termination of employment, a leaving indemnity for the period of his
260
employment calculated on the basis of fifteen days' wages for each
year of the first three years of service and of one month's wages for
each year of service thereafter. Such worker shall be entitled to
payment of leaving indemnity upon a quantum meruit in proportion
to the period of his service completed within a year.
All the individual complainants-appellants have already been
repatriated to the Philippines at the time of the filing of these cases
(R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: — Whether or not complainants are entitled to the benefits
provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in Bahrain are
entitled to the above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing
a more favorable treatment of alien employees) bars complainants
from enjoying its benefits.
Second: — Assuming that Amiri Decree No. 23 of Bahrain is
applicable in these cases, whether or not complainants' claim for the
benefits provided therein have prescribed.
Third: — Whether or not the instant cases qualify as a class suit.
Fourth: — Whether or not the proceedings conducted by the POEA,
as well as the decision that is the subject of these appeals, conformed
with the requirements of due process;
(a) Whether or not the respondent-appellant was denied its right to
due process;
(b) Whether or not the admission of evidence by the POEA after
these cases were submitted for decision was valid;
(c) Whether or not the POEA acquired jurisdiction over Brown &
Root International, Inc.;
(d) Whether or not the judgment awards are supported by substantial
evidence;
(e) Whether or not the awards based on the averages and formula
presented by the complainants-appellants are supported by
substantial evidence;
(f) Whether or not the POEA awarded sums beyond what the
complainants-appellants prayed for; and, if so, whether or not these
awards are valid.
Fifth: — Whether or not the POEA erred in holding respondents
AIBC and Brown & Root jointly are severally liable for the judgment
awards despite the alleged finding that the former was the employer
of the complainants;
(a) Whether or not the POEA has acquired jurisdiction over Brown &
Root;
(b) Whether or not the undisputed fact that AIBC was a licensed
construction contractor precludes a finding that Brown & Root is
liable for complainants claims.
Sixth: — Whether or not the POEA Administrator's failure to hold
respondents in default constitutes a reversible error.
Seventh: — Whether or not the POEA Administrator erred in
dismissing the following claims:
a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at least 100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;
j. Refund of withholding tax not remitted to BIR;
k. Fringe benefits under B & R's "A Summary of Employee Benefits"
(Annex "Q" of Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment award;
n. Other reliefs, like suspending and/or cancelling the license to
recruit of AIBC and the accreditation of B & R issued by POEA;
o. Penalty for violations of Article 34 (prohibited practices), not
excluding reportorial requirements thereof.
Eighth: — Whether or not the POEA Administrator erred in not
dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989
Revised Rules on Evidence governing the pleading and proof of a
foreign law and admitted in evidence a simple copy of the Bahrain's
Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector).
NLRC invoked Article 221 of the Labor Code of the Philippines,
vesting on the Commission ample discretion to use every and all
reasonable means to ascertain the facts in each case without regard to
the technicalities of law or procedure. NLRC agreed with the POEA
Administrator that the Amiri Decree No. 23, being more favorable
and beneficial to the workers, should form part of the overseas
employment contract of the complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to
the claimants, who worked in Bahrain, and set aside awards of the
POEA Administrator in favor of the claimants, who worked
elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the
filing of the claims of the complainants was three years, as provided
in Article 291 of the Labor Code of the Philippines, and not ten years
as provided in Article 1144 of the Civil Code of the Philippines nor
one year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that
the labor cases cannot be treated as a class suit for the simple reason
that not all the complainants worked in Bahrain and therefore, the
subject matter of the action, the claims arising from the Bahrain law,
is not of common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the
cardinal rules of administrative due process: namely, (1) the failure
of the POEA Administrator to consider the evidence presented by
AIBC and BRII; (2) some findings of fact were not supported by
substantial evidence; and (3) some of the evidence upon which the
decision was based were not disclosed to AIBC and BRII during the
hearing.
261
On the fifth issue, NLRC sustained the ruling of the POEA
Administrator that BRII and AIBC are solidarily liable for the claims
of the complainants and held that BRII was the actual employer of
the complainants, or at the very least, the indirect employer, with
AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the
POEA Administrator through the summons served on AIBC, its local
agent.
On the sixth issue, NLRC held that the POEA Administrator was
correct in denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based
on the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims
for refund of the SSS premiums and refund of withholding taxes and
the claimants should file their claims for said refund with the
appropriate government agencies;
(2) the claimants failed to establish that they are entitled to the claims
which are not based on the overseas employment contracts nor the
Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for
moral and exemplary damages and nonetheless, the basis for granting
said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion
of their contract may be allowed if filed within the three-year
prescriptive period;
(5) that the allegation that complainants were prematurely repatriated
prior to the expiration of their overseas contract was not established;
and
(6) that the POEA Administrator has no jurisdiction over the
complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case
No. (L) 86-65-460 should have been dismissed on the ground that the
claimants in said case were also claimants in POEA Case No. (L)
84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the
POEA just resolved the corresponding claims in POEA Case No. (L)
84-06-555. In other words, the POEA did not pass upon the same
claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on
the following grounds:
(1) that they were deprived by NLRC and the POEA of their right to
a speedy disposition of their cases as guaranteed by Section 16,
Article III of the 1987 Constitution. The POEA Administrator
allowed private respondents to file their answers in two years (on
June 19, 1987) after the filing of the original complaint (on April 2,
1985) and NLRC, in total disregard of its own rules, affirmed the
action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default and should have rendered summary
judgment on the basis of the pleadings and evidence submitted by
claimants;
(3) the NLRC and POEA Administrator erred in not holding that the
labor cases filed by AIBC and BRII cannot be considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years;
and
(5) that NLRC and the POEA Administrator should have dismissed
POEA Case No. L-86-05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776,
argued:
(1) that they were not responsible for the delay in the disposition of
the labor cases, considering the great difficulty of getting all the
records of the more than 1,500 claimants, the piece-meal filing of the
complaints and the addition of hundreds of new claimants by
petitioners;
(2) that considering the number of complaints and claimants, it was
impossible to prepare the answers within the ten-day period provided
in the NLRC Rules, that when the motion to declare AIBC in default
was filed on July 19, 1987, said party had already filed its answer,
and that considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties,
the ten-day rule to answer was not fair and reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of the
controversy — which was the applicability of the Amiri Decree No.
23. Likewise, the nature of the claims varied, some being based on
salaries pertaining to the unexpired portion of the contracts while
others being for pure money claims. Each claimant demanded
separate claims peculiar only to himself and depending upon the
particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed
by Article 291 of the Labor Code of the Philippines (three years) and
not the one prescribed by Article 1144 of the Civil Code of the
Philippines (ten years); and
(5) that they are not concerned with the issue of whether POEA Case
No. L-86-05-460 should be dismissed, this being a private quarrel
between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike
out the joint manifestations and motions of AIBC and BRII dated
September 2 and 11, 1992, claiming that all the claimants who
entered into the compromise agreements subject of said
manifestations and motions were his clients and that Atty. Florante
M. de Castro had no right to represent them in said agreements. He
also claimed that the claimants were paid less than the award given
them by NLRC; that Atty. De Castro collected additional attorney's
fees on top of the 25% which he was entitled to receive; and that the
consent of the claimants to the compromise agreements and
quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp.
838-810). In the Resolution dated November 23, 1992, the Court
denied the motion to strike out the Joint Manifestations and Motions
dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.
608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim
to Enforce Attorney's Lien," alleging that the claimants who entered
into compromise agreements with AIBC and BRII with the
assistance of Atty. De Castro, had all signed a retainer agreement
with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del
Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of
262
court and for violation of Canons 1, 15 and 16 of the Code of
Professional Responsibility. The said lawyers allegedly misled this
Court, by making it appear that the claimants who entered into the
compromise agreements were represented by Atty. De Castro, when
in fact they were represented by Atty. Del Mundo (G.R. No.
104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges
against Atty. De Castro for unethical practices and moved for the
voiding of the quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition
for certiorari on the grounds that NLRC gravely abused its discretion
when it: (1) applied the three-year prescriptive period under the
Labor Code of the Philippines; and (2) it denied the claimant's
formula based on an average overtime pay of three hours a day
(Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself
during the negotiation for an amicable settlement of their money
claims in Bahrain as shown in the Memorandum dated April 16,
1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R.
No. 104776 that the prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that provided in the Civil
Code of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the
method of computing the overtime pay, BRII and AIBC claimed that
they were not bound by what appeared therein, because such
memorandum was proposed by a subordinate Bahrain official and
there was no showing that it was approved by the Bahrain Minister of
Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement
of the dispute and any offer made by a party therein could not be
used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely
abused its discretion when it: (1) enforced the provisions of the
Amiri Decree No. 23 of 1976 and not the terms of the employment
contracts; (2) granted claims for holiday, overtime and leave
indemnity pay and other benefits, on evidence admitted in
contravention of petitioner's constitutional right to due process; and
(3) ordered the POEA Administrator to hold new hearings for the
683 claimants whose claims had been dismissed for lack of proof by
the POEA Administrator or NLRC itself. Lastly, they allege that
assuming that the Amiri Decree No. 23 of 1976 was applicable,
NLRC erred when it did not apply the one-year prescription provided
in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they
disagreed as to the time that should be embraced within the
prescriptive period.
To the POEA Administrator, the prescriptive period was ten years,
applying Article 1144 of the Civil Code of the Philippines. NLRC
believed otherwise, fixing the prescriptive period at three years as
provided in Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14,
invoking different grounds, insisted that NLRC erred in ruling that

the prescriptive period applicable to the claims was three years,
instead of ten years, as found by the POEA Administrator.
The Solicitor General expressed his personal view that the
prescriptive period was one year as prescribed by the Amiri Decree
No. 23 of 1976 but he deferred to the ruling of NLRC that Article
291 of the Labor Code of the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer to
those arising from the employer's violation of the employee's right as
provided by the Labor Code.
In the instant case, what the respondents violated are not the rights of
the workers as provided by the Labor Code, but the provisions of the
Amiri Decree No. 23 issued in Bahrain, which ipso facto amended
the worker's contracts of employment. Respondents consciously
failed to conform to these provisions which specifically provide for
the increase of the worker's rate. It was only after June 30, 1983, four
months after the brown builders brought a suit against B & R in
Bahrain for this same claim, when respondent AIBC's contracts have
undergone amendments in Bahrain for the new hires/renewals
(Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this
instant case is Article 1144 of the Civil Code of the Philippines,
which provides:
Art. 1144. The following actions may be brought within ten years
from the time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the
respondents shall prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the ten-year prescriptive
period, no claim suffered the infirmity of being prescribed (G.R. No.
104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the
prescriptive period is three years as provided in Article 291 of the
Labor Code of the Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three years
from the time the cause of action accrued; otherwise they shall be
forever barred" (Art. 291, Labor Code, as amended). This three-year
prescriptive period shall be the one applied here and which should be
reckoned from the date of repatriation of each individual complainant,
considering the fact that the case is having (sic) filed in this country.
We do not agree with the POEA Administrator that this three-year
prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291 gives no
such indication. Likewise, We can not consider complainants' cause/s
of action to have accrued from a violation of their employment
contracts. There was no violation; the claims arise from the benefits
of the law of the country where they worked. (G.R. No.
104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as
provided by the Amiri Decree No. 23 of 1976, NLRC opined that the
applicability of said law was one of characterization, i.e., whether to
characterize the foreign law on prescription or statute of limitation as
"substantive" or "procedural." NLRC cited the decision in Bournias v.
Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where
the issue was the applicability of the Panama Labor Code in a case
263
filed in the State of New York for claims arising from said Code. In
said case, the claims would have prescribed under the Panamanian
Law but not under the Statute of Limitations of New York. The U.S.
Circuit Court of Appeals held that the Panamanian Law was
procedural as it was not "specifically intended to be substantive,"
hence, the prescriptive period provided in the law of the forum
should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of limitations of
a foreign country, and it is not clear on the face of the statute that its
purpose was to limit the enforceability, outside as well as within the
foreign country concerned, of the substantive rights to which the
statute pertains, we think that as a yardstick for determining whether
that was the purpose this test is the most satisfactory one. It does not
lead American courts into the necessity of examining into the
unfamiliar peculiarities and refinements of different foreign legal
systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is entitled to
succeed, for the respondents have failed to satisfy us that the
Panamanian period of limitation in question was specifically aimed
against the particular rights which the libelant seeks to enforce. The
Panama Labor Code is a statute having broad objectives, viz: "The
present Code regulates the relations between capital and labor,
placing them on a basis of social justice, so that, without injuring any
of the parties, there may be guaranteed for labor the necessary
conditions for a normal life and to capital an equitable return to its
investment." In pursuance of these objectives the Code gives laborers
various rights against their employers. Article 623 establishes the
period of limitation for all such rights, except certain ones which are
enumerated in Article 621. And there is nothing in the record to
indicate that the Panamanian legislature gave special consideration to
the impact of Article 623 upon the particular rights sought to be
enforced here, as distinguished from the other rights to which that
Article is also applicable. Were we confronted with the question of
whether the limitation period of Article 621 (which carves out
particular rights to be governed by a shorter limitation period) is to
be regarded as "substantive" or "procedural" under the rule of
"specifity" we might have a different case; but here on the surface of
things we appear to be dealing with a "broad," and not a "specific,"
statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of
the Labor Code of the Philippines, which was applied by NLRC,
refers only to claims "arising from the employer's violation of the
employee's right as provided by the Labor Code." They assert that
their claims are based on the violation of their employment contracts,
as amended by the Amiri Decree No. 23 of 1976 and therefore the
claims may be brought within ten years as provided by Article 1144
of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine
Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have
prescribed under the Amiri Decree No. 23 of 1976, argue that there is
in force in the Philippines a "borrowing law," which is Section 48 of
the Code of Civil Procedure and that where such kind of law exists, it
takes precedence over the common-law conflicts rule (G.R. No.
104776, Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription
of action based on the Amiri Decree No. 23 of 1976 or a Philippine
law on prescription that shall be the governing law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be
actionable after the lapse of one year from the date of the expiry of
the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the
forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed
by the laws of the forum. This is true even if the action is based upon
a foreign substantive law (Restatement of the Conflict of Laws, Sec.
685; Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in
the sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the
American court applied the statute of limitations of New York,
instead of the Panamanian law, after finding that there was no
showing that the Panamanian law on prescription was intended to be
substantive. Being considered merely a procedural law even in
Panama, it has to give way to the law of the forum on prescription of
actions.
However, the characterization of a statute into a procedural or
substantive law becomes irrelevant when the country of the forum
has a "borrowing statute." Said statute has the practical effect of
treating the foreign statute of limitation as one of substance
(Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute"
directs the state of the forum to apply the foreign statute of
limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing
statutes," one form provides that an action barred by the laws of the
place where it accrued, will not be enforced in the forum even though
the local statute has not run against it (Goodrich and Scoles, Conflict
of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure
is of this kind. Said Section provides:
If by the laws of the state or country where the cause of action arose,
the action is barred, it is also barred in the Philippines Islands.
Section 48 has not been repealed or amended by the Civil Code of
the Philippines. Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedures as to which were
inconsistent with it. There is no provision in the Civil Code of the
Philippines, which is inconsistent with or contradictory to Section 48
of the Code of Civil Procedure (Paras, Philippine Conflict of Laws
104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be
enforced ex proprio vigore insofar as it ordains the application in this
jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious
to the forum's public policy (Canadian Northern Railway Co. v.
Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To
enforce the one-year prescriptive period of the Amiri Decree No. 23
of 1976 as regards the claims in question would contravene the
public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987
Constitution emphasized that:
The state shall promote social justice in all phases of national
development. (Sec. 10).
The state affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare (Sec. 18).
264
In article XIII on Social Justice and Human Rights, the 1987
Constitution provides:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the
Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the
Labor Code or ten years, as provided by the Civil Code of the
Philippines.
The claimants are of the view that the applicable provision is Article
1144 of the Civil Code of the Philippines, which provides:
The following actions must be brought within ten years from the time
the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is
Article 291 of the Labor Code of the Philippines, which in pertinent
part provides:
Money claims-all money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed
within three (3) years from the time the cause of action accrued,
otherwise they shall be forever barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine
Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in
G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p.
21). The said case involved the correct computation of overtime pay
as provided in the collective bargaining agreements and not the
Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not
make any reference as to the computation for overtime work under
the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead
insisted that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for pay
differentials is primarily anchored on the written contracts between
the litigants, the ten-year prescriptive period provided by Art. 1144(1)
of the New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended
by R.A. No. 19933) provides:
Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued
otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour Labor
Law (CA No. 444 as amended) will apply, if the claim for
differentials for overtime work is solely based on said law, and not
on a collective bargaining agreement or any other contract. In the
instant case, the claim for overtime compensation is not so much
because of Commonwealth Act No. 444, as amended but because the
claim is demandable right of the employees, by reason of the
above-mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive
period for filing "actions to enforce any cause of action under said

law." On the other hand, Article 291 of the Labor Code of the
Philippines provides the prescriptive period for filing "money claims
arising from employer-employee relations." The claims in the cases
at bench all arose from the employer-employee relations, which is
broader in scope than claims arising from a specific law or from the
collective bargaining agreement.
The contention of the POEA Administrator, that the three-year
prescriptive period under Article 291 of the Labor Code of the
Philippines applies only to money claims specifically recoverable
under said Code, does not find support in the plain language of the
provision. Neither is the contention of the claimants in G.R. Nos.
104911-14 that said Article refers only to claims "arising from the
employer's violation of the employee's right," as provided by the
Labor Code supported by the facial reading of the provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776,
claimants aver: (1) that while their complaints were filed on June 6,
1984 with POEA, the case was decided only on January 30, 1989, a
clear denial of their right to a speedy disposition of the case; and (2)
that NLRC and the POEA Administrator should have declared AIBC
and BRII in default (Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987
Constitution, which provides:
Sec. 16. All persons shall have the right to a speedy disposition of
their cases before all judicial, quasi-judicial, or administrative bodies.
It is true that the constitutional right to "a speedy disposition of
cases" is not limited to the accused in criminal proceedings but
extends to all parties in all cases, including civil and administrative
cases, and in all proceedings, including judicial and quasi-judicial
hearings. Hence, under the Constitution, any party to a case may
demand expeditious action on all officials who are tasked with the
administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987),
"speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in
all criminal proceedings, "speedy disposition of cases" is a flexible
concept. It is consistent with delays and depends upon the
circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights
nugatory.
Caballero laid down the factors that may be taken into consideration
in determining whether or not the right to a "speedy disposition of
cases" has been violated, thus:
In the determination of whether or not the right to a "speedy trial"
has been violated, certain factors may be considered and balanced
against each other. These are length of delay, reason for the delay,
assertion of the right or failure to assert it, and prejudice caused by
the delay. The same factors may also be considered in answering
judicial inquiry whether or not a person officially charged with the
administration of justice has violated the speedy disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we
held:
It must be here emphasized that the right to a speedy disposition of a
case, like the right to speedy trial, is deemed violated only when the
proceeding is attended by vexatious, capricious, and oppressive
delays; or when unjustified postponements of the trial are asked for
265
and secured, or when without cause or justified motive a long period
of time is allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served
with a copy of the amended complaint, claimants had been asking
that AIBC and BRII be declared in default for failure to file their
answers within the ten-day period provided in Section 1, Rule III of
Book VI of the Rules and Regulations of the POEA. At that time,
there was a pending motion of AIBC and BRII to strike out of the
records the amended complaint and the "Compliance" of claimants to
the order of the POEA, requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that
their final disposition in the administrative level after seven years
from their inception, cannot be said to be attended by unreasonable,
arbitrary and oppressive delays as to violate the constitutional rights
to a speedy disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of
1,767 claimants. Said complaint had undergone several amendments,
the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They
were deployed in different areas, one group in and the other groups
outside of, Bahrain. The monetary claims totalling more than US$65
million according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security System;
10. Refund of Withholding Tax not remitted to Bureau of Internal
Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of
Employees Benefits consisting of 43 pages (Annex "Q" of Amended
Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to
recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient definiteness
and clarity of some facts, the claimants were ordered to comply with
the motion of AIBC for a bill of particulars. When claimants filed
their "Compliance and Manifestation," AIBC moved to strike out the
complaint from the records for failure of claimants to submit a proper
bill of particulars. While the POEA Administrator denied the motion
to strike out the complaint, he ordered the claimants "to correct the
deficiencies" pointed out by AIBC.

Before an intelligent answer could be filed in response to the
complaint, the records of employment of the more than 1,700
claimants had to be retrieved from various countries in the Middle
East. Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA
Administrator were interrupted several times by the various appeals,
first to NLRC and then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were
filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May
29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation,
noted that the exact number of claimants had never been completely
established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p.
57). All the three new cases were consolidated with POEA Case No.
L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in
terminating the proceedings, thus:
These cases could have been spared the long and arduous route
towards resolution had the parties and their counsel been more
interested in pursuing the truth and the merits of the claims rather
than exhibiting a fanatical reliance on technicalities. Parties and
counsel have made these cases a litigation of emotion. The
intransigence of parties and counsel is remarkable. As late as last
month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order
directing respondent Brown & Root's resident agent/s to appear) to
come to a more conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in
the disposition of the cases, to the lament of NLRC, which
complained:
It is very evident from the records that the protagonists in these
consolidated cases appear to be not only the individual complainants,
on the one hand, and AIBC and Brown & Root, on the other hand.
The two lawyers for the complainants, Atty. Gerardo Del Mundo and
Atty. Florante De Castro, have yet to settle the right of representation,
each one persistently claiming to appear in behalf of most of the
complainants. As a result, there are two appeals by the complainants.
Attempts by this Commission to resolve counsels' conflicting claims
of their respective authority to represent the complainants prove
futile. The bickerings by these two counsels are reflected in their
pleadings. In the charges and countercharges of falsification of
documents and signatures, and in the disbarment proceedings by one
against the other. All these have, to a large extent, abetted in
confounding the issues raised in these cases, jumble the presentation
of evidence, and even derailed the prospects of an amicable
settlement. It would not be far-fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for the complainants, with
the proverbial pot of gold at its end containing more than US$100
million, the aggregate of the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and exuberance caused them to
throw all caution to the wind in the matter of elementary rules of
procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the
listing of some of the complainants in both petitions filed by the two
lawyers. As noted by NLRC, "the problem created by this situation is
that if one of the two petitions is dismissed, then the parties and the
public respondents would not know which claim of which petitioner
was dismissed and which was not."
B. Claimants insist that all their claims could properly be
consolidated in a "class suit" because "all the named complainants
266
have similar money claims and similar rights sought irrespective of
whether they worked in Bahrain, United Arab Emirates or in Abu
Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is
one of common or general interest to many and the parties are so
numerous that it is impracticable to bring them all before the court
(Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law,
many of the claimants worked outside Bahrain. Some of the
claimants were deployed in Indonesia and Malaysia under different
terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that
inasmuch as the first requirement of a class suit is not present
(common or general interest based on the Amiri Decree of the State
of Bahrain), it is only logical that only those who worked in Bahrain
shall be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature
of the claims is the same (for employee's benefits), there is no
common question of law or fact. While some claims are based on the
Amiri Law of Bahrain, many of the claimants never worked in that
country, but were deployed elsewhere. Thus, each claimant is
interested only in his own demand and not in the claims of the other
employees of defendants. The named claimants have a special or
particular interest in specific benefits completely different from the
benefits in which the other named claimants and those included as
members of a "class" are claiming (Berses v. Villanueva, 25 Phil.
473 [1913]). It appears that each claimant is only interested in
collecting his own claims. A claimants has no concern in protecting
the interests of the other claimants as shown by the fact, that
hundreds of them have abandoned their co-claimants and have
entered into separate compromise settlements of their respective
claims. A principle basic to the concept of "class suit" is that
plaintiffs brought on the record must fairly represent and protect the
interests of the others (Dimayuga v. Court of Industrial Relations,
101 Phil. 590 [1957]). For this matter, the claimants who worked in
Bahrain can not be allowed to sue in a class suit in a judicial
proceeding. The most that can be accorded to them under the Rules
of Court is to be allowed to join as plaintiffs in one complaint
(Revised Rules of Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are
the exceptions to the condition sine qua non, requiring the joinder of
all indispensable parties.
In an improperly instituted class suit, there would be no problem if
the decision secured is favorable to the plaintiffs. The problem arises
when the decision is adverse to them, in which case the others who
were impleaded by their self-appointed representatives, would surely
claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante De
Castro guilty of "forum shopping, ambulance chasing activities,
falsification, duplicity and other unprofessional activities" and his
appearances as counsel for some of the claimants as illegal (Rollo, pp.
38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is
intended to put a stop to the practice of some parties of filing
multiple petitions and complaints involving the same issues, with the
result that the courts or agencies have to resolve the same issues.
Said Rule, however, applies only to petitions filed with the Supreme
Court and the Court of Appeals. It is entitled "Additional
Requirements For Petitions Filed with the Supreme Court and the
Court of Appeals To Prevent Forum Shopping or Multiple Filing of

Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of
petitions in the Supreme Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of
the anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for
unethical conduct against Atty. De Castro because NLRC and POEA
have no jurisdiction to investigate charges of unethical conduct of
lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December
14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his
claim for attorney's fees for legal services rendered in favor of the
claimants (G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court
or administrative agency which renders and executes the money
judgment secured by the lawyer for his clients. The lawyer shall
cause written notice thereof to be delivered to his clients and to the
adverse party (Revised Rules of Court, Rule 138, Sec. 37). The
statement of the claim for the charging lien of Atty. Del Mundo
should have been filed with the administrative agency that rendered
and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante
De Castro and Atty. Katz Tierra for violation of the Code of
Professional Responsibility should be filed in a separate and
appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not
accepting their formula of "Three Hours Average Daily Overtime" in
computing the overtime payments. They claim that it was BRII itself
which proposed the formula during the negotiations for the
settlement of their claims in Bahrain and therefore it is in estoppel to
disclaim said offer (Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of
Bahrain dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President and the
Area Manager, Middle East, of Brown & Root Co. and the Summary
of the compensation offered by the Company to the employees in
respect of the difference of pay of the wages of the overtime and the
difference of vacation leave and the perusal of the documents
attached thereto i.e., minutes of the meetings between the
Representative of the employees and the management of the
Company, the complaint filed by the employees on 14/2/83 where
they have claimed as hereinabove stated, sample of the Service
Contract executed between one of the employees and the company
through its agent in (sic) Philippines, Asia International Builders
Corporation where it has been provided for 48 hours of work per
week and an annual leave of 12 days and an overtime wage of 1 &
1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is 35
months for the Philippino (sic) employees . . . .
267
2. The average wage per hour for the Philippino (sic) employee is
US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all public
holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation
for the difference of the wages of the overtime done for each
Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not
prepared by them but by a subordinate official in the Bahrain
Department of Labor; (2) that there was no showing that the Bahrain
Minister of Labor had approved said memorandum; and (3) that the
offer was made in the course of the negotiation for an amicable
settlement of the claims and therefore it was not admissible in
evidence to prove that anything is due to the claimants.
While said document was presented to the POEA without observing
the rule on presenting official documents of a foreign government as
provided in Section 24, Rule 132 of the 1989 Revised Rules on
Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said
memorandum, and they could easily verify its authenticity and
accuracy.
The admissibility of the offer of compromise made by BRII as
contained in the memorandum is another matter. Under Section 27,
Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a
claim is not an admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. — In civil cases, an offer of
compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the
record with unwanted evidence but a statement of public policy.
There is great public interest in having the protagonists settle their
differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The
submission of offers and counter-offers in the negotiation table is a
step in the right direction. But to bind a party to his offers, as what
claimants would make this Court do, would defeat the salutary
purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides
for greater benefits than those stipulated in the overseas-employment
contracts of the claimants. It was of the belief that "where the laws of
the host country are more favorable and beneficial to the workers,
then the laws of the host country shall form part of the overseas
employment contract." It quoted with approval the observation of the
POEA Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor" (Rollo,
pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically
when it refused to enforce the overseas-employment contracts, which
became the law of the parties. They contend that the principle that a
law is deemed to be a part of a contract applies only to provisions of
Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC
and BRII themselves, provided that the laws of the host country
became applicable to said contracts if they offer terms and conditions

more favorable that those stipulated therein. It was stipulated in said
contracts that:
The Employee agrees that while in the employ of the Employer, he
will not engage in any other business or occupation, nor seek
employment with anyone other than the Employer; that he shall
devote his entire time and attention and his best energies, and
abilities to the performance of such duties as may be assigned to him
by the Employer; that he shall at all times be subject to the direction
and control of the Employer; and that the benefits provided to
Employee hereunder are substituted for and in lieu of all other
benefits provided by any applicable law, provided of course, that
total remuneration and benefits do not fall below that of the host
country regulation or custom, it being understood that should
applicable laws establish that fringe benefits, or other such benefits
additional to the compensation herein agreed cannot be waived,
Employee agrees that such compensation will be adjusted downward
so that the total compensation hereunder, plus the non-waivable
benefits shall be equivalent to the compensation herein agreed (Rollo,
pp. 352-353).
The overseas-employment contracts could have been drafted more
felicitously. While a part thereof provides that the compensation to
the employee may be "adjusted downward so that the total
computation (thereunder) plus the non-waivable benefits shall be
equivalent to the compensation" therein agreed, another part of the
same provision categorically states "that total remuneration and
benefits do not fall below that of the host country regulation and
custom."
Any ambiguity in the overseas-employment contracts should be
interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257
[1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion
where there is already a prepared form containing the stipulations of
the employment contract and the employees merely "take it or leave
it." The presumption is that there was an imposition by one party
against the other and that the employees signed the contracts out of
necessity that reduced their bargaining power (Fieldmen's Insurance
Co., Inc. v. Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment
contracts in question as adopting the provisions of the Amiri Decree
No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be
governed (Cheshire, Private International Law, 187 [7th ed.]). In
such a case, the foreign law is adopted as a "system" to regulate the
relations of the parties, including questions of their capacity to enter
into the contract, the formalities to be observed by them, matters of
performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties
may just agree that specific provisions of a foreign statute shall be
deemed incorporated into their contract "as a set of terms." By such
reference to the provisions of the foreign law, the contract does not
become a foreign contract to be governed by the foreign law. The
said law does not operate as a statute but as a set of contractual terms
deemed written in the contract (Anton, Private International Law,
197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th
ed.]).
268
A basic policy of contract is to protect the expectation of the parties
(Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal
of Transnational Law 1, 21 [1977]). Such party expectation is
protected by giving effect to the parties' own choice of the applicable
law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]).
The choice of law must, however, bear some relationship to the
parties or their transaction (Scoles and Hayes, Conflict of Law
644-647 [1982]). There is no question that the contracts sought to be
enforced by claimants have a direct connection with the Bahrain law
because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117
SCRA 486 (1982), the "Employment Agreement," between Norse
Management Co. and the late husband of the private respondent,
expressly provided that in the event of illness or injury to the
employee arising out of and in the course of his employment and not
due to his own misconduct, "compensation shall be paid to employee
in accordance with and subject to the limitation of the Workmen's
Compensation Act of the Republic of the Philippines or the Worker's
Insurance Act of registry of the vessel, whichever is greater." Since
the laws of Singapore, the place of registry of the vessel in which the
late husband of private respondent served at the time of his death,
granted a better compensation package, we applied said foreign law
in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National
Labor Relations Commission, 135 SCRA 278 (1985), relied upon by
AIBC and BRII is inapposite to the facts of the cases at bench. The
issue in that case was whether the amount of the death compensation
of a Filipino seaman should be determined under the shipboard
employment contract executed in the Philippines or the Hongkong
law. Holding that the shipboard employment contract was controlling,
the court differentiated said case from Norse Management Co. in that
in the latter case there was an express stipulation in the employment
contract that the foreign law would be applicable if it afforded
greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their
right to due process when said administrative agency granted
Friday-pay differential, holiday-pay differential, annual-leave
differential and leave indemnity pay to the claimants listed in Annex
B of the Resolution. At first, NLRC reversed the resolution of the
POEA Administrator granting these benefits on a finding that the
POEA Administrator failed to consider the evidence presented by
AIBC and BRII, that some findings of fact of the POEA
Administrator were not supported by the evidence, and that some of
the evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36;
106-107). But instead of remanding the case to the POEA
Administrator for a new hearing, which means further delay in the
termination of the case, NLRC decided to pass upon the validity of
the claims itself. It is this procedure that AIBC and BRII complain of
as being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence
submitted on appeal, the same evidence which NLRC found to have
been "unilaterally submitted by the claimants and not disclosed to the
adverse parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were
submitted to the POEA administrator by the claimants after the cases
were deemed submitted for resolution and which were taken
cognizance of by the POEA Administrator in resolving the cases.
While AIBC and BRII had no opportunity to refute said evidence of
the claimants before the POEA Administrator, they had all the
opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator.
 269

Under Article 221 of the Labor Code of the Philippines, NLRC is

enjoined to "use every and all reasonable means to ascertain the facts
in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."

In deciding to resolve the validity of certain claims on the basis of

the evidence of both parties submitted before the POEA
Administrator and NLRC, the latter considered that it was not
expedient to remand the cases to the POEA Administrator for that
would only prolong the already protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits
instead of remanding them to the trial court for the reception of
evidence, where the same can be readily determined from the
uncontroverted facts on record (Development Bank of the Philippines
v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan
v. National Labor Relations Commission, 127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion

when it ordered the POEA Administrator to hold new hearings for
683 claimants listed in Annex D of the Resolution dated September 2,
1991 whose claims had been denied by the POEA Administrator "for
lack of proof" and for 69 claimants listed in Annex E of the same
Resolution, whose claims had been found by NLRC itself as not
"supported by evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the
Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its
jurisdiction, . . . ."

It is the posture of AIBC and BRII that NLRC has no authority under
Article 218(c) to remand a case involving claims which had already
been dismissed because such provision contemplates only situations
where there is still a question or controversy to be resolved (Rollo, pp.
41-42).

A principle well embedded in Administrative Law is that the

technical rules of procedure and evidence do not apply to the
proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986];
Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]).
This principle is enshrined in Article 221 of the Labor Code of the
Philippines and is now the bedrock of proceedings before NLRC.

Notwithstanding the non-applicability of technical rules of procedure

and evidence in administrative proceedings, there are cardinal rules
which must be observed by the hearing officers in order to comply
with the due process requirements of the Constitution. These cardinal
rules are collated in Ang Tibay v. Court of Industrial Relations, 69
Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of
Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned
orders. We find no such abuse of discretion.

WHEREFORE, all the three petitions are DISMISSED.

SO ORDERED.

G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES
CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor;
HON. VICENTE LEOGARDO, JR., in his capacity as Deputy
Minister; ETHELYNNE B. FARRALES and MARIA
MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for
petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines
Corporation ("PIA"), a foreign corporation licensed to do business in
the Philippines, executed in Manila two (2) separate contracts of
employment, one with private respondent Ethelynne B. Farrales and
the other with private respondent Ma. M.C. Mamasig. 1The contracts,
which became effective on 9 January 1979, provided in pertinent
portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended
by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA
reserves the right to terminate this agreement at any time by giving
the EMPLOYEE notice in writing in advance one month before the
intended termination or in lieu thereof, by paying the EMPLOYEE
wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the
laws of Pakistan, and only the Courts of Karachi, Pakistan shall have
the jurisdiction to consider any matter arising out of or under this
agreement.
Respondents then commenced training in Pakistan. After their
training period, they began discharging their job functions as flight
attendants, with base station in Manila and flying assignments to
different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to
the expiration of the contracts of employment, PIA through Mr.
Oscar Benares, counsel for and official of the local branch of PIA,
sent separate letters both dated 1 August 1980 to private respondents
Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980,
conformably to clause 6 (b) of the employment agreement [they had)
executed with [PIA]."2
On 9 September 1980, private respondents Farrales and Mamasig
jointly instituted a complaint, docketed as NCR-STF-95151-80, for
illegal dismissal and non-payment of company benefits and bonuses,
against PIA with the then Ministry of Labor and Employment
("MOLE"). After several unfruitful attempts at conciliation, the
270
MOLE hearing officer Atty. Jose M. Pascual ordered the parties to
submit their position papers and evidence supporting their respective
positions. The PIA submitted its position paper, 3 but no evidence,
and there claimed that both private respondents were habitual
absentees; that both were in the habit of bringing in from abroad
sizeable quantities of "personal effects"; and that PIA personnel at
the Manila International Airport had been discreetly warned by
customs officials to advise private respondents to discontinue that
practice. PIA further claimed that the services of both private
respondents were terminated pursuant to the provisions of the
employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L.
Estrella ordered the reinstatement of private respondents with full
backwages or, in the alternative, the payment to them of the amounts
equivalent to their salaries for the remainder of the fixed three-year
period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round
trip ticket Manila-USA Manila; and payment of a bonus to each of
the private respondents equivalent to their one-month salary. 4 The
Order stated that private respondents had attained the status of
regular employees after they had rendered more than a year of
continued service; that the stipulation limiting the period of the
employment contract to three (3) years was null and void as violative
of the provisions of the Labor Code and its implementing rules and
regulations on regular and casual employment; and that the dismissal,
having been carried out without the requisite clearance from the
MOLE, was illegal and entitled private respondents to reinstatement
with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente
Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact
and conclusions of the Regional Director and affirmed the latter's
award save for the portion thereof giving PIA the option, in lieu of
reinstatement, "to pay each of the complainants [private respondents]
their salaries corresponding to the unexpired portion of the contract[s]
[of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award
of the Regional Director and the Order of the Deputy Minister as
having been rendered without jurisdiction; for having been rendered
without support in the evidence of record since, allegedly, no hearing
was conducted by the hearing officer, Atty. Jose M. Pascual; and for
having been issued in disregard and in violation of petitioner's rights
under the employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director, MOLE,
had no jurisdiction over the subject matter of the complaint initiated
by private respondents for illegal dismissal, jurisdiction over the
same being lodged in the Arbitration Branch of the National Labor
Relations Commission ("NLRC") It appears to us beyond dispute,
however, that both at the time the complaint was initiated in
September 1980 and at the time the Orders assailed were rendered on
January 1981 (by Regional Director Francisco L. Estrella) and
August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the
Regional Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the
termination of the services of employees with at least one (1) year of
service without prior clearance from the Department of Labor and
Employment:
Art. 278. Miscellaneous Provisions — . . .
(b) With or without a collective agreement, no employer may shut
down his establishment or dismiss or terminate the employment of
employees with at least one year of service during the last two (2)
years, whether such service is continuous or broken, without prior

written authority issued in accordance with such rules and
regulations as the Secretary may promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing
the Labor Code, made clear that in case of a termination without the
necessary clearance, the Regional Director was authorized to order
the reinstatement of the employee concerned and the payment of
backwages; necessarily, therefore, the Regional Director must have
been given jurisdiction over such termination cases:
Sec. 2. Shutdown or dismissal without clearance. — Any shutdown
or dismissal without prior clearance shall be conclusively presumed
to be termination of employment without a just cause. The Regional
Director shall, in such case order the immediate reinstatement of the
employee and the payment of his wages from the time of the
shutdown or dismissal until the time of reinstatement. (emphasis
supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23
April 1976, was similarly very explicit about the jurisdiction of the
Regional Director over termination of employment cases:
Under PD 850, termination cases — with or without CBA — are
now placed under the original jurisdiction of the Regional Director.
Preventive suspension cases, now made cognizable for the first time,
are also placed under the Regional Director. Before PD 850,
termination cases where there was a CBA were under the jurisdiction
of the grievance machinery and voluntary arbitration, while
termination cases where there was no CBA were under the
jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its
implementing rules and regulations with respect to termination and
preventive suspension cases are:
1. The Regional Director is now required to rule on every application
for clearance, whether there is opposition or not, within ten days
from receipt thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the
Regional Director had jurisdiction, still his order was null and void
because it had been issued in violation of petitioner's right to
procedural due process .6 This claim, however, cannot be given
serious consideration. Petitioner was ordered by the Regional
Director to submit not only its position paper but also such evidence
in its favor as it might have. Petitioner opted to rely solely upon its
position paper; we must assume it had no evidence to sustain its
assertions. Thus, even if no formal or oral hearing was conducted,
petitioner had ample opportunity to explain its side. Moreover,
petitioner PIA was able to appeal his case to the Ministry of Labor
and Employment. 7
There is another reason why petitioner's claim of denial of due
process must be rejected. At the time the complaint was filed by
private respondents on 21 September 1980 and at the time the
Regional Director issued his questioned order on 22 January 1981,
applicable regulation, as noted above, specified that a "dismissal
without prior clearance shall be conclusively presumed to be
termination of employment without a cause", and the Regional
Director was required in such case to" order the immediate
reinstatement of the employee and the payment of his wages from the
time of the shutdown or dismiss until . . . reinstatement." In other
words, under the then applicable rule, the Regional Director did not
even have to require submission of position papers by the parties in
view of the conclusive (juris et de jure) character of the presumption
created by such applicable law and regulation. In Cebu Institute of
271
Technology v. Minister of Labor and Employment, 8 the Court
pointed out that "under Rule 14, Section 2, of the Implementing
Rules and Regulations, the termination of [an employee] which was
without previous clearance from the Ministry of Labor is
conclusively presumed to be without [just] cause . . . [a presumption
which] cannot be overturned by any contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6
of its contract of employment with private respondents Farrales and
Mamasig, arguing that its relationship with them was governed by
the provisions of its contract rather than by the general provisions of
the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that
relationship, extendible by agreement between the parties; while
paragraph 6 provided that, notwithstanding any other provision in the
Contract, PIA had the right to terminate the employment agreement
at any time by giving one-month's notice to the employee or, in lieu
of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA
argues, since a contract is the law between the parties. 10 The
principle of party autonomy in contracts is not, however, an absolute
principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem
convenient, "provided they are not contrary to law, morals, good
customs, public order or public policy." Thus, counter-balancing the
principle of autonomy of contracting parties is the equally general
rule that provisions of applicable law, especially provisions relating
to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that
parties may not contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed with
public interest. The law relating to labor and employment is clearly
such an area and parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and regulations by
simply contracting with each other. It is thus necessary to appraise
the contractual provisions invoked by petitioner PIA in terms of their
consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister,
MOLE, in effect held that paragraph 5 of that employment contract
was inconsistent with Articles 280 and 281 of the Labor Code as they
existed at the time the contract of employment was entered into, and
hence refused to give effect to said paragraph 5. These Articles read
as follows:
Art. 280. Security of Tenure. — In cases of regular employment, the
employer shall not terminate the services of an employee except for a
just cause or when authorized by this Title An employee who is
unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and to his backwages computed from
the time his compensation was withheld from him up to the time his
reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreements of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal
in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by
the preceding paragraph: provided, that, any employee who has
rendered at least one year of service, whether such service is

continuous or broken, shall be considered as regular employee with
respect to the activity in which he is employed and his employment
shall continue while such actually exists. (Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the
Court had occasion to examine in detail the question of whether
employment for a fixed term has been outlawed under the above
quoted provisions of the Labor Code. After an extensive examination
of the history and development of Articles 280 and 281, the Court
reached the conclusion that a contract providing for employment
with a fixed period was not necessarily unlawful:
There can of course be no quarrel with the proposition that where
from the circumstances it is apparent that periods have been imposed
to preclude acquisition of tenurial security by the employee, they
should be struck down or disregarded as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is shown,
or stated otherwise, where the reason for the law does not exist e.g.
where it is indeed the employee himself who insists upon a period or
where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is
a sine qua non would an agreement fixing a period be essentially evil
or illicit, therefore anathema Would such an agreement come within
the scope of Article 280 which admittedly was enacted "to prevent
the circumvention of the right of the employee to be secured in . . .
(his) employment?"
As it is evident from even only the three examples already given
that Article 280 of the Labor Code, under a narrow and literal
interpretation, not only fails to exhaust the gamut of employment
contracts to which the lack of a fixed period would be an anomaly,
but would also appear to restrict, without reasonable distinctions,
the right of an employee to freely stipulate with his employer the
duration of his engagement, it logically follows that such a literal
interpretation should be eschewed or avoided. The law must be
given reasonable interpretation, to preclude absurdity in its
application. Outlawing the whole concept of term employment and
subverting to boot the principle of freedom of contract to remedy the
evil of employers" using it as a means to prevent their employees
from obtaining security of tenure is like cutting off the nose to spite
the face or, more relevantly, curing a headache by lopping off the
head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of
legislation culminating in the present Article 280 of the Labor Code
clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely ruling out all
written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements
entered into precisely to circumvent security of tenure. It should have
no application to instances where a fixed period of employment was
agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent,
or where it satisfactorily appears that the employer and employee
dealt with each other on more or less equal terms with no moral
dominance whatever being exercised by the former over the
latter. Unless thus limited in its purview, the law would be made to
apply to purposes other than those explicitly stated by its framers; it
thus becomes pointless and arbitrary, unjust in its effects and apt to
lead to absurd and unintended consequences. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the
presence or absence of a substantial indication that the period
272
specified in an employment agreement was designed to circumvent
the security of tenure of regular employees which is provided for in
Articles 280 and 281 of the Labor Code. This indication must
ordinarily rest upon some aspect of the agreement other than the
mere specification of a fixed term of the ernployment agreement, or
upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment
agreement between petitioner PIA and private respondents, we
consider that those provisions must be read together and when so
read, the fixed period of three (3) years specified in paragraph 5 will
be seen to have been effectively neutralized by the provisions of
paragraph 6 of that agreement. Paragraph 6 in effect took back from
the employee the fixed three (3)-year period ostensibly granted by
paragraph 5 by rendering such period in effect a facultative one at the
option of the employer PIA. For petitioner PIA claims to be
authorized to shorten that term, at any time and for any cause
satisfactory to itself, to a one-month period, or even less by simply
paying the employee a month's salary. Because the net effect of
paragraphs 5 and 6 of the agreement here involved is to render the
employment of private respondents Farrales and Mamasig basically
employment at the pleasure of petitioner PIA, the Court considers
that paragraphs 5 and 6 were intended to prevent any security of
tenure from accruing in favor of private respondents even during the
limited period of three (3) years,13 and thus to escape completely the
thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the
applicable law of the agreement and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi Pakistan". The first clause of
paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and regulations to the subject matter of this
case, i.e., the employer-employee relationship between petitioner
PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to
govern their relationship. Neither may petitioner invoke the second
clause of paragraph 10, specifying the Karachi courts as the sole
venue for the settlement of dispute; between the contracting parties.
Even a cursory scrutiny of the relevant circumstances of this case
will show the multiple and substantive contacts between Philippine
law and Philippine courts, on the one hand, and the relationship
between the parties, upon the other: the contract was not only
executed in the Philippines, it was also performed here, at least
partially; private respondents are Philippine citizens and respondents,
while petitioner, although a foreign corporation, is licensed to do
business (and actually doing business) and hence resident in the
Philippines; lastly, private respondents were based in the Philippines
in between their assigned flights to the Middle East and Europe. All
the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes
between the parties. Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust
Philippine agencies and courts of the jurisdiction vested upon them
by Philippine law. Finally, and in any event, the petitioner PIA did
not undertake to plead and prove the contents of Pakistan law on the
matter; it must therefore be presumed that the applicable provisions
of the law of Pakistan are the same as the applicable provisions of
Philippine law.14
We conclude that private respondents Farrales and Mamasig were
illegally dismissed and that public respondent Deputy Minister,
MOLE, had not committed any grave abuse of discretion nor any act
without or in excess of jurisdiction in ordering their reinstatement
with backwages. Private respondents are entitled to three (3) years
 273

backwages without qualification or deduction. Should their

reinstatement to their former or other substantially equivalent
positions not be feasible in view of the length of time which has gone
by since their services were unlawfully terminated, petitioner should
be required to pay separation pay to private respondents amounting
to one (1) month's salary for every year of service rendered by them,
including the three (3) years service putatively rendered.

ACCORDINGLY, the Petition for certiorari is hereby DISMISSED

for lack of merit, and the Order dated 12 August 1982 of public
respondent is hereby AFFIRMED, except that (1) private
respondents are entitled to three (3) years backwages, without
deduction or qualification; and (2) should reinstatement of private
respondents to their former positions or to substantially equivalent
positions not be feasible, then petitioner shall, in lieu thereof, pay to
private respondents separation pay amounting to one (1)-month's
salary for every year of service actually rendered by them and for the
three (3) years putative service by private respondents. The
Temporary Restraining Order issued on 13 September 1982 is hereby
LIFTED. Costs against petitioner.

SO ORDERED.

G.R. No. 133876. December 29, 1999]
BANK OF AMERICA, NT and SA, petitioner, vs. AMERICAN
REALTY CORPORATION and COURT OF
APPEALS, respondents.
DECISION
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real
estate mortgage constituted over a third party mortgagors property
situated in the Philippines by filing an action for the collection of the
principal loan before foreign courts?
Sought to be reversed in the instant petition for review
on certiorari under Rule 45 of the Rules of Court are the
decision[1] of public respondent Court of Appeals in CA G.R. CV No.
51094, promulgated on 30 September 1997 and its
resolution,[2] dated 22 May 1998, denying petitioners motion for
reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international
banking and financing institution duly licensed to do business in the
Philippines, organized and existing under and by virtue of the laws of
the State of California, United States of America while private
respondent American Realty Corporation (ARC) is a domestic
corporation.
Bank of America International Limited (BAIL), on the other hand, is
a limited liability company organized and existing under the laws of
England.
As borne by the records, BANTSA and BAIL on several occasions
granted three major multi-million United States (US) Dollar loans to
the following corporate borrowers: (1) Liberian Transport Navigation,
S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as borrowers), all of which are
existing under and by virtue of the laws of the Republic of Panama
and are foreign affiliates of private respondent.[3]
Due to the default in the payment of the loan amortizations,
BANTSA and the corporate borrowers signed and entered into
restructuring agreements. As additional security for the restructured
loans, private respondent ARC as third party mortgagor executed two
real estate mortgages,[4] dated 17 February 1983 and 20 July 1984,
over its parcels of land including improvements thereon, located at
Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which are
covered by Transfer Certificate of Title Nos. T-78759, T-78760,
T-78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment of the
restructured loans prompting petitioner BANTSA to file civil
actions[5] before foreign courts for the collection of the principal loan,
to wit:
a) In England, in its High Court of Justice, Queens Bench Division,
Commercial Court (1992-Folio No. 2098) against Liberian Transport
Navigation S.A., Eshley Compania Naviera S.A., El Challenger S.A.,
Espriona Shipping Company S.A., Eddie Navigation Corp., S.A.,
Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June
17, 1992.
b) In England, in its High Court of Justice, Queens Bench Division,
Commercial Court (1992-Folio No. 2245) against El Challenger S.A.,
Espriona Shipping Company S.A., Eduardo Katipuan Litonjua &
Aurelio Katipunan Litonjua on July 2, 1992;
c) In Hongkong, in the Supreme Court of Hongkong High Court
(Action No. 4039 of 1992) against Eshley Compania Naviera S.A.,
274
El Challenger S.A., Espriona Shipping Company S.A. Pacific
Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua,
Jr. and Eduardo Katipunan Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court
(Action No. 4040 of 1992) against Eshley Compania Naviera S.A.,
El Challenger S.A., Espriona Shipping Company, S.A., Pacific
Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Jr. and Eduardo Katipunan
Litonjua on November 21, 1992.
In the civil suits instituted before the foreign courts, private
respondent ARC, being a third party mortgagor, was not impleaded
as party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office
of the Provincial Sheriff of Bulacan, Philippines, an application for
extrajudicial foreclosure[6] of real estate mortgage.
On 22 January 1993, after due publication and notice, the mortgaged
real properties were sold at public auction in an extrajudicial
foreclosure sale, with Integrated Credit and Corporation Services Co.
(ICCS) as the highest bidder for the sum of Twenty Four Million
Pesos (P24,000,000.00).[7]
On 12 February 1993, private respondent filed before the Pasig
Regional Trial Court, Branch 159, an action for damages[8] against
the petitioner, for the latters act of foreclosing extrajudicially the real
estate mortgages despite the pendency of civil suits before foreign
courts for the collection of the principal loan.
In its answer[9] petitioner alleged that the rule prohibiting the
mortgagee from foreclosing the mortgage after an ordinary suit for
collection has been filed, is not applicable in the present case,
claiming that:
a) The plaintiff, being a mere third party mortgagor and not a party to
the principal restructuring agreements, was never made a party
defendant in the civil cases filed in Hongkong and England;
b) There is actually no civil suit for sum of money filed in the
Philippines since the civil actions were filed in Hongkong and
England. As such, any decisions (sic) which may be rendered in the
abovementioned courts are not (sic) enforceable in the Philippines
unless a separate action to enforce the foreign judgments is first filed
in the Philippines, pursuant to Rule 39, Section 50 of the Revised
Rules of Court.
c) Under English Law, which is the governing law under the
principal agreements, the mortgagee does not lose its security interest
by filing civil actions for sums of money.
On 14 December 1993, private respondent filed a motion for
suspension[10] of the redemption period on the ground that it cannot
exercise said right of redemption without at the same time waiving or
contradicting its contentions in the case that the foreclosure of the
mortgage on its properties is legally improper and therefore invalid.
In an order[11] dated 28 January 1994, the trial court granted the
private respondents motion for suspension after which a copy of said
order was duly received by the Register of Deeds of Meycauayan,
Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged
properties at the foreclosure sale, consolidated its ownership over the
real properties, resulting to the issuance of Transfer Certificate of
Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in
its name.

On 18 March 1994, after the consolidation of ownership in its favor,
ICCS sold the real properties to Stateland Investment Corporation for
the amount of Thirty Nine Million Pesos
(P39,000,000.00).[12]Accordingly, Transfer Certificate of Title Nos.
T-187781(m), T-187782(m), T-187783(m), T-16653P(m) and
T-16652P(m) were issued in the latters name.
After trial, the lower court rendered a decision[13] in favor of private
respondent ARC dated 12 May 1993, the decretal portion of which
reads:
WHEREFORE, judgment is hereby rendered declaring that the filing
in foreign courts by the defendant of collection suits against the
principal debtors operated as a waiver of the security of the
mortgages.Consequently, the plaintiffs rights as owner and possessor
of the properties then covered by Transfer Certificates of Title Nos.
T-78759, T-78762, T-78763, T-78760 and T-78761, all of the
Register of Deeds of Meycauayan, Bulacan, Philippines, were
violated when the defendant caused the extrajudicial foreclosure of
the mortgages constituted thereon.
Accordingly, the defendant is hereby ordered to pay the plaintiff the
following sums, all with legal interest thereon from the date of the
filing of the complaint up to the date of actual payment:
1) Actual or compensatory damages in the amount of Ninety Nine
Million Pesos (P99,000,000.00);
2) Exemplary damages in the amount of Five Million Pesos
(P5,000,000.00); and
3) Costs of suit.
SO ORDERED.
On appeal, the Court of Appeals affirmed the assailed decision of the
lower court prompting petitioner to file a motion for reconsideration
which the appellate court denied.
Hence, the instant petition for review[14] on certiorari where herein
petitioner BANTSA ascribes to the Court of Appeals the following
assignment of errors:
1. The Honorable Court of Appeals disregarded the doctrines laid
down by this Hon. Supreme Court in the cases of Caltex Philippines,
Inc. vs. Intermediate Appellate Court docketed as G.R. No. 74730
promulgated on August 25, 1989 and Philippine Commercial
International Bank vs. IAC, 196 SCRA 29 (1991 case), although
said cases were duly cited, extensively discussed and specifically
mentioned, as one of the issues in the assignment of errors found on
page 5 of the decision dated September 30, 1997.
2. The Hon. Court of Appeals acted with grave abuse of discretion
when it awarded the private respondent actual and exemplary
damages totalling P171,600,000.00, as of July 12, 1998 although
such huge amount was not asked nor prayed for in private
respondents complaint, is contrary to law and is totally unsupported
by evidence (sic).
In fine, this Court is called upon to resolve two main issues:
1. Whether or not the petitioners act of filing a collection suit against
the principal debtors for the recovery of the loan before foreign
courts constituted a waiver of the remedy of foreclosure.
2. Whether or not the award by the lower court of actual and
exemplary damages in favor of private respondent ARC, as
third-party mortgagor, is proper.
The petition is bereft of merit.
275
First, as to the issue of availability of remedies, petitioner submits
that a waiver of the remedy of foreclosure requires the concurrence
of two requisites: an ordinary civil action for collection should be
filed and subsequently a final judgment be correspondingly rendered
therein.
According to petitioner, the mere filing of a personal action to collect
the principal loan does not suffice; a final judgment must be secured
and obtained in the personal action so that waiver of the remedy of
foreclosure may be appreciated. To put it differently, absent any of
the two requisites, the mortgagee-creditor is deemed not to have
waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioners arguments untenable and
upholds the jurisprudence laid down in Bachrach[15] and similar
cases adjudicated thereafter, thus:
In the absence of express statutory provisions, a mortgage creditor
may institute against the mortgage debtor either a personal action for
debt or a real action to foreclose the mortgage. In other words, he
may pursue either of the two remedies, but not both. By such election,
his cause of action can by no means be impaired, for each of the two
remedies is complete in itself. Thus, an election to bring a personal
action will leave open to him all the properties of the debtor for
attachment and execution, even including the mortgaged property
itself. And, if he waives such personal action and pursues his remedy
against the mortgaged property, an unsatisfied judgment thereon
would still give him the right to sue for a deficiency judgment, in
which case, all the properties of the defendant, other than the
mortgaged property, are again open to him for the satisfaction of the
deficiency. In either case, his remedy is complete, his cause of action
undiminished, and any advantages attendant to the pursuit of one or
the other remedy are purely accidental and are all under his right of
election. On the other hand, a rule that would authorize the plaintiff
to bring a personal action against the debtor and simultaneously or
successively another action against the mortgaged property, would
result not only in multiplicity of suits so offensive to justice (Soriano
vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio
vs. San Agustin, 25 Phil., 404), but also in subjecting the defendant
to the vexation of being sued in the place of his residence or of the
residence of the plaintiff, and then again in the place where the
property lies.
In Danao vs. Court of Appeals,[16] this Court, reiterating
jurisprudence enunciated in Manila Trading and Supply Co. vs. Co
Kim[17]and Movido vs. RFC,[18] invariably held:
x x x The rule is now settled that a mortgage creditor may elect to
waive his security and bring, instead, an ordinary action to recover
the indebtedness with the right to execute a judgment thereon on all
the properties of the debtor, including the subject matter of the
mortgage x x x, subject to the qualification that if he fails in the
remedy by him elected, he cannot pursue further the remedy he has
waived.(Underscoring Ours)
Anent real properties in particular, the Court has laid down the rule
that a mortgage creditor may institute against the mortgage debtor
either a personal action for debt or a real action to foreclose the
mortgage.[19]
In our jurisdiction, the remedies available to the mortgage creditor
are deemed alternative and not cumulative. Notably, an election of
one remedy operates as a waiver of the other. For this purpose, a
remedy is deemed chosen upon the filing of the suit for collection or
upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of
Civil Procedure. As to extrajudicial foreclosure, such remedy is

deemed elected by the mortgage creditor upon filing of the petition
not with any court of justice but with the Office of the Sheriff of the
province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.
In the case at bench, private respondent ARC constituted real estate
mortgages over its properties as security for the debt of the principal
debtors. By doing so, private respondent subjected itself to the
liabilities of a third party mortgagor. Under the law, third persons
who are not parties to a loan may secure the latter by pledging or
mortgaging their own property.[20]
Notwithstanding, there is no legal provision nor jurisprudence in our
jurisdiction which makes a third person who secures the fulfillment
of anothers obligation by mortgaging his own property, to be
solidarily bound with the principal obligor. The signatory to the
principal contractloanremains to be primarily bound. It is only upon
default of the latter that the creditor may have recourse on the
mortgagors by foreclosing the mortgaged properties in lieu of an
action for the recovery of the amount of the loan. [21]
In the instant case, petitioners contention that the requisites of filing
the action for collection and rendition of final judgment therein
should concur, is untenable.
Thus, in Cerna vs. Court of Appeals,[22] we agreed with the
petitioner in said case, that the filing of a collection suit barred the
foreclosure of the mortgage:
A mortgagee who files a suit for collection abandons the remedy of
foreclosure of the chattel mortgage constituted over the personal
property as security for the debt or value of the promissory note
when he seeks to recover in the said collection suit.
x x x When the mortgagee elects to file a suit for collection, not
foreclosure, thereby abandoning the chattel mortgage as basis for
relief, he clearly manifests his lack of desire and interest to go after
the mortgaged property as security for the promissory note x x x.
Contrary to petitioners arguments, we therefore reiterate the rule, for
clarity and emphasis, that the mere act of filing of an ordinary action
for collection operates as a waiver of the mortgage-creditors remedy
to foreclose the mortgage. By the mere filing of the ordinary action
for collection against the principal debtors, the petitioner in the
present case is deemed to have elected a remedy, as a result of which
a waiver of the other necessarily must arise. Corollarily, no final
judgment in the collection suit is required for the rule on waiver to
apply.
Hence, in Caltex Philippines, Inc. vs. Intermediate Appellate
Court,[23] a case relied upon by petitioner, supposedly to buttress its
contention, this Court had occasion to rule that the mere act
of filing a collection suit for the recovery of a debt secured by a
mortgage constitutes waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action
which is non-payment of the debt. Nevertheless, alternative remedies
are available for its enjoyment and exercise. Petitioner then may opt
to exercise only one of two remedies so as not to violate the rule
against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor
Co., Inc. vs. Icarangal.[24]
For non-payment of a note secured by mortgage, the creditor has a
single cause of action against the debtor. This single cause of action
consists in the recovery of the credit with execution of the
security. In other words, the creditor in his action may make two
demands, the payment of the debt and the foreclosure of his
mortgage. But both demands arise from the same cause, the
276
non-payment of the debt, and for that reason, they constitute a single
cause of action. Though the debt and the mortgage constitute
separate agreements, the latter is subsidiary to the former, and both
refer to one and the same obligation.Consequently, there exists only
one cause of action for a single breach of that obligation. Plaintiff,
then, by applying the rules above stated, cannot split up his single
cause of action by filing a complaint for payment of the debt, and
thereafter another complaint for foreclosure of the mortgage. If he
does so, the filing of the first complaint will bar the subsequent
complaint. By allowing the creditor to file two separate complaints
simultaneously or successively, one to recover his credit and another
to foreclose his mortgage, we will, in effect, be authorizing him
plural redress for a single breach of contract at so much cost to the
courts and with so much vexation and oppression to the debtor.
Petitioner further faults the Court of Appeals for allegedly
disregarding the doctrine enunciated in Caltex, wherein this High
Court relaxed the application of the general rules to wit:
In the present case, however, we shall not follow this rule to the letter
but declare that it is the collection suit which was waived and/or
abandoned. This ruling is more in harmony with the principles
underlying our judicial system. It is of no moment that the collection
suit was filed ahead, what is determinative is the fact that the
foreclosure proceedings ended even before the decision in the
collection suit was rendered. x x x
Notably, though, petitioner took the Caltex ruling out of context. We
must stress that the Caltex case was never intended to overrule the
well-entrenched doctrine enunciated in Bachrach, which to our mind
still finds applicability in cases of this sort. To reiterate, Bachrach is
still good law.
We then quote the decision[25]of the trial court, in the present case,
thus:
The aforequoted ruling in Caltex is the exception rather than the rule,
dictated by the peculiar circumstances obtaining therein. In the said
case, the Supreme Court chastised Caltex for making x x x a
mockery of our judicial system when it initially filed a collection suit
then, during the pendency thereof, foreclosed extrajudicially the
mortgaged property which secured the indebtedness, and still
pursued the collection suit to the end. Thus, to prevent a mockery of
our judicial system, the collection suit had to be nullified because the
foreclosure proceedings have already been pursued to their end and
can no longer be undone.
xxxxxxxxx
In the case at bar, it has not been shown whether the defendant
pursued to the end or are still pursuing the collection suits filed in
foreign courts. There is no occasion, therefore, for this court to apply
the exception laid down by the Supreme Court in Caltex, by
nullifying the collection suits. Quite obviously, too, the aforesaid
collection suits are beyond the reach of this Court. Thus the only way
the court may prevent the spector of a creditor having plural redress
for a single breach of contract is by holding, as the Court hereby
holds, that the defendant has waived the right to foreclose the
mortgages constituted by the plaintiff on its properties originally
covered by Transfer Certificates of Title Nos. T-78759, T-78762,
T-78760 and T-78761. (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism,
to say the least.[26]
Moreover, petitioner attempts to mislead this Court by citing the case
of PCIB vs. IAC.[27] Again, petitioner tried to fit a square peg in a
round hole. It must be stressed that far from overturning the doctrine

laid down in Bachrach, this Court in PCIB buttressed its firm stand
on this issue by declaring:
While the law allows a mortgage creditor to either institute a
personal action for the debt or a real action to foreclosure the
mortgage, he cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case.
xxxxxxxxx
Thus, when the PCIB filed Civil Case No. 29392 to enforce payment
of the 1.3 million promissory note secured by real estate mortgages
and subsequently filed a petition for extrajudicial foreclosure, it
violates the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by
the expediency of filing four civil suits before foreign courts,
necessarily abandoned the remedy to foreclose the real estate
mortgages constituted over the properties of third-party mortgagor
and herein private respondent ARC. Moreover, by filing the four
civil actions and by eventually foreclosing extrajudicially the
mortgages, petitioner in effect transgressed the rules against splitting
a cause of action well-enshrined in jurisprudence and our statute
books.
In Bachrach, this Court resolved to deny the creditor the remedy of
foreclosure after the collection suit was filed, considering that the
creditor should not be afforded plural redress for a single breach of
contract. For cause of action should not be confused with the remedy
created for its enforcement.[28]
Notably, it is not the nature of the redress which is crucial but the
efficacy of the remedy chosen in addressing the creditors
cause. Hence, a suit brought before a foreign court having
competence and jurisdiction to entertain the action is deemed, for this
purpose, to be within the contemplation of the remedy available to
the mortgagee-creditor. This pronouncement would best serve the
interest of justice and fair play and further discourage the noxious
practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which
according to petitioner is the governing law with regard to the
principal agreements, the mortgagee does not lose its security interest
by simply filing civil actions for sums of money.[29]
We rule in the negative.
This argument shows desperation on the part of petitioner to rivet its
crumbling cause. In the case at bench, Philippine law shall apply
notwithstanding the evidence presented by petitioner to prove the
English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded
principle in our jurisdiction that there is no judicial notice of any
foreign law. A foreign law must be properly pleaded and proved as a
fact.[30] Thus, if the foreign law involved is not properly pleaded and
proved, our courts will presume that the foreign law is the same as
our local or domestic or internal law.[31] This is what we refer to as
the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the
matter were properly pleaded and proved in accordance with Section
24, Rule 132 of the Rules of Court and the jurisprudence laid down
in Yao Kee, et al. vs. Sy-Gonzales,[32] said foreign law would still not
find applicability.
Thus, when the foreign law, judgment or contract is contrary to a
sound and established public policy of the forum, the said foreign
law, judgment or order shall not be applied.[33]
277
Additionally, prohibitive laws concerning persons, their acts or
property, and those which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determinations or conventions agreed
upon in a foreign country.[34]
The public policy sought to be protected in the instant case is the
principle imbedded in our jurisdiction proscribing the splitting up of
a single cause of action.
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent -
If two or more suits are instituted on the basis of the same cause of
action, the filing of one or a judgment upon the merits in any one is
available as a ground for the dismissal of the others.
Moreover, foreign law should not be applied when its application
would work undeniable injustice to the citizens or residents of the
forum. To give justice is the most important function of law; hence, a
law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.[35]
Clearly then, English Law is not applicable.
As to the second pivotal issue, we hold that the private respondent is
entitled to the award of actual or compensatory damages inasmuch as
the act of petitioner BANTSA in extrajudicially foreclosing the real
estate mortgages constituted a clear violation of the rights of herein
private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of
pecuniary loss in business, trade, property, profession, job or
occupation and the same must be proved, otherwise if the proof is
flimsy and non-substantial, no damages will be given.[36] Indeed, the
question of the value of property is always a difficult one to settle as
valuation of real property is an imprecise process since real estate has
no inherent value readily ascertainable by an appraiser or by the
court.[37] The opinions of men vary so much concerning the real
value of property that the best the courts can do is hear all of the
witnesses which the respective parties desire to present, and then, by
carefully weighing that testimony, arrive at a conclusion which is just
and equitable.[38]
In the instant case, petitioner assails the Court of Appeals for relying
heavily on the valuation made by Philippine Appraisal Company. In
effect, BANTSA questions the act of the appellate court in giving
due weight to the appraisal report composed of twenty three pages,
signed by Mr. Lauro Marquez and submitted as evidence by private
respondent. The appraisal report, as the records would readily show,
was corroborated by the testimony of Mr. Reynaldo Flores, witness
for private respondent.
On this matter, the trial court observed:
The record herein reveals that plaintiff-appellee formally offered as
evidence the appraisal report dated March 29, 1993 (Exhibit J,
Records, p. 409), consisting of twenty three (23) pages which set out
in detail the valuation of the property to determine its fair market
value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00
(TSN, ibid., p. 5), together with the corroborative testimony of one
Mr. Reynaldo F. Flores, an appraiser and director of Philippine
Appraisal Company, Inc. (TSN, ibid., p. 3). The latters testimony
was subjected to extensive cross-examination by counsel for
defendant-appellant (TSN, April 22, 1994, pp. 6-22).[39]
In the matter of credibility of witnesses, the Court reiterates the
familiar and well-entrenched rule that the factual findings of the trial
court should be respected.[40] The time-tested jurisprudence is that the
findings and conclusions of the trial court on the credibility of
witnesses enjoy a badge of respect for the reason that trial courts

have the advantage of observing the demeanor of witnesses as they
testify.[41]
This Court will not alter the findings of the trial court on the
credibility of witnesses, principally because they are in a better
position to assess the same than the appellate court.[42] Besides, trial
courts are in a better position to examine real evidence as well as
observe the demeanor of witnesses.[43]
Similarly, the appreciation of evidence and the assessment of the
credibility of witnesses rest primarily with the trial court. [44] In the
case at bar, we see no reason that would justify this Court to disturb
the factual findings of the trial court, as affirmed by the Court of
Appeals, with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial court justified
the award by presenting the following ratiocination in its assailed
decision[45], to wit:
Indeed, the Court has its own mind in the matter of valuation. The
size of the subject real properties are (sic) set forth in their individual
titles, and the Court itself has seen the character and nature of said
properties during the ocular inspection it conducted. Based
principally on the foregoing, the Court makes the following
observations:
1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San
Jose del Monte, Bulacan, which is (sic) not distant from Metro
Manila the biggest urban center in the Philippines and are easily
accessible through well-paved roads;
2. The properties are suitable for development into a subdivision for
low cost housing, as admitted by defendants own appraiser (TSN,
May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been
demolished. Houses of strong materials are found in the vicinity of
the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing
community. It has even been shown that the house of the Barangay
Chairman is located adjacent to the property in question (Exh. 27),
and the only remaining piggery (named Cherry Farm) in the vicinity
is about 2 kilometers away from the western boundary of the
property in question (TSN, November 19, p. 3);
4. It will not be hard to find interested buyers of the property, as
indubitably shown by the fact that on March 18, 1994, ICCS (the
buyer during the foreclosure sale) sold the consolidated real estate
properties to Stateland Investment Corporation, in whose favor new
titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m),
T-187783(m); T-16653P(m) and T-166521(m) by the Register of
Deeds of Meycauayan (sic), Bulacan;
5. The fact that ICCS was able to sell the subject properties to
Stateland Investment Corporation for Thirty Nine Million
(P39,000,000.00) Pesos, which is more than triple defendants
appraisal (Exh. 2) clearly shows that the Court cannot rely on
defendants aforesaid estimate (Decision, Records, p. 603).
It is a fundamental legal aphorism that the conclusions of the trial
judge on the credibility of witnesses command great respect and
consideration especially when the conclusions are supported by the
evidence on record.[46] Applying the foregoing principle, we
therefore hold that the trial court committed no palpable error in
giving credence to the testimony of Reynaldo Flores, who according
to the records, is a licensed real estate broker, appraiser and director
of Philippine Appraisal Company, Inc. since 1990.[47] As the records
show, Flores had been with the company for 26 years at the time of
his testimony.
278
Of equal importance is the fact that the trial court did not confine
itself to the appraisal report dated 29 March 1993, and the testimony
given by Mr. Reynaldo Flores, in determining the fair market value
of the real property. Above all these, the record would likewise show
that the trial judge in order to appraise himself of the characteristics
and condition of the property, conducted an ocular inspection where
the opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm
the ruling of the trial court as regards the valuation of the property
x x x a valuation of Ninety Nine Million Pesos (P99,000,000.00) for
the 39-hectare properties (sic) translates to just about Two Hundred
Fifty Four Pesos (P254.00) per square meter. This appears to be, as
the court so holds, a better approximation of the fair market value of
the subject properties. This is the amount which should be restituted
by the defendant to the plaintiff by way of
actual or compensatorydamages x x x.[48]
Further, petitioner ascribes error to the lower court for awarding an
amount allegedly not asked nor prayed for in private respondents
complaint.
Notwithstanding the fact that the award of actual and compensatory
damages by the lower court exceeded that prayed for in the
complaint, the same is nonetheless valid, subject to certain
qualifications.
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:
SEC. 5. Amendment to conform to or authorize presentation of
evidence. When issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment
of the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgement; but failure to amend does
not affect the result of the trial of these issues. If evidence is objected
to at the trial on the ground that it is not within the issues made by
the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the
action and the ends of substantial justice will be subserved
thereby. The court may grant a continuance to enable the amendment
to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs.
Asociacion de Agricultures de Talisay-Silay, Inc.[49] citing Northern
Cement Corporation vs. Intermediate Appellate Court [50] is
enlightening:
There have been instances where the Court has held that even
without the necessary amendment, the amount proved at the trial may
be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we
said that if the facts shown entitled plaintiff to relief other than that
asked for, no amendment to the complaint was necessary, especially
where defendant had himself raised the point on which recovery was
based.The appellate court could treat the pleading as amended to
conform to the evidence although the pleadings were actually not
amended. Amendment is also unnecessary when only clerical error or
non substantial matters are involved, as we held in Bank of the
Philippine Islands vs. Laguna (48 Phil. 5). In Co Tiamco vs. Diaz (75
Phil. 672), we stressed that the rule on amendment need not be
applied rigidly, particularly where no surprise or prejudice is caused
the objecting party. And in the recent case of National Power
Corporation vs. Court of Appeals (113 SCRA 556), we held that
where there is a variance in the defendants pleadings and the
evidence adduced by it at the trial, the Court may treat the pleading
as amended to conform with the evidence.
 279

It is the view of the Court that pursuant to the above-mentioned rule SO ORDERED.
and in light of the decisions cited, the trial court should not be
precluded from awarding an amount higher than that claimed in the
pleading notwithstanding the absence of the
required amendment. But it is upon the condition that the evidence of
such higher amount has been presented properly, with full
opportunity on the part of the opposing parties to support their
respective contentions and to refute each others evidence.

The failure of a party to amend a pleading to conform to the evidence

adduced during trial does not preclude an adjudication by the court
on the basis of such evidence which may embody new issues not
raised in the pleadings, or serve as a basis for a higher award of
damages. Although the pleading may not have been amended to
conform to the evidence submitted during trial, judgment may
nonetheless be rendered, not simply on the basis of the issues alleged
but also on the basis of issues discussed and the assertions of fact
proved in the course of trial. The court may treat the pleading as if it
had been amended to conform to the evidence, although it had not
been actually so amended. Former Chief Justice Moran put the
matter in this way:

`When evidence is presented by one party, with the expressed or

implied consent of the adverse party, as to issues not alleged in the
pleadings, judgment may be rendered validly as regards those issues,
which shall be considered as if they have been raised in the
pleadings. There is implied consent to the evidence thus presented
when the adverse party fails to object thereto.

Clearly, a court may rule and render judgment on the basis of the
evidence before it even though the relevant pleading had not been
previously amended, so long as no surprise or prejudice is thereby
caused to the adverse party. Put a little differently, so long as the
basis requirements of fair play had been met, as where litigants were
given full opportunity to support their respective contentions and to
object to or refute each others evidence, the court may validly treat
the pleadings as if they had been amended to conform to the evidence
and proceed to adjudicate on the basis of all the evidence before it.

In the instant case, inasmuch as the petitioner was afforded the

opportunity to refute and object to the evidence, both documentary
and testimonial, formally offered by private respondent, the
rudiments of fair play are deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during the course of the
cross-examination. Under these circumstances, the court acted within
the bounds of its jurisdiction and committed no reversible error in
awarding actual damages the amount of which is higher than that
prayed for. Verily, the lower courts actuations are sanctioned by the
Rules and supported by jurisprudence.

Similarly, we affirm the grant of exemplary damages although the

amount of Five Million Pesos (P5,000,000.00) awarded, being
excessive, is subject to reduction. Exemplary or corrective damages
are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory
damages.[51] Considering its purpose, it must be fair and reasonable
in every case and should not be awarded to unjustly enrich a
prevailing party.[52] In our view, an award of P50,000.00 as
exemplary damages in the present case qualifies the test of
reasonableness.

WHEREFORE, premises considered, the instant petition is

DENIED for lack of merit. The decision of the Court of Appeals is
hereby AFFIRMED with MODIFICATION of the amount awarded
as exemplary damages. Accordingly, petitioner is hereby ordered to
pay private respondent the sum of P99,000,000.00 as actual or
compensatory damages; P50,000.00 as exemplary damage and the
costs of suit.
 280

IV. RECOGNITION AND ENFORCEMENT OF FOREIGN

JUDGEMENT

To be continued…..