Conflicts of Law – Property
On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
G.R. No. 101949 December 1, 1994
THE HOLY SEE, petitioner,
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court
of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES, INC., respondents.
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set
aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial Court,
Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in
Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion for
reconsideration of the June 20,1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy, and
is represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in
the real estate business.
This petition arose from a controversy over a parcel of land consisting of 6,000 square meters
(Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of Parañaque,
Metro Manila and registered in the name of petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of
Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine Realty
Corporation (PRC).
The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as
agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute
arose as to who of the parties has the responsibility of evicting and clearing the land of
squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to
Tropicana Properties and Development Corporation (Tropicana).
I
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and
specific performance and damages against petitioner, represented by the Papal Nuncio, and
three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil
Case No.
90-183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner
and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00
per square meters; (2) the agreement to sell was made on the condition that earnest money of
P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of
squatters who were then occupying the same; (3) Licup paid the earnest money to Msgr.
Cirilos; (4) in the same month, Licup assigned his rights over the property to private
respondent and informed the sellers of the said assignment; (5) thereafter, private respondent
demanded from Msgr. Cirilos that the sellers fulfill their undertaking and clear the property of
squatters; however, Msgr. Cirilos informed private respondent of the squatters' refusal to
vacate the lots, proposing instead either that private respondent undertake the eviction or
that the earnest money be returned to the latter; (6) private respondent counterproposed that
if it would undertake the eviction of the squatters, the purchase price of the lots should be
reduced from P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest
money of P100,000.00 and wrote private respondent giving it seven days from receipt of the
letter to pay the original purchase price in cash; (8) private respondent sent the earnest
money back to the sellers, but later discovered that on March 30, 1989, petitioner and the
PRC, without notice to private respondent, sold the lots to Tropicana, as evidenced by two
separate Deeds of Sale, one over Lot 5-A, and another over Lots 5-B and 5-D; and that the
sellers' transfer certificate of title over the lots were cancelled, transferred and registered in
the name of Tropicana; (9) Tropicana induced petitioner and the PRC to sell the lots to it and
thus enriched itself at the expense of private respondent; (10) private respondent demanded
the rescission of the sale to Tropicana and the reconveyance of the lots, to no avail; and (11)
private respondent is willing and able to comply with the terms of the contract to sell and has
actually made plans to develop the lots into a townhouse project, but in view of the sellers'
breach, it lost profits of not less than P30,000.000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between petitioner
and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance of the lots in
question; (3) specific performance of the agreement to sell between it and the owners of the
lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint —
petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for
being an improper party. An opposition to the motion was filed by private respondent.
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On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion
to dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the
business contract in question" (Rollo, pp. 20-21).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual Allegation
for claim of Immunity as a Jurisdictional Defense." So as to facilitate the determination of its
defense of sovereign immunity, petitioner prayed that a hearing be conducted to allow it to
establish certain facts upon which the said defense is based. Private respondent opposed this
motion as well as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the motion for
reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo,
p. 22).
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of
sovereign immunity only on its own behalf and on behalf of its official representative, the
Papal Nuncio.
On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the
diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained
in the petition of the Holy See insofar as they refer to arguments relative to its claim of
sovereign immunity from suit" (Rollo, p. 87).
Private respondent opposed the intervention of the Department of Foreign Affairs. In
compliance with the resolution of this Court, both parties and the Department of Foreign
Affairs submitted their respective memoranda.
II
A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the
order denying petitioner's motion to dismiss. The general rule is that an order denying a
motion to dismiss is not reviewable by the appellate courts, the remedy of the movant being
to file his answer and to proceed with the hearing before the trial court. But the general rule
admits of exceptions, and one of these is when it is very clear in the records that the trial
court has no alternative but to dismiss the complaint (Philippine National Bank v. Florendo,
206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such a
case, it would be a sheer waste of time and energy to require the parties to undergo the rigors
of a trial.
The other procedural question raised by private respondent is the personality or legal interest
of the Department of Foreign Affairs to intervene in the case in behalf of the Holy See (Rollo,
pp. 186-190).
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.
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.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed
the said Department to file its memorandum in support of petitioner's claim of sovereign
immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local courts
by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states
bypass the Foreign Office, the courts can inquire into the facts and make their own
determination as to the nature of the acts and transactions involved.
III
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The burden of the petition is that respondent trial court has no jurisdiction over petitioner,
being a foreign state enjoying sovereign immunity. On the other hand, private respondent
insists that the doctrine of non-suability is not anymore absolute and that petitioner has
divested itself of such a cloak when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he,
as the Holy See, was considered a subject of International Law. With the loss of the Papal
States and the limitation of the territory under the Holy See to an area of 108.7 acres, the
position of the Holy See in International Law became controversial (Salonga and Yap, Public
International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats to
foreign countries, and to enter into treaties according to International Law (Garcia, Questions
and Problems In International Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of assuring
to the Holy See absolute and visible independence and of guaranteeing to it indisputable
sovereignty also in the field of international relations" (O'Connell, I International Law 311
[1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested that
the treaty created two international persons — the Holy See and Vatican City (Salonga and
Yap, supra, 37).
The Vatican City fits into none of the established categories of states, and the attribution to it
of "sovereignty" must be made in a sense different from that in which it is applied to other
states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a
community of national states, the Vatican City represents an entity organized not for political
but for ecclesiastical purposes and international objects. Despite its size and object, the
Vatican City has an independent government of its own, with the Pope, who is also head of
the Roman Catholic Church, as the Holy See or Head of State, in conformity with its
traditions, and the demands of its mission in the world. Indeed, the world-wide interests and
activities of the Vatican City are such as to make it in a sense an "international state"
(Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).
One authority wrote that the recognition of the Vatican City as a state has significant
implication — that it is possible for any entity pursuing objects essentially different from
those pursued by states to be invested with international personality (Kunz, The Status of the
Holy See in International Law, 46 The American Journal of International Law 308 [1952]).
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the
Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own
view, it is the Holy See that is the international person.
The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign.
The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic representations
with the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal
practice in international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally
accepted principles of International Law. Even without this affirmation, such principles of
International Law are deemed incorporated as part of the law of the land as a condition and
consequence of our admission in the society of nations (United States of America v. Guinto,
182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another sovereign. According to the newer or
restrictive theory, the immunity of the sovereign is recognized only with regard to public acts
or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago,
Public International Law 194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States passed the
Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as "either a
regular course of commercial conduct or a particular commercial transaction or act."
Furthermore, the law declared that the "commercial character of the activity shall be
determined by reference to the nature of the course of conduct or particular transaction or
act, rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an
Act to Provide For State Immunity in Canadian Courts. The Act defines a "commercial
activity" as any particular transaction, act or conduct or any regular course of conduct that
by reason of its nature, is of a "commercial character."
The restrictive theory, which is intended to be a solution to the host of problems involving the
issue of sovereign immunity, has created problems of its own. Legal treatises and the
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decisions in countries which follow the restrictive theory have difficulty in characterizing
whether a contract of a sovereign state with a private party is an act jure gestionis or an
act jure imperii.
The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions. This
is particularly true with respect to the Communist states which took control of nationalized
business activities and international trading.
This Court has considered the following transactions by a foreign state with private parties as
acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of its
military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the
repair of a wharf at a United States Naval Station (United States of America v. Ruiz, supra.);
and (3) the change of employment status of base employees (Sanders v. Veridiano, 162 SCRA
88 [1988]).
On the other hand, this Court has considered the following transactions by a foreign state
with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop at
the John Hay Air Station in Baguio City, to cater to American servicemen and the general
public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for the
operation of barber shops in Clark Air Base in Angeles City (United States of America v.
Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to
the general public is undoubtedly for profit as a commercial and not a governmental activity.
By entering into the employment contract with the cook in the discharge of its proprietary
function, the United States government impliedly divested itself of its sovereign immunity
from suit.
In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own
guidelines, tentative they may be.
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.
As held in United States of America v. Guinto, (supra):
There is no question that the United States of America, like any other state,
will be deemed to have impliedly waived its non-suability if it has entered into
a contract in its proprietary or private capacity. It is only when the contract
involves its sovereign or governmental capacity that no such waiver may be
implied.
In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real
estate business, surely the said transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were
made for profit but claimed that it acquired said property for the site of its mission or the
Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign to
acquire property, real or personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on
Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and
entered into force in the Philippines on November 15, 1965.
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private
immovable property situated in the territory of the receiving state which the envoy holds on
behalf of the sending state for the purposes of the mission. If this immunity is provided for a
diplomatic envoy, with all the more reason should immunity be recognized as regards the
sovereign itself, which in this case is the Holy See.
The decision to transfer the property and the subsequent disposal thereof are likewise clothed
with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living
thereon made it almost impossible for petitioner to use it for the purpose of the donation. The
fact that squatters have occupied and are still occupying the lot, and that they stubbornly
refuse to leave the premises, has been admitted by private respondent in its complaint (Rollo,
pp. 26, 27).
The issue of petitioner's non-suability can be determined by the trial court without going to
trial in the light of the pleadings, particularly the admission of private respondent. Besides,
the privilege of sovereign immunity in this case was sufficiently established by the
Memorandum and Certification of the Department of Foreign Affairs. As the department
tasked with the conduct of the Philippines' foreign relations (Administrative Code of 1987,
Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this case
and officially certified that the Embassy of the Holy See is a duly accredited diplomatic
mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all
the rights, privileges and immunities of a diplomatic mission or embassy in this country
(Rollo, pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is
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conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190
SCRA 130 [1990]). Where the plea of immunity is recognized and affirmed by the executive
branch, it is the duty of the courts to accept this claim so as not to embarrass the executive
arm of the government in conducting the country's foreign relations (World Health
Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration
Commission and in World Health Organization, we abide by the certification of the Department
of Foreign Affairs.
Ordinarily, the procedure would be to remand the case and order the trial court to conduct a
hearing to establish the facts alleged by petitioner in its motion. In view of said certification,
such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd.
Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).
IV
Private respondent is not left without any legal remedy for the redress of its grievances. Under
both Public International Law and Transnational Law, a person who feels aggrieved by the
acts of a foreign sovereign can ask his own government to espouse his cause through
diplomatic channels.
Private respondent can ask the Philippine government, through the Foreign Office, to espouse
its claims against the Holy See. Its first task is to persuade the Philippine government to take
up with the Holy See the validity of its claims. Of course, the Foreign Office shall first make a
determination of the impact of its espousal on the relations between the Philippine
government and the Holy See (Young, Remedies of Private Claimants Against Foreign States,
Selected Readings on Protection by Law of Private Foreign Investments 905, 919 [1964]).
Once the Philippine government decides to espouse the claim, the latter ceases to be a private
cause.
According to the Permanent Court of International Justice, the forerunner of the International
Court of Justice:
By taking up the case of one of its subjects and by reporting to diplomatic
action or international judicial proceedings on his behalf, a State is in reality
asserting its own rights — its right to ensure, in the person of its subjects,
respect for the rules of international law (The Mavrommatis Palestine
Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No. 90-
183 against petitioner is DISMISSED.
G.R. No. 94723 August 21, 1997
KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.
SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI y NORTHCOTT, respondents.
TORRES, JR., J.:
In our predisposition to discover the "original intent" of a statute, courts become the unfeeling
pillars of the status quo. Ligle do we realize that statutes or even constitutions are bundles of
compromises thrown our way by their framers. Unless we exercise vigilance, the statute may
already be out of tune and irrelevant to our day.
The petition is for declaratory relief. It prays for the following reliefs:
a.) Immediately upon the filing of this petition, an Order be issued restraining
the respondents from applying and enforcing Section 113 of Central Bank
Circular No. 960;
b.) After hearing, judgment be rendered:
1.) Declaring the respective rights and duties of petitioners and respondents;
2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to
the provisions of the Constitution, hence void; because its provision that
"Foreign currency deposits shall be exempt from attachment, garnishment, or
any other order or process of any court, legislative body, government agency
or any administrative body whatsoever
i.) has taken away the right of petitioners to have the bank
deposit of defendant Greg Bartelli y Northcott garnished to
satisfy the judgment rendered in petitioners' favor in
violation of substantive due process guaranteed by the
Constitution;
ii.) has given foreign currency depositors an undue favor or a
class privilege in violation of the equal protection clause of
the Constitution;
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iii.) has provided a safe haven for criminals like the herein
respondent Greg Bartelli y Northcott since criminals could
escape civil liability for their wrongful acts by merely
converting their money to a foreign currency and depositing
it in a foreign currency deposit account with an authorized
bank.
The antecedent facts:
On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured
petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg
Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to
rape the child once on February 4, and three times each day on February 5, 6, and 7, 1989.
On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli
was arrested and detained at the Makati Municipal Jail. The policemen recovered from
Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303,
US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar Account —
China Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine Money
(P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in seducing the
complainant.
On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg
Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802,
803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the
Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary
attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled
hearing for Bartelli's petition for bail the latter escaped from jail.
On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance
of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg
Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989.
Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989
granting the application of herein petitioners, for the issuance of the writ of preliminary
attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in
the amount of P100,000.00, a Writ of Preliminary Attachment was issued by the trial court on
February 28, 1989.
On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China
Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China
Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of
garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de Guzman
sent his reply to China Banking Corporation saying that the garnishment did not violate the
secrecy of bank deposits since the disclosure is merely incidental to a garnishment properly
and legally made by virtue of a court order which has placed the subject deposits in custodia
legis. In answer to this letter of the Deputy Sheriff of Makati, China Banking Corporation, in a
letter dated March 20, 1989, invoked Section 113 of Central Bank Circular No. 960 to the
effect that the dollar deposits or defendant Greg Bartelli are exempt from attachment,
garnishment, or any other order or process of any court, legislative body, government agency
or any administrative body, whatsoever.
This prompted the counsel for petitioners to make an inquiry with the Central Bank in a
letter dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception
or whether said section has been repealed or amended since said section has rendered
nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the
civil action secured by way of the writ of preliminary attachment as granted to the plaintiff
under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:
May 26, 1989
Ms. Erlinda S. Carolino
12 Pres. Osmena Avenue
South Admiral Village
Paranaque, Metro Manila
Dear Ms. Carolino:
This is in reply to your letter dated April 25, 1989 regarding your inquiry on
Section 113, CB Circular No. 960 (1983).
The cited provision is absolute in application. It does not admit of any
exception, nor has the same been repealed nor amended.
The purpose of the law is to encourage dollar accounts within the country's
banking system which would help in the development of the economy. There
is no intention to render futile the basic rights of a person as was suggested
in your subject letter. The law may be harsh as some perceive it, but it is still
the law. Compliance is, therefore, enjoined.
Very truly yours,
(SGD) AGAPITO S. FAJARDO
Director1
Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve
summons by publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs.
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Greg Bartelli y Northcott." Summons with the complaint was a published in the Manila Times
once a week for three consecutive weeks. Greg Bartelli failed to file his answer to the
complaint and was declared in default on August 7, 1989. After hearing the case ex-parte, the
court rendered judgment in favor of petitioners on March 29, 1990, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against
defendant, ordering the latter:
1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral
damages;
2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and
Evelina E. Salvacion the amount of P150,000.00 each or a total of
P300,000.00 for both of them;
3. To pay plaintiffs exemplary damages of P100,000.00; and
4. To pay attorney's fees in an amount equivalent to 25% of the total amount
of damages herein awarded;
5. To pay litigation expenses of P10,000.00; plus
6. Costs of the suit.
SO ORDERED.
The heinous acts of respondent Greg Bartelli which gave rise to the award were related in
graphic detail by the trial court in its decision as follows:
The defendant in this case was originally detained in the municipal jail of
Makati but was able to escape therefrom on February 24, 1989 as per report
of the Jail Warden of Makati to the Presiding Judge, Honorable Manuel M.
Cosico of the Regional Trial Court of Makati, Branch 136, where he was
charged with four counts of Rape and Serious Illegal Detention (Crim. Cases
Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel,
summons was served upon defendant by publication in the Manila Times, a
newspaper of general circulation as attested by the Advertising Manager of
the Metro Media Times, Inc., the publisher of the said newspaper. Defendant,
however, failed to file his answer to the complaint despite the lapse of the
period of sixty (60) days from the last publication; hence, upon motion of the
plaintiffs, through counsel, defendant was declared in default and plaintiffs
were authorized to present their evidence ex parte.
In support of the complaint, plaintiffs presented as witnesses the minor
Karen E. Salvacion, her father, Federico N. Salvacion, Jr., a certain Joseph
Aguilar and a certain Liberato Madulio, who gave the following testimony:
Karen took her first year high school in St. Mary's Academy in Pasay City but
has recently transferred to Arellano University for her second year.
In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati
Cinema Square, with her friend Edna Tangile whiling away her free time. At
about 3:30 p.m. while she was finishing her snack on a concrete bench in
front of Plaza Fair, an American approached her. She was then alone because
Edna Tangile had already left, and she was about to go home. (TSN, Aug. 15,
1989, pp. 2 to 5)
The American asked her name and introduced himself as Greg Bartelli. He
sat beside her when he talked to her. He said he was a Math teacher and told
her that he has a sister who is a nurse in New York. His sister allegedly has a
daughter who is about Karen's age and who was with him in his house along
Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5)
The American asked Karen what was her favorite subject and she told him
it's Pilipino. He then invited her to go with him to his house where she could
teach Pilipino to his niece. He even gave her a stuffed toy to persuade her to
teach his niece. (Id., pp. 5-6)
They walked from Plaza Fair along Pasong Tamo, turning right to reach the
defendant's house along Kalayaan Avenue. (Id., p. 6)
When they reached the apartment house, Karen noticed that defendant's
alleged niece was not outside the house but defendant told her maybe his
niece was inside. When Karen did not see the alleged niece inside the house,
defendant told her maybe his niece was upstairs, and invited Karen to go
upstairs. (Id., p. 7)
Upon entering the bedroom defendant suddenly locked the door. Karen
became nervous because his niece was not there. Defendant got a piece of
cotton cord and tied Karen's hands with it, and then he undressed her.
Karen cried for help but defendant strangled her. He took a packing tape and
he covered her mouth with it and he circled it around her head. (Id., p. 7)
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Then, defendant suddenly pushed Karen towards the bed which was just
near the door. He tied her feet and hands spread apart to the bed posts. He
knelt in front of her and inserted his finger in her sex organ. She felt severe
pain. She tried to shout but no sound could come out because there were
tapes on her mouth. When defendant withdrew his finger it was full of blood
and Karen felt more pain after the withdrawal of the finger. (Id., p. 8)
He then got a Johnson's Baby Oil and he applied it to his sex organ as well
as to her sex organ. After that he forced his sex organ into her but he was not
able to do so. While he was doing it, Karen found it difficult to breathe and
she perspired a lot while feeling severe pain. She merely presumed that he
was able to insert his sex organ a little, because she could not see. Karen
could not recall how long the defendant was in that position. (Id. pp. 8-9)
After that, he stood up and went to the bathroom to wash. He also told Karen
to take a shower and he untied her hands. Karen could only hear the sound
of the water while the defendant, she presumed, was in the bathroom
washing his sex organ. When she took a shower more blood came out from
her. In the meantime, defendant changed the mattress because it was full of
blood. After the shower, Karen was allowed by defendant to sleep. She fell
asleep because she got tired crying. The incident happened at about 4:00
p.m. Karen had no way of determining the exact time because defendant
removed her watch. Defendant did not care to give her food before she went
to sleep. Karen woke up at about 8:00 o'clock the following morning. (Id., pp.
9-10)
The following day, February 5, 1989, a Sunday, after a breakfast of biscuit
and coke at about 8:30 to 9:00 a.m. defendant raped Karen while she was
still bleeding. For lunch, they also took biscuit and coke. She was raped for
the second time at about 12:00 to 2:00 p.m. In the evening, they had rice for
dinner which defendant had stored downstairs; it was he who cooked the rice
that is why it looks like "lugaw". For the third time, Karen was raped again
during the night. During those three times defendant succeeded in inserting
his sex organ but she could not say whether the organ was inserted wholly.
Karen did not see any firearm or any bladed weapon. The defendant did not
tie her hands and feet nor put a tape on her mouth anymore but she did not
cry for help for fear that she might be killed; besides, all the windows and
doors were closed. And even if she shouted for help, nobody would hear her.
She was so afraid that if somebody would hear her and would be able to call
the police, it was still possible that as she was still inside the house,
defendant might kill her. Besides, the defendant did not leave that Sunday,
ruling out her chance to call for help. At nighttime he slept with her again.
(TSN, Aug. 15, 1989, pp. 12-14)
On February 6, 1989, Monday, Karen was raped three times, once in the
morning for thirty minutes after a breakfast of biscuits; again in the
afternoon; and again in the evening. At first, Karen did not know that there
was a window because everything was covered by a carpet, until defendant
opened the window for around fifteen minutes or less to let some air in, and
she found that the window was covered by styrofoam and plywood. After
that, he again closed the window with a hammer and he put the styrofoam,
plywood, and carpet back. (Id., pp. 14-15)
That Monday evening, Karen had a chance to call for help, although
defendant left but kept the door closed. She went to the bathroom and saw a
small window covered by styrofoam and she also spotted a small hole. She
stepped on the bowl and she cried for help through the hole. She cried:
"Maawa no po kayo so akin. Tulungan n'yo akong makalabas dito. Kinidnap
ako!" Somebody heard her. It was a woman, probably a neighbor, but she got
angry and said she was "istorbo". Karen pleaded for help and the woman told
her to sleep and she will call the police. She finally fell asleep but no
policeman came. (TSN, Aug. 15, 1989, pp. 15-16)
She woke up at 6:00 o'clock the following morning, and she saw defendant in
bed, this time sleeping. She waited for him to wake up. When he woke up, he
again got some food but he always kept the door locked. As usual, she was
merely fed with biscuit and coke. On that day, February 7, 1989, she was
again raped three times. The first at about 6:30 to 7:00 a.m., the second at
about 8:30 — 9:00, and the third was after lunch at 12:00 noon. After he had
raped her for the second time he left but only for a short while. Upon his
return, he caught her shouting for help but he did not understand what she
was shouting about. After she was raped the third time, he left the house.
(TSN, Aug. 15, 1989, pp. 16-17) She again went to the bathroom and shouted
for help. After shouting for about five minutes, she heard many voices. The
voices were asking for her name and she gave her name as Karen Salvacion.
After a while, she heard a voice of a woman saying they will just call the
police. They were also telling her to change her clothes. She went from the
bathroom to the room but she did not change her clothes being afraid that
should the neighbors call for the police and the defendant see her in different
clothes, he might kill her. At that time she was wearing a T-shirt of the
American because the latter washed her dress. (Id., p. 16)
Afterwards, defendant arrived and he opened the door. He asked her if she
had asked for help because there were many policemen outside and she
denied it. He told her to change her clothes, and she did change to the one
she was wearing on Saturday. He instructed her to tell the police that she left
home and willingly; then he went downstairs but he locked the door. She
could hear people conversing but she could not understand what they were
saying. (Id., p. 19)
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When she heard the voices of many people who were conversing downstairs,
she knocked repeatedly at the door as hard as she could. She heard
somebody going upstairs and when the door was opened, she saw a
policeman. The policeman asked her name and the reason why she was
there. She told him she was kidnapped. Downstairs, he saw about five
policemen in uniform and the defendant was talking to them. "Nakikipag-
areglo po sa mga pulis," Karen added. "The policeman told him to just explain
at the precinct. (Id., p. 20)
They went out of the house and she saw some of her neighbors in front of the
house. They rode the car of a certain person she called Kuya Boy together
with defendant, the policeman, and two of her neighbors whom she called
Kuya Bong Lacson and one Ate Nita. They were brought to Sub-Station I and
there she was investigated by a policeman. At about 2:00 a.m., her father
arrived, followed by her mother together with some of their neighbors. Then
they were brought to the second floor of the police headquarters. (Id., p. 21)
At the headquarters, she was asked several questions by the investigator.
The written statement she gave to the police was marked as Exhibit A. Then
they proceeded to the National Bureau of Investigation together with the
investigator and her parents. At the NBI, a doctor, a medico-legal officer,
examined her private parts. It was already 3:00 in the early morning of the
following day when they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The
findings of the medico-legal officer has been marked as Exhibit B.
She was studying at the St. Mary's Academy in Pasay City at the time of the
incident but she subsequently transferred to Apolinario Mabini, Arellano
University, situated along Taft Avenue, because she was ashamed to be the
subject of conversation in the school. She first applied for transfer to Jose
Abad Santos, Arellano University along Taft Avenue near the Light Rail
Transit Station but she was denied admission after she told the school the
true reason for her transfer. The reason for their denial was that they might
be implicated in the case. (TSN, Aug. 15, 1989, p. 46)
xxx xxx xxx
After the incident, Karen has changed a lot. She does not play with her
brother and sister anymore, and she is always in a state of shock; she has
been absent-minded and is ashamed even to go out of the house. (TSN, Sept.
12, 1989, p. 10) She appears to be restless or sad, (Id., p. 11) The father
prays for P500,000.00 moral damages for Karen for this shocking experience
which probably, she would always recall until she reaches old age, and he is
not sure if she could ever recover from this experience. (TSN, Sept. 24, 1989,
pp. 10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice was published
in the Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen (15)
days from the date of the last publication of the notice of judgment and the decision of the
trial court had become final, petitioners tried to execute on Bartelli's dollar deposit with
China Banking Corporation. Likewise, the bank invoked Section 113 of Central Bank Circular
No. 960.
Thus, petitioners decided to seek relief from this Court.
The issues raised and the arguments articulated by the parties boil down to two:
May this Court entertain the instant petition despite the fact that original jurisdiction in
petitions for declaratory relief rests with the lower court? Should Section 113 of Central Bank
Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as
the Foreign Currency Deposit Act be made applicable to a foreign transient?
Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960
providing that "Foreign currency deposits shall be exempt from attachment, garnishment, or
any other order or process of any court, legislative body, government agency or any
administrative body whatsoever." should be adjudged as unconstitutional on the grounds
that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant Greg
Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in
violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign
currency depositors an undue favor or a class privilege in violation of the equal protection
clause of the Constitution; 3.) it has provided a safe haven for criminals like the herein
respondent Greg Bartelli y Northcott since criminals could escape civil liability for their
wrongful acts by merely converting their money to a foreign currency and depositing it in a
foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in
issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi-
legislative power when it took away: a.) the plaintiffs substantive right to have the claim
sought to be enforced by the civil action secured by way of the writ of preliminary attachment
as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to
have the judgment credit satisfied by way of the writ of execution out of the bank deposit of
the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of
Court, which is beyond its power to do so.
On the other hand, respondent Central Bank, in its Comment alleges that the Monetary
Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority
because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended
by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment
or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that it
does not violate the substantive due process guaranteed by the Constitution because a.) it
was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to regular
methods of procedure; and d.) it applies to all members of a class.
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Expanding, the Central Bank said; that one reason for exempting the foreign currency
deposits from attachment, garnishment or any other order or process of any court, is to
assure the development and speedy growth of the Foreign Currency Deposit System and the
Offshore Banking System in the Philippines; that another reason is to encourage the inflow of
foreign currency deposits into the banking institutions thereby placing such institutions more
in a position to properly channel the same to loans and investments in the Philippines, thus
directly contributing to the economic development of the country; that the subject section is
being enforced according to the regular methods of procedure; and that it applies to all
foreign currency deposits made by any person and therefore does not violate the equal
protection clause of the Constitution.
Respondent Central Bank further avers that the questioned provision is needed to promote
the public interest and the general welfare; that the State cannot just stand idly by while a
considerable segment of the society suffers from economic distress; that the State had to take
some measures to encourage economic development; and that in so doing persons and
property may be subjected to some kinds of restraints or burdens to secure the general
welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of
the Revised Rules of Court provide that some properties are exempted from
execution/attachment especially provided by law and R.A. No. 6426 as amended is such a
law, in that it specifically provides, among others, that foreign currency deposits shall be
exempted from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.
For its part, respondent China Banking Corporation, aside from giving reasons similar to that
of respondent Central Bank, also stated that respondent China Bank is not unmindful of the
inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of
Greg Bartelli; that it is only too willing to release the dollar deposit of Bartelli which may
perhaps partly mitigate the sufferings petitioner has undergone; but it is restrained from
doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and that
despite the harsh effect of these laws on petitioners, CBC has no other alternative but to
follow the same.
This Court finds the petition to be partly meritorious.
Petitioner deserves to receive the damages awarded to her by the court. But this petition for
declaratory relief can only be entertained and treated as a petition for mandamus to require
respondents to honor and comply with the writ of execution in Civil Case No. 89-3214.
This Court has no original and exclusive jurisdiction over a petition for declaratory
relief.2 However, exceptions to this rule have been recognized. Thus, where the petition has
far-reaching implications and raises questions that should be resolved, it may be treated as
one for mandamus.3
Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her
gesture of kindness by teaching his alleged niece the Filipino language as requested by the
American, trustingly went with said stranger to his apartment, and there she was raped by
said American tourist Greg Bartelli. Not once, but ten times. She was detained therein for
four (4) days. This American tourist was able to escape from the jail and avoid punishment.
On the other hand, the child, having received a favorable judgment in the Civil Case for
damages in the amount of more than P1,000,000.00, which amount could alleviate the
humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer
for a long, long time; and knowing that this person who had wronged her has the money,
could not, however get the award of damages because of this unreasonable law. This
questioned law, therefore makes futile the favorable judgment and award of damages that she
and her parents fully deserve. As stated by the trial court in its decision,
Indeed, after hearing the testimony of Karen, the Court believes that it was
undoubtedly a shocking and traumatic experience she had undergone which
could haunt her mind for a long, long time, the mere recall of which could
make her feel so humiliated, as in fact she had been actually humiliated once
when she was refused admission at the Abad Santos High School, Arellano
University, where she sought to transfer from another school, simply because
the school authorities of the said High School learned about what happened
to her and allegedly feared that they might be implicated in the case.
xxx xxx xxx
The reason for imposing exemplary or corrective damages is due to the
wanton and bestial manner defendant had committed the acts of rape during
a period of serious illegal detention of his hapless victim, the minor Karen
Salvacion whose only fault was in her being so naive and credulous to believe
easily that defendant, an American national, could not have such a bestial
desire on her nor capable of committing such a heinous crime. Being only 12
years old when that unfortunate incident happened, she has never heard of
an old Filipino adage that in every forest there is a
snake, . . . .4
If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom
how the incentive for foreign currency deposit could be more important than his child's rights
to said award of damages; in this case, the victim's claim for damages from this alien who
had the gall to wrong a child of tender years of a country where he is a mere visitor. This
further illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the
country's economy was in a shambles; when foreign investments were minimal and
presumably, this was the reason why said statute was enacted. But the realities of the
present times show that the country has recovered economically; and even if not, the
Page 10 of 45
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questioned law still denies those entitled to due process of law for being unreasonable and
oppressive. The intention of the questioned law may be good when enacted. The law failed to
anticipate the iniquitous effects producing outright injustice and inequality such as the case
before us.
It has thus been said that —
But I also know,5 that laws and institutions must go hand in hand with the
progress of the human mind. As that becomes more developed, more
enlightened, as new discoveries are made, new truths are disclosed and
manners and opinions change with the change of circumstances, institutions
must advance also, and keep pace with the times. . . We might as well
require a man to wear still the coat which fitted him when a boy, as civilized
society to remain ever under the regimen of their barbarous ancestors.
In his Comment, the Solicitor General correctly opined, thus:
The present petition has far-reaching implications on the right of a national
to obtain redress for a wrong committed by an alien who takes refuge under
a law and regulation promulgated for a purpose which does not contemplate
the application thereof envisaged by the alien. More specifically, the petition
raises the question whether the protection against attachment, garnishment
or other court process accorded to foreign currency deposits by PD No. 1246
and CB Circular No. 960 applies when the deposit does not come from a
lender or investor but from a mere transient or tourist who is not expected to
maintain the deposit in the bank for long.
The resolution of this question is important for the protection of nationals
who are victimized in the forum by foreigners who are merely passing
through.
xxx xxx xxx
. . . Respondents China Banking Corporation and Central Bank of the
Philippines refused to honor the writ of execution issued in Civil Case No. 89-
3214 on the strength of the following provision of Central Bank Circular No.
960:
Sec. 113. Exemption from attachment. — Foreign currency
deposits shall be exempt from attachment, garnishment, or
any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.
Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic
Act No. 6426:
Sec. 7. Rules and Regulations. The Monetary Board of the
Central Bank shall promulgate such rules and regulations as
may be necessary to carry out the provisions of this Act
which shall take effect after the publication of such rules
and regulations in the Official Gazette and in a newspaper of
national circulation for at least once a week for three
consecutive weeks. In case the Central Bank promulgates
new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit
was made shall govern.
The aforecited Section 113 was copied from Section 8 of Republic Act NO.
6426, as amended by P.D. 1246, thus:
Sec. 8. Secrecy of Foreign Currency Deposits. — All foreign
currency deposits authorized under this Act, as amended by
Presidential Decree No. 1035, as well as foreign currency
deposits authorized under Presidential Decree No. 1034, are
hereby declared as and considered of an absolutely
confidential nature and, except upon the written permission
of the depositor, in no instance shall such foreign currency
deposits be examined, inquired or looked into by any person,
government official, bureau or office whether judicial or
administrative or legislative or any other entity whether
public or private: Provided, however, that said foreign
currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court,
legislative body, government agency or any administrative
body whatsoever.
The purpose of PD 1246 in according protection against attachment,
garnishment and other court process to foreign currency deposits is stated in
its whereases, viz.:
WHEREAS, under Republic Act No. 6426, as amended by
Presidential Decree No. 1035, certain Philippine banking
institutions and branches of foreign banks are authorized to
accept deposits in foreign currency;
WHEREAS, under the provisions of Presidential Decree No.
1034 authorizing the establishment of an offshore banking
Page 11 of 45
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system in the Philippines, offshore banking units are also
authorized to receive foreign currency deposits in certain
cases;
WHEREAS, in order to assure the development and speedy
growth of the Foreign Currency Deposit System and the
Offshore Banking System in the Philippines, certain
incentives were provided for under the two Systems such as
confidentiality of deposits subject to certain exceptions and
tax exemptions on the interest income of depositors who are
nonresidents and are not engaged in trade or business in the
Philippines;
WHEREAS, making absolute the protective cloak of
confidentiality over such foreign currency deposits,
exempting such deposits from tax, and guaranteeing the
vested rights of depositors would better encourage the inflow
of foreign currency deposits into the banking institutions
authorized to accept such deposits in the Philippines thereby
placing such institutions more in a position to properly
channel the same to loans and investments in the
Philippines, thus directly contributing to the economic
development of the country;
Thus, one of the principal purposes of the protection accorded to foreign
currency deposits is "to assure the development and speedy growth of the
Foreign Currency Deposit system and the Offshore Banking in the
Philippines" (3rd Whereas).
The Offshore Banking System was established by PD No. 1034. In turn, the
purposes of PD No. 1034 are as follows:
WHEREAS, conditions conducive to the establishment of an
offshore banking system, such as political stability, a
growing economy and adequate communication facilities,
among others, exist in the Philippines;
WHEREAS, it is in the interest of developing countries to
have as wide access as possible to the sources of capital
funds for economic development;
WHEREAS, an offshore banking system based in the
Philippines will be advantageous and beneficial to the
country by increasing our links with foreign lenders,
facilitating the flow of desired investments into the
Philippines, creating employment opportunities and
expertise in international finance, and contributing to the
national development effort.
WHEREAS, the geographical location, physical and human
resources, and other positive factors provide the Philippines
with the clear potential to develop as another financial center
in Asia;
On the other hand, the Foreign Currency Deposit system was created by PD.
No. 1035. Its purposes are as follows:
WHEREAS, the establishment of an offshore banking system
in the Philippines has been authorized under a separate
decree;
WHEREAS, a number of local commercial banks, as
depository bank under the Foreign Currency Deposit Act (RA
No. 6426), have the resources and managerial competence to
more actively engage in foreign exchange transactions and
participate in the grant of foreign currency loans to resident
corporations and firms;
WHEREAS, it is timely to expand the foreign currency
lending authority of the said depository banks under RA
6426 and apply to their transactions the same taxes as
would be applicable to transaction of the proposed offshore
banking units;
It is evident from the above [Whereas clauses] that the Offshore Banking
System and the Foreign Currency Deposit System were designed to draw
deposits from foreign lenders and investors (Vide second Whereas of PD No.
1034; third Whereas of PD No. 1035). It is these deposits that are induced by
the two laws and given protection and incentives by them.
Obviously, the foreign currency deposit made by a transient or a tourist is
not the kind of deposit encouraged by PD Nos. 1034 and 1035 and given
incentives and protection by said laws because such depositor stays only for
a few days in the country and, therefore, will maintain his deposit in the
bank only for a short time.
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Respondent Greg Bartelli, as stated, is just a tourist or a transient. He
deposited his dollars with respondent China Banking Corporation only for
safekeeping during his temporary stay in the Philippines.
For the reasons stated above, the Solicitor General thus submits that the
dollar deposit of respondent Greg Bartelli is not entitled to the protection of
Section 113 of Central Bank Circular No. 960 and PD No. 1246 against
attachment, garnishment or other court processes.6
In fine, the application of the law depends on the extent of its justice. Eventually, if we rule
that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that
"in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Simply stated, when the statute is silent or ambiguous, this
is one of those fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).
It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be
used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the
guilty at the expense of the innocent.
Call it what it may — but is there no conflict of legal policy here? Dollar against Peso?
Upholding the final and executory judgment of the lower court against the Central Bank
Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a
transient alien depositor against injustice to a national and victim of a crime? This situation
calls for fairness against legal tyranny.
We definitely cannot have both ways and rest in the belief that we have served the ends of
justice.
IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No. 1246,
insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this
case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY
with the writ of execution issued in Civil Case No. 89-3214, "Karen Salvacion, et al. vs. Greg
Bartelli y Northcott, by Branch CXLIV, RTC Makati and to RELEASE to petitioners the dollar
deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the
judgment.
SO ORDERED.
G.R. No. L-23678 June 6, 1967
TESTATE ESTATE OF AMOS G. BELLIS, deceased.
PEOPLE'S BANK and TRUST COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants,
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.
BENGZON, J.P., J.:
This is a direct appeal to Us, upon a question purely of law, from an order of the Court of
First Instance of Manila dated April 30, 1964, approving the project of partition filed by the
executor in Civil Case No. 37089 therein.1äwphï1.ñët
The facts of the case are as follows:
Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States."
By his first wife, Mary E. Mallen, whom he divorced, he had five legitimate children: Edward
A. Bellis, George Bellis (who pre-deceased him in infancy), Henry A. Bellis, Alexander Bellis
and Anna Bellis Allsman; by his second wife, Violet Kennedy, who survived him, he had three
legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he had
three illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis.
On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed
that after all taxes, obligations, and expenses of administration are paid for, his distributable
estate should be divided, in trust, in the following order and manner: (a) $240,000.00 to his
first wife, Mary E. Mallen; (b) P120,000.00 to his three illegitimate children, Amos Bellis, Jr.,
Maria Cristina Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two
items have been satisfied, the remainder shall go to his seven surviving children by his first
and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis
Allsman, Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.1äwphï1.ñët
Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San Antonio, Texas,
U.S.A. His will was admitted to probate in the Court of First Instance of Manila on September
15, 1958.
The People's Bank and Trust Company, as executor of the will, paid all the bequests therein
including the amount of $240,000.00 in the form of shares of stock to Mary E. Mallen and to
the three (3) illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma
Bellis, various amounts totalling P40,000.00 each in satisfaction of their respective legacies,
or a total of P120,000.00, which it released from time to time according as the lower court
approved and allowed the various motions or petitions filed by the latter three requesting
partial advances on account of their respective legacies.
Page 13 of 45
Conflicts of Law – Property
On January 8, 1964, preparatory to closing its administration, the executor submitted and
filed its "Executor's Final Account, Report of Administration and Project of Partition" wherein
it reported, inter alia, the satisfaction of the legacy of Mary E. Mallen by the delivery to her of
shares of stock amounting to $240,000.00, and the legacies of Amos Bellis, Jr., Maria
Cristina Bellis and Miriam Palma Bellis in the amount of P40,000.00 each or a total of
P120,000.00. In the project of partition, the executor — pursuant to the "Twelfth" clause of
the testator's Last Will and Testament — divided the residuary estate into seven equal
portions for the benefit of the testator's seven legitimate children by his first and second
marriages.
On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their respective
oppositions to the project of partition on the ground that they were deprived of their legitimes
as illegitimate children and, therefore, compulsory heirs of the deceased.
Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is
evidenced by the registry receipt submitted on April 27, 1964 by the executor.1
After the parties filed their respective memoranda and other pertinent pleadings, the lower
court, on April 30, 1964, issued an order overruling the oppositions and approving the
executor's final account, report and administration and project of partition. Relying upon Art.
16 of the Civil Code, it applied the national law of the decedent, which in this case is Texas
law, which did not provide for legitimes.
Their respective motions for reconsideration having been denied by the lower court on June
11, 1964, oppositors-appellants appealed to this Court to raise the issue of which law must
apply — Texas law or Philippine law.
In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi,
applied by this Court in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said
doctrine is usually pertinent where the decedent is a national of one country, and a domicile
of another. In the present case, it is not disputed that the decedent was both a national of
Texas and a domicile thereof at the time of his death.2 So that even assuming Texas has a
conflict of law rule providing that the domiciliary system (law of the domicile) should govern,
the same would not result in a reference back (renvoi) to Philippine law, but would still refer
to Texas law. Nonetheless, if Texas has a conflicts rule adopting the situs theory (lex rei sitae)
calling for the application of the law of the place where the properties are situated, renvoi
would arise, since the properties here involved are found in the Philippines. In the absence,
however, of proof as to the conflict of law rule of Texas, it should not be presumed different
from ours.3 Appellants' position is therefore not rested on the doctrine of renvoi. As stated,
they never invoked nor even mentioned it in their arguments. Rather, they argue that their
case falls under the circumstances mentioned in the third paragraph of Article 17 in relation
to Article 16 of the Civil Code.
Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the national law of the
decedent, in intestate or testamentary successions, with regard to four items: (a) the order of
succession; (b) the amount of successional rights; (e) the intrinsic validity of the provisions of
the will; and (d) the capacity to succeed. They provide that —
ART. 16. 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 he the nature of the property and
regardless of the country wherein said property may be found.
ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent.
Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating
that —
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.
prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This is not correct.
Precisely, Congress deleted the phrase, "notwithstanding the provisions of this and the next
preceding article" when they incorporated Art. 11 of the old Civil Code as Art. 17 of the new
Civil Code, while reproducing without substantial change the second paragraph of Art. 10 of
the old Civil Code as Art. 16 in the new. It must have been their purpose to make the second
paragraph of Art. 16 a specific provision in itself which must be applied in testate and
intestate succession. As further indication of this legislative intent, Congress added a new
provision, under Art. 1039, which decrees that capacity to succeed is to be governed by the
national law of the decedent.
It is therefore evident that whatever public policy or good customs may be involved in our
System of legitimes, Congress has not intended to extend the same to the succession of
foreign nationals. For it has specifically chosen to leave, inter alia, the amount of successional
rights, to the decedent's national law. Specific provisions must prevail over general ones.
Appellants would also point out that the decedent executed two wills — one to govern his
Texas estate and the other his Philippine estate — arguing from this that he intended
Philippine law to govern his Philippine estate. Assuming that such was the decedent's
intention in executing a separate Philippine will, it would not alter the law, for as this Court
Page 14 of 45
Conflicts of Law – Property
ruled in Miciano v. Brimo, 50 Phil. 867, 870, a provision in a foreigner's will to the effect that
his properties shall be distributed in accordance with Philippine law and not with his national
law, is illegal and void, for his national law cannot be ignored in regard to those matters that
Article 10 — now Article 16 — of the Civil Code states said national law should govern.
The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas,
U.S.A., and that under the laws of Texas, there are no forced heirs or legitimes. Accordingly,
since the intrinsic validity of the provision of the will and the amount of successional rights
are to be determined under Texas law, the Philippine law on legitimes cannot be applied to
the testacy of Amos G. Bellis.
Wherefore, the order of the probate court is hereby affirmed in toto, with costs against
appellants. So ordered.
G.R. No. L-42091 November 2, 1935
GONZALO CHUA GUAN, plaintiff-appellant,
vs.
SAMAHANG MAGSASAKA, INC., and SIMPLICIO OCAMPO, ADRIANO G. SOTTO, and
EMILIO VERGARA, as president, secretary and treasurer respectively of the
same, defendants-appellees.
BUTTE, J.:
This is an appeal from a judgment of the Court of First Instance of Nueva Ecija in an action
for a writ of mandamus. The case is remarkable for the following reason: that the parties
entered into a stipulation in which the defendants admitted all of the allegations of the
complaint and the plaintiff admitted all of the special defenses in the answer of the
defendants, and on this stipulation they submitted the case for decision.
The complaint alleges that the defendant Samahang Magsasaka, Inc., is a corporation duly
organized under the laws of the Philippine Islands with principal office in Cabanatuan, Nueva
Ecija, and that the individual defendants are the president, secretary and treasurer
respectively of the same; that on June 18, 1931, Gonzalo H. Co Toco was the owner of 5,894
shares of the capital stock of the said corporation represented by nine certificates having a
par value of P5 per share; that on said date Gonzalo H. Co Toco, a resident of Manila,
mortgaged said 5,894 shares to Chua Chiu to guarantee the payment of a debt of P20,000
due on or before June 19, 1932. The said certificates of stock were delivered with the
mortgage to the mortgagee, Chua Chiu. The said mortgage was duly registered in the office of
the register of deeds of Manila on June 23, 1931, and in the office of the said corporation on
September 30, 1931.
On November 28, 1931, Chua Chiu assigned all his right and interest in the said mortgage to
the plaintiff and the assignment was registered in the office of the register of deeds in the City
of Manila on December 28, 1931, and in the office of the said corporation on January 4,
1932.
The debtor, Gonzalo H. Co Toco, having defaulted in the payment of said debt at maturity, the
plaintiff foreclosed said mortgage and delivered the certificates of stock and copies of the
mortgage and assignment to the sheriff of the City of Manila in order to sell the said shares at
public auction. The sheriff auctioned said 5,894 shares of stock on December 22, 1932, and
the plaintiff having been the highest bidder for the sum of P14,390, the sheriff executed in his
favor a certificate of sale of said shares.
The plaintiff tendered the certificates of stock standing in the name of Gonzalo H. Co Toco to
the proper officers of the corporation for cancellation and demanded that they issue new
certificates in the name of the plaintiff. The said officers (the individual defendants) refused
and still refuse to issue said new shares in the name of the plaintiff.
The prayer is that a writ of mandamus be issued requiring the defendants to transfer the said
5,894 shares of stock to the plaintiff by cancelling the old certificates and issuing new ones in
their stead.
The special defenses set up in the answer are as follows: that the defendants refuse to cancel
the said certificates standing in the name of Gonzalo H. Co Toco on the books of the
corporation and to issue new ones in the name of the plaintiff because prior to the date when
the plaintiff made his demand, to wit, February 4, 1933, nine attachments had been issued
and served and noted on the books of the corporation against the shares of Gonzalo H. Co
Toco and the plaintiff objected to having these attachments noted on the new certificates
which he demanded. These attachments noted on the books of the corporation against the
shares of Gonzalo H. Co Toco are as follows:
MISSING PAGES: 475-477.
Page 15 of 45
Conflicts of Law – Property
It will be noted that the first eight of the said writs of attachment were served on the
corporation and noted on its records before the corporation received notice from the
mortgagee Chua Chiu of the mortgage of said shares dated June 18, 1931. No question is
raised as to the validity of said mortgage or of said writs of attachment and the sole question
presented for decision is whether the said mortgage takes priority over the said writs of
attachment.
It is not alleged that the said attaching creditors had actual notice of the said mortgage and
the question therefore narrows itself down to this: Did the registration of said chattel
mortgage in the registry of chattel mortgages in the office of the register of deeds of Manila,
under date of July 23, 1931, give constructive notice to the said attaching creditors?
In passing, let it be noted that the registration of the said chattel mortgage in the office of the
corporation was not necessary and had no legal effect. (Monserrat vs. Ceron, 58 Phil., 469.)
The long mooted question as to whether or not shares of a corporation could be hypothecated
by placing a chattel mortgage on the certificate representing such shares we now regard as
settled by the case of Monserrat vs. Ceron, supra. But that case did not deal with any
question relating to the registration of such a mortgage or the effect of such registration.
Nothing appears in the record of that case even tending to show that the chattel mortgage
there involved was ever registered anywhere except in the office of the corporation, and there
was no question involved there as to the right of priority among conflicting claims of creditors
of the owner of the shares.
The Chattel Mortgage Law, Act No. 1508, as amended by Act No. 2496, contains the following
provision:
SEC. 4. A chattel mortgage shall not be valid against any person except the
mortgagor, his executors or administrators, unless the possession of the property is
delivered to and retained by the mortgagee or unless the mortgage is recorded in the
office of the register of deeds of the province in which the mortgagor resides at the
time of making the same, or, if he resides the Philippine Islands, in the province in
which the property is situated: Provided, however, That if the property is situated in a
different province from that in which the mortgagor resides, the mortgage shall be
recorded in the office of the register of deeds of both the province in which the
mortgagor resides and that in which the property is situated, and for the purposes of
this Act the City of Manila Shall be deemed to be a province.
The practical application of the Chattel Mortgage Law to shares of stock of a corporation
presents considerable difficulty and we have obtained little aid from the decisions of other
jurisdictions because that form of mortgage is ill suited to the hypothecation of shares of
stock and has been rarely used elsewhere. In fact, it has been doubted whether shares of
stock in a corporation are chattels in the sense in which that word is used chattel mortgage
statutes. This doubt is reflected in our own decision in the case of Fua Cun vs. Summers and
China Banking Corporation (44 Phil., 705), in which we said:
". . . an equity in shares of stock is of such an intangible character that it is somewhat
difficult to see how it can be treated as a chattel and mortgaged in such a manner that the
recording of the mortgage will furnish constructive notice to third parties. . . ."And we held
that the chattel mortgage there involved: "at least operated as a conditional equitable
assignment." In that case we quoted the following from Spalding vs. Paine's Adm'r. (81 Ky.,
416), with regard to a chattel mortgage of shares of stock:
"These certificates of stock are in the pockets of the owner, and go with him where he
may happen to locate, as choses in action, or evidence of his right, without any
means on the part of those with whom he proposes to deal on the faith of such a
security of ascertaining whether or not this stock is in pledge or mortgaged to others.
He finds the name of the owner on the books of the company as a subscriber of paid-
up stock, amounting to 180 shares, with the certificates in his possession, pays for
these certificates their full value, and has the transfer to him made on the books of
the company, thereby obtaining a perfect title. What other inquiry is he to make, so
as to make his investment certain and secure? Where is he to look, in order to
ascertain whether or not this stock has been mortgaged? The chief office of the
company may be at one place today and at another tomorrow. The owner may have
no fixed or permanent abode, and with his notes in one pocket and his certificates of
stock in the other — the one evidencing the extent of his interest in the stock of the
corporation, the other his right to money owing him by his debtor, we are asked to
say that the mortgage is effectual as to the one and inoperative as to the other."
But the case of Fua Cun vs. Summers and China Banking Corporation, supra, did not decide
the question here presented and gave no light as to the registration of a chattel mortgage of
shares of stock of a corporation under the provisions of section 4 of the Chattel Mortgage
Law, supra.
Section 4 of Act No. 1508 provides two ways for executing a valid chattel mortgage which
shall be effective against third persons. First, the possession of the property mortgage must
be delivered to and retained by the mortgagee; and, second, without such delivery the
mortgage must be recorded in the proper office or offices of the register or registers of deeds.
If a chattel mortgage of shares of stock of a corporation may validly be made without the
delivery of possession of the property to the mortgagee and the mere registration of the
mortgage is sufficient to constructive notice to third parties, we are confronted with the
question as to the proper place of registration of such a mortgage. Section 4 provides that in
such a case the mortgage resides at the time of making the same or, if he is a non-resident, in
the province in which the property is situated; and it also provides that if the property is
situated in a different province from that in which the mortgagor resides the mortgage shall
be recorded both in the province of the mortgagor's residence and in the province where the
property is situated.
If with respect to a chattel mortgage of shares of stock of a corporation, registration in the
province of the owner's domicile should be sufficient, those who lend on such security would
Page 16 of 45
Conflicts of Law – Property
be confronted with the practical difficulty of being compelled not only to search the records of
every province in which the mortgagor might have been domiciled but also every province in
which a chattel mortgage by any former owner of such shares might be registered. We cannot
think that it was the intention of the legislature to put this almost prohibitive impediment
upon the hypothecation of shares of stock in view of the great volume of business that is done
on the faith of the pledge of shares of stock as collateral.
It is a common but not accurate generalization that the situs of shares of stock is at the
domicile of the owner. The term situs is not one of fixed of invariable meaning or usage. Nor
should we lose sight of the difference between the situs of the shares and the situs of the
certificates of shares. The situs of shares of stock for some purposes may be at the domicile of
the owner and for others at the domicile of the corporation; and even elsewhere. (Cf.
Vidal vs.South American Securities Co., 276 Fed., 855; Black Eagle Min. Co. vs. Conroy, 94
Okla., 199; 221 Pac,, 425 Norrie vs. Kansas City Southern Ry. Co., 7 Fed. [2d]. 158.) It is a
general rule that for purposes of execution, attachment and garnishment, it is not the
domicile of the owner of a certificate but the domicile of the corporation which is decisive.
(Fletcher, Cyclopedia of the Law of Private Corporations, vol. 11, paragraph 5106. Cf. sections
430 and 450, Code of Civil Procedure.)
By analogy with the foregoing and considering the ownership of shares in a corporation as
property distinct from the certificates which are merely the evidence of such ownership, it
seems to us a reasonable construction of section 4 of Act No. 1508 to hold that the property
in the shares may be deemed to be situated in the province in which the corporation has its
principal office or place of business. If this province is also the province of the owner's
domicile, a single registration sufficient. If not, the chattel mortgage should be registered both
at the owner's domicile and in the province where the corporation has its principal office or
place of business. In this sense the property mortgaged is not the certificate but the
participation and share of the owner in the assets of the corporation.
Apart from the cumbersome and unusual method of hypothecating shares of stock by chattel
mortgage, it appears that in the present state of our law, the only safe way to accomplish the
hypothecation of share of stock of a Philippine corporation is for the creditor to insist on the
assignment and delivery of the certificate and to obtain the transfer of the legal title to him on
the books of the corporation by the cancellation of the certificate and the issuance of a new
one to him. From the standpoint of the debtor this may be unsatisfactory because it leaves
the creditor as the ostensible owner of the shares and the debtor is forced to rely upon the
honesty and solvency of the creditor. Of course, the mere possession and retention of the
debtor's certificate by the creditor gives some security to the creditor against an attempted
voluntary transfer by the debtor, provided the by-laws of the corporation expressly enact that
transfers may be made only upon the surrender of the certificate. It is to be noted, however,
that section 35 of the Corporation Law (Act No. 1459) enacts that shares of stock "may be
transferred by delivery of the certificate endorsed by the owner or his attorney in fact or other
person legally authorized to make the transfer." The use of the verb "may" does not exclude
the possibility that a transfer may be made in a different manner, thus leaving the creditor in
an insecure position even though he has the certificate in his possession. Moreover, the
shares still standing in the name of the debtor on the books of the corporation will be liable to
seizure by attachment or levy on execution at the instance of other creditors. (Cf. Uy
Piaoco vs. McMicking, 10 Phil., 286, and Uson vs.Diosomito, 61 Phil., 535.) This
unsatisfactory state of our law is well known to the bench and bar. (Cf. Fisher, The Philippine
Law of Stock Corporations, pages 163-168.) Loans upon stock securities should be facilitated
in order to foster economic development. The transfer by endorsement and delivery of a
certificate with intention to pledge the shares covered thereby should be sufficient to give
legal effect to that intention and to consummate the juristic act without necessity for
registration.lawphil.net
We are fully conscious of the fact that our decisions in the case of Monserrat vs. Ceron, supra,
and in the present case have done little perhaps to ameliorate the present uncertain and
unsatisfactory state of our law applicable to pledges and chattel mortgages of shares of stock
of Philippine corporations. The remedy lies with the legislature.
In view of the premises, the attaching creditors are entitled to priority over the defectively
registered mortgage of the appellant and the judgment appealed from must be affirmed
without special pronouncement as to costs in this instance. 1
G.R. No. L-46720 June 28, 1940
WELLS FARGO BANK & UNION TRUST COMPANY, petitioner-appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, respondent-appellee.
De Witt, Perkins and Ponce Enrile for appellant.
Office of the Solicitor-General Ozaeta and Assistant Solicitor-General Concepcion for appellee.
Ross, Lawrence, Selph and Carrascoso, James Madison Ross and Federico Agrava as amici
curiæ.
MORAN, J.:
An appeal from a declaratory judgment rendered by the Court of First Instance of Manila.
Birdie Lillian Eye, wife of Clyde Milton Eye, died on September 16, 1932, at Los Angeles,
California, the place of her alleged last residence and domicile. Among the properties she left
her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining
Company, an anonymous partnership (sociedad anonima), organized and existing under the
laws of the Philippines, with is principal office in the City of Manila. She left a will which was
duly admitted to probate in California where her estate was administered and settled.
Petitioner-appellant, Wells Fargo Bank & Union Trust Company, was duly appointed trustee
of the created by the said will. The Federal and State of California's inheritance taxes due on
said shares have been duly paid. Respondent Collector of Internal Revenue sought to subject
Page 17 of 45
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anew the aforesaid shares of stock to the Philippine inheritance tax, to which petitioner-
appellant objected. Wherefore, a petition for a declaratory judgment was filed in the lower
court, with the statement that, "if it should be held by a final declaratory judgment that the
transfer of the aforesaid shares of stock is legally subject to the Philippine inheritance tax,
the petitioner will pay such tax, interest and penalties (saving error in computation) without
protest and will not file to recover the same; and the petitioner believes and t herefore alleges
that it should be held that such transfer is not subject to said tax, the respondent will not
proceed to assess and collect the same." The Court of First Instance of Manila rendered
judgment, holding that the transmission by will of the said 35,000 shares of stock is subject
to Philippine inheritance tax. Hence, this appeal by the petitioner.
Petitioner concedes (1) that the Philippine inheritance tax is not a tax property, but upon
transmission by inheritance (Lorenzo vs. Posadas, 35 Off. Gaz., 2393, 2395), and (2) that as
to real and tangible personal property of a non-resident decedent, located in the Philippines,
the Philippine inheritance tax may be imposed upon their transmission by death, for the self-
evident reason that, being a property situated in this country, its transfer is, in some way,
defendant, for its effectiveness, upon Philippine laws. It is contended, however, that, as to
intangibles, like the shares of stock in question, their situs is in the domicile of the owner
thereof, and, therefore, their transmission by death necessarily takes place under his
domiciliary laws.
Section 1536 of the Administrative Code, as amended, provides that every transmission by
virtue of inheritance of any share issued by any corporation of sociedad anonima organized or
constituted in the Philippines, is subject to the tax therein provided. This provision has
already been applied to shares of stock in a domestic corporation which were owned by a
British subject residing and domiciled in Great Britain. (Knowles vs. Yatco, G. R. No.
42967. See also Gibbs vs. Government of P. I., G. R. No. 35694.) Petitioner, however, invokes
the rule laid down by the United States Supreme Court in four cases (Farmers Loan & Trust
Company vs. Minnesota, 280 U.S. 204; 74 Law. ed., 371; Baldwin vs. Missouri, 281 U.S.,
586; 74 Law. ed., 1056, Beidler vs. South Carolina Tax Commission 282 U. S., 1; 75 Law. ed.,
131; First National Bank of Boston vs. Maine, 284 U. S., 312; 52 S. Ct., 174, 76 Law. ed.,
313; 77 A. L. R., 1401), to the effect that an inheritance tax can be imposed with respect to
intangibles only by the State where the decedent was domiciled at the time of his death, and
that, under the due-process clause, the State in which a corporation has been incorporated
has no power to impose such tax if the shares of stock in such corporation are owned by a
non-resident decedent. It is to be observed, however, that in a later case (Burnet vs. Brooks,
288 U. S., 378; 77 Law. ed., 844), the United States Supreme Court upheld the authority of
the Federal Government to impose an inheritance tax on the transmission, by death of a non-
resident, of stock in a domestic (America) corporation, irrespective of the situs of the
corresponding certificates of stock. But it is contended that the doctrine in the foregoing case
is not applicable, because the due-process clause is directed at the State and not at the
Federal Government, and that the federal or national power of the United States is to be
determined in relation to other countries and their subjects by applying the principles of
jurisdiction recognized in international relations. Be that as it may, the truth is that the due-
process clause is "directed at the protection of the individual and he is entitled to its
immunity as much against the state as against the national government."
(Curry vs. McCanless, 307 U. S., 357, 370; 83 Law. ed., 1339, 1349.) Indeed, the rule laid
down in the four cases relied upon by the appellant was predicated on a proper regard for the
relation of the states of the American Union, which requires that property should be taxed in
only one state and that jurisdiction to tax is restricted accordingly. In other words, the
application to the states of the due-process rule springs from a proper distribution of their
powers and spheres of activity as ordained by the United States Constitution, and such
distribution is enforced and protected by not allowing one state to reach out and tax property
in another. And these considerations do not apply to the Philippines. Our status rests upon a
wholly distinct basis and no analogy, however remote, cam be suggested in the relation of one
state of the Union with another or with the United States. The status of the Philippines has
been aptly defined as one which, though a part of the United States in the international
sense, is, nevertheless, foreign thereto in a domestic sense. (Downes vs. Bidwell, 182 U. S.,
244, 341.)
At any rate, we see nothing of consequence in drawing any distinct between the operation and
effect of the due-process clause as it applies to the individual states and to the national
government of the United States. The question here involved is essentially not one of due-
process, but of the power of the Philippine Government to tax. If that power be conceded, the
guaranty of due process cannot certainly be invoked to frustrate it, unless the law involved is
challenged, which is not, on considerations repugnant to such guaranty of due process of
that of the equal protection of the laws, as, when the law is alleged to be arbitrary, oppressive
or discriminatory.
Originally, the settled law in the United States is that intangibles have only one situs for the
purpose of inheritance tax, and that such situs is in the domicile of the decedent at the time
of his death. But this rule has, of late, been relaxed. The maxim mobilia sequuntur personam,
upon which the rule rests, has been described as a mere "fiction of law having its origin in
consideration of general convenience and public policy, and cannot be applied to limit or
control the right of the state to tax property within its jurisdiction" (State Board of
Assessors vs. Comptoir National D'Escompte, 191 U. S., 388, 403, 404), and must "yield to
established fact of legal ownership, actual presence and control elsewhere, and cannot be
applied if to do so result in inescapable and patent injustice." (Safe Deposit & Trust
Co. vs. Virginia, 280 U. S., 83, 91-92) There is thus a marked shift from artificial postulates
of law, formulated for reasons of convenience, to the actualities of each case.
An examination of the adjudged cases will disclose that the relaxation of the original rule
rests on either of two fundamental considerations: (1) upon the recognition of the inherent
power of each government to tax persons, properties and rights within its jurisdiction and
enjoying, thus, the protection of its laws; and (2) upon the principle that as o intangibles, a
single location in space is hardly possible, considering the multiple, distinct relationships
which may be entered into with respect thereto. It is on the basis of the first consideration
that the case of Burnet vs.Brooks, supra, was decided by the Federal Supreme Court,
sustaining the power of the Government to impose an inheritance tax upon transmission, by
death of a non-resident, of shares of stock in a domestic (America) corporation, regardless of
Page 18 of 45
Conflicts of Law – Property
the situs of their corresponding certificates; and on the basis of the second consideration, the
case of Cury vs. McCanless, supra.
In Burnet vs. Brooks, the court, in disposing of the argument that the imposition of the
federal estate tax is precluded by the due-process clause of the Fifth Amendment, held:
The point, being solely one of jurisdiction to tax, involves none of the other
consideration raised by confiscatory or arbitrary legislation inconsistent with the
fundamental conceptions of justice which are embodied in the due-process clause for
the protection of life, liberty, and property of all persons — citizens and friendly
aliens alike. Russian Volunteer Fleet vs. United States, 282 U. S., 481, 489; 75 Law
ed., 473, 476; 41 S. Ct., 229; Nicholas vs. Coolidge, 274 U. S., 531; 542, 71 Law ed.,
1184, 1192; 47 S. Ct., 710; 52 A. L. R., 1081; Heiner vs. Donnon, 285 U.S., 312, 326;
76 Law ed., 772, 779; 52 S. Ct., 358. If in the instant case the Federal Government
had jurisdiction to impose the tax, there is manifestly no ground for assailing it.
Knowlton vs. Moore, 178 U.S., 41, 109; 44 Law. ed., 969, 996; 20 S. Ct., 747;
MaGray vs. United States, 195 U.S., 27, 61; 49 Law. ed., 78; 97; 24 S. Ct., 769; 1
Ann. Cas., 561; Flint vs. Stone Tracy Co., 220 U.S., 107, 153, 154; 55 Law. ed., 389,
414, 415; 31 S. Ct., 342; Ann. Cas., 1912B, 1312; Brushaber vs. Union p. R. Co.,
240 U.S., 1, 24; 60 Law. ed., 493, 504; 36 S. Ct., 236; L. R. A., 1917 D; 414, Ann.
Cas, 1917B, 713; United States vs. Doremus, 249 U. S., 86, 93; 63 Law. ed., 439,
496; 39 S. Ct., 214. (Emphasis ours.)
And, in sustaining the power of the Federal Government to tax properties within its borders,
wherever its owner may have been domiciled at the time of his death, the court ruled:
. . . There does not appear, a priori, to be anything contrary to the principles of
international law, or hurtful to the polity of nations, in a State's taxing property
physically situated within its borders, wherever its owner may have been domiciled at
the time of his death. . . .
As jurisdiction may exist in more than one government, that is, jurisdiction based on
distinct grounds — the citizenship of the owner, his domicile, the source of income,
the situs of the property — efforts have been made to preclude multiple taxation
through the negotiation of appropriate international conventions. These endeavors,
however, have proceeded upon express or implied recognition, and not in denial, of
the sovereign taxing power as exerted by governments in the exercise of jurisdiction
upon any one of these grounds. . . . (See pages 396-397; 399.)
In Curry vs. McCanless, supra, the court, in deciding the question of whether the States of
Alabama and Tennessee may each constitutionally impose death taxes upon the transfer of
an interest in intangibles held in trust by an Alabama trustee but passing under the will of a
beneficiary decedent domiciles in Tennessee, sustained the power of each State to impose the
tax. In arriving at this conclusion, the court made the following observations:
In cases where the owner of intangibles confines his activity to the place of his
domicile it has been found convenient to substitute a rule for a reason, cf. New York
ex rel., Cohn vs. Graves, 300 U.S., 308, 313; 81 Law. ed., 666, 670; 57 S. Ct., 466;
108 A. L. R., 721; First Bank Stock Corp. vs. Minnesota, 301 U. S., 234, 241; 81 Law.
ed., 1061, 1065; 57 S. Ct., 677; 113 A. L. R., 228, by saying that his intangibles are
taxed at their situs and not elsewhere, or perhaps less artificially, by invoking the
maxim mobilia sequuntur personam. Blodgett vs. Silberman, 277 U.S., 1; 72 Law. ed.,
749; S. Ct., 410, supra; Baldwin vs. Missouri, 281 U. S., 568; 74 Law. ed., 1056; 50
S. Ct., 436; 72 A. L. R., 1303, supra, which means only that it is the identify owner at
his domicile which gives jurisdiction to tax. But when the taxpayer extends his
activities with respect to his intangibles, so as to avail himself of the protection and
benefit of the laws of another state, in such a way as to bring his person or properly
within the reach of the tax gatherer there, the reason for a single place of taxation no
longer obtains, and the rule even workable substitute for the reasons may exist in
any particular case to support the constitutional power of each state concerned to
tax. Whether we regard the right of a state to tax as founded on power over the object
taxed, as declared by Chief Justice Marshall in McCulloch vs. Maryland, 4 Wheat.,
316; 4 Law. ed., 579, supra, through dominion over tangibles or over persons whose
relationships are source of intangibles rights, or on the benefit and protection
conferred by the taxing sovereignty, or both, it is undeniable that the state of domicile
is not deprived, by the taxpayer's activities elsewhere, of its constitutional jurisdiction
to tax, and consequently that there are many circumstances in which more than one
state may have jurisdiction to impose a tax and measure it by some or all of the
taxpayer's intangibles. Shares or corporate stock be taxed at the domicile of the
shareholder and also at that of the corporation which the taxing state has created
and controls; and income may be taxed both by the state where it is earned and by
the state of the recipient's domicile. protection, benefit, and power over the subject
matter are not confined to either state. . . .(p. 1347-1349.)
. . . We find it impossible to say that taxation of intangibles can be reduced in every
case to the mere mechanical operation of locating at a single place, and there taxing,
every legal interest growing out of all the complex legal relationships which may be
entered into between persons. This is the case because in point of actuality those
interests may be too diverse in their relationships to various taxing jurisdictions to
admit of unitary treatment without discarding modes of taxation long accepted and
applied before the Fourteen Amendment was adopted, and still recognized by this
Court as valid. (P. 1351.)
We need not belabor the doctrines of the foregoing cases. We believe, and so hold, that the
issue here involved is controlled by those doctrines. In the instant case, the actual situs of
the shares of stock is in the Philippines, the corporation being domiciled therein. And
besides, the certificates of stock have remained in this country up to the time when the
deceased died in California, and they were in possession of one Syrena McKee, secretary of
the Benguet Consolidated Mining Company, to whom they have been delivered and indorsed
in blank. This indorsement gave Syrena McKee the right to vote the certificates at the general
Page 19 of 45
Conflicts of Law – Property

meetings of the stockholders, to collect dividends, and dispose of the shares in the manner
she may deem fit, without prejudice to her liability to the owner for violation of instructions.
For all practical purposes, then, Syrena McKee had the legal title to the certificates of stock
held in trust for the true owner thereof. In other words, the owner residing in California has
extended here her activities with respect to her intangibles so as to avail herself of the
protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine
Government to tax must be upheld.
Judgment is affirmed, with costs against petitioner-appellant.
G.R. No. 48122 October 29, 1948
88,163 shares of stock of Beam Investment Company, evidenced by Certificates Nos. 11, 23
and 24 issued to and in the name of A. W. Beam;
500 shares of stock of Benguet Consolidated Mining Company, evidenced by Certificate No.
3342 issued to and in the name of A. W. Beam;
2,080 shares of stock of Balatoc Mining Company, evidenced by Certificates Nos. 600, 614
and 809 issued to and in the name of A. W. Beam;
5,000 shares of stock of Beam Investment Company evidenced by Certificates Nos. 17 and 26
issued to and in the name of A. W. Beam, Junior;lawphil.net

A. W. BEAM, A. W. BEAM, Jr., and EUGENIA BEAM, the latter two assisted by their Deposit of P2,933.18 in Manila Building and Loan Association in the name and to the credit
guardian ad litem, of A. W. Beam, Junior;
John W. Haussermann, plaintiffs-appellants,
vs. 5,000 shares of stock of Beam Investment Company, evidenced by Certificates Nos. 19 and 27
A. L. YATCO, Collector of Internal Revenue of the Philippines, defendant-appellee. issued to and in the name of Eugenia Beam;

Ross, Selph, Carrascoso and Janda for appellants. Deposit of P2,933.18 in Manila Building and Loan Association in the name and to the credit
Office of the Solicitor General Roman Ozaeta and Assistant Solicitor General Rafael Amparo for of Eugenia Beam.
appellee.

One-half thereof, appraised at P4,050,272.46, was the estate to the deceased Lydia McKee
Beam located in the Philippines and transmitted to plaintiffs and to Syrena McKee and Rose
P. McKee by virtue of inheritance, devise, or bequest, gifts mortis causa or advance in
anticipation of inheritance, and the collector assessed and demanded inheritance taxes
PERFECTO, J.: thereon as follows:

On July 17, 1937, plaintiffs filed a complaint praying that the amount of P343,298.72, paid Heirs Share Tax
by them as inheritance tax, be refunded to them as follows: P40,480 to A. W. Beam,
P151,409.36 to A. W. Beam, Jr. and P151,409.36 to Eugenia Beam. A. W. Beam P532,375.00 P40,480.00
A. W. Beam, Jr. 1,749,448.73 151,409.36
In March, 1938, the parties entered into a stipulation of facts from which the following can be Eugenia Beam 1,749,448.73 151,409.36
gathered: Syrena McKee 10,000.00 200.00
Rose T. McKee 10,000.00 200.00
That on or before April 26, 1937, the Collector of Internal Revenue declared and assessed the
following items of property of A. W. Beam and Lydia McKee Beam at the time of the death of P4,050,272.46 P343,698.72
the latter on October 18, 1934, at P8,100,544.91:

On April 26, 1937, plaintiffs, together with Syrena McKee and Rose T. McKee, both sister of
15,000 shares of stock of Beam Investment Company, evidenced by Certificates Nos. 2, 15
and 25 issued to and in the name of Lydia McKee Beam; Lydia Mckee Beam, paid respectively the amounts assessed and demanded by the collector,
aggregating P343,698.72, under protest that was overruled by the collector on May 11, 1937.

Page 20 of 45
Conflicts of Law – Property
A. W. Beam is of age but the other two plaintiffs are minors and are assisted by their
guardian ad litem, John W. Haussermann.
On her death in the State of California on October 8, 1934, Lydia McKee Beam left a last will
and testament which, after due and regular proceedings, was admitted to probate in the
superior court of the State of California for the County of Almeda.
Lydia McKee Beam was the wife of A. W. Beam from their marriage in 1913 until her death,
and the other two plaintiffs are the legitimate children of said marriage. Plaintiffs are, and
since birth, have been, and Lydia McKee Beam was, throughout of her life, citizens of the
United States of America. A. W. Beam was for many years, beginning from year 1902, a
resident domiciled in the Philippines.
On April 18, 1934, A. W. Beam, with his wife Lydia and daughter Eugenia, left the Philippines
for California and arrived at San Francisco on May 9, 1934, and since such arrival neither
said Lydia nor any of the plaintiffs have been in the Philippines, except A. W. Beam who was
in the Philippines from December 20, 1936, to January 15, 1937.
At the time of the death of Lydia McKee Beam, she and plaintiffs owned separately and
severally, according to plaintiffs, and jointly with Lydia McKee Beam and A. W. Beam,
according to defendant, the following properties:
LYDIA MCKEE BEAM: 15,000 shares of stock of Beam Investment Company,
evidenced by Certificates Nos. 2, 15 and 25 issued to and in the name of Lydia McKee
Beam;
A. W. BEAM: 88,163 shares of stock of Beam Investment Company, evidenced by
Certificates Nos. 11, 23 and 24 issued to and in the name of A. W. Beam; 500 shares
of stock of Benguet Consolidated Mining Company, evidenced by Certificate No. 3342
issued to and in the name of A. W. Beam; 2,080 shares of stock of Balatoc Mining
Company, evidenced by Certificates Nos. 600, 614 and 809 issued to and in the name
of A. W. Beam;
A. W. BEAM, JUNIOR: 5,000 shares of stock of Beam Investment Company evidenced
by Certificates Nos. 17 and 26 issued to and in the name of A. W. Beam, Junior;
Deposit of P2,933.18 in Manila Building and Loan Association in the name and to the
credit of A. W. Beam, Junior;
EUGENIA BEAM: 5,000 shares of stock of Beam Investment Company, evidenced by
Certificates Nos. 19 and 27 issued to and in the name of Eugenia Beam; Deposit of
P2,933.18 in Manila Building and Loan Association in the name and to the credit of
Eugenia Beam.
The Beam Investment Company, the Balatoc Mining Company and the Manila Building and
Loan Association are, and were at all times mentioned in the amended complaint,
corporations organized and existing under the laws of the Philippines. The Benguet
Consolidated Mining Company is, and was at all times mentioned in the amended complaint,
a sociedad anonima organized and existing under the laws of the Philippines.
The above-listed properties were acquired in the Philippines during and within the period
from the marriage of A. W. Beam to Lydia McKee Beam in 1913 to April 18, 1934. A. W. Beam
has been, and was up to April 18, 1934, the Vice-President and Assistant General Manager of
the Benguet Consolidated Mining Company and a member of the Board of Directors of said
company and of the Balatoc Mining Company. He was also, and up to the present, is, the
President of Beam Investment Company.
Prior to his departure from the Philippines on April 18, 1934, with his wife and his daughter
Eugenia, A. W. Beam filed an application for a tax clearance certificate with the Bureau of
Internal Revenue.
On September 30, 1940, the lower court rendered decision dismissing the complaint with
costs against the plaintiffs.
Plaintiffs appealed.
Appellants complain that the lower court dismissed the complaint on factual conclusions
dealing with points not at issue between the parties. They allege that the issue of fact, under
the pleadings, was between the appellants' contention that A. W. Beam and deceased wife
were residents and citizens of California on October 18, 1934, and appellee's contention that
their Philippine residence and domicile extended to October 18, 1934, and sometime later,
and there was no issue as to whether or not said A. W. Beam changed his residence and
domicile in 1923 from the Philippines to California and, therefore, the lower court erred in
finding that appellant became a resident and citizen of California in 1923.
Appellee alleges that it has been his original theory from the inception of the action that the
plaintiffs were and continued to be California citizens and that they are not entitled to recover
on the ground that according to California law the property acquired by A. W. Beam in one-
half thereof belongs to the deceased and passed by succession to her heirs subject to the
inheritance tax, and said theory is borne out by the following allegation of the amended
answers filed on September 2, 1937:
That under the Inheritance Tax Law, the defendant demanded and collected from the
plaintiffs the sum of P343,698.72 alleged in the complaint, which had been assessed
on the amount of P4,050,272.46, value of the estate of said Lydia McKee, located and
having business situs in the Philippines, and transmitted to the plaintiffs by virtue of
inheritance. (Pages 15, 16, record on appeal; emphasis supplied.)
Page 21 of 45
Conflicts of Law – Property
That the law of the State of California in effect at the time of the death of Lydia McKee
Beam provided that, upon the death of a wife, one-half of the community property
shall go to the surviving spouse, the other half being subject to the testamentary
disposition of the decedent, and that in the absence thereof, that half shall go to the
surviving spouse by inheritance.
The last paragraph reproduces only the penultimate paragraph of the original answer dated
October 11, 1937.
The allegations necessarily include by implication the allegation of California citizenship so
that the California law may be invoked as the personal law of the deceased applicable to her
personal property in the Philippines in accordance with article 10 of the Civil Code.
The finding of the lower court is fully supported by the testimonies of A. W. Beam and John
W. Haussermann, wherein the first stated that in 1923 he bought a house in Oakland,
California, and used it as a residence until December, 1930, when he built another in
Piedmont, California, which he has used and occupied as a residence since then, and his
children were in school in California and Mrs. Beam wanted to be with them and made a
home for them, and it was his intention to live in California and from 1923 on, his family
spent most of their time in California, where he himself used to take long vacations, and that
he never really intended to live permanently in the Philippines, while Haussermann testified
that A. W. Beam left the Philippines somewhere along 1923 and 1924 when he established a
home for his wife and children on Kenmore Avenue, Oakland, and he went there frequently.
We are of opinion that, upon the pleadings and the evidence, the lower court did not err in
finding that A. W. Beam and wife became residents and citizens of California in 1923.
On the other hand, appellee maintains that, because the burden of proof is on the plaintiffs
to establish their right to recover, in view of the fact that they had failed to establish that
right based on their alleged Utah citizenship, the dismissal of the complaint is fully justified,
and the defendant is entitled to take advantage of the plaintiff's failure to present sufficient
proof and of the evidence adduced by themselves.
Plaintiff pleaded Utah citizenship to invoke the laws of the state which, it is alleged, is to the
effect that properties acquired by the spouses during marriage belong to them separately, and
the Utah citizenship was thus put in issue in view of the general denial of appellee and his
special defense predicated on the California law.
The evidence of the plaintiff on the Utah citizenship consists exclusively in the deposition of
A. W. Beam wherein he states that he was born in Nevada in 1878; he lived with his parents
in Nevada until 1883 and then in Utah until 1898, when he enlisted in the army; and that
upon his discharge from the army in San Francisco in 1889 he returned to, and stayed in,
Utah, until he came to the Philippines in 1902. As contended by appellee, the evidence does
not sufficiently prove the Utah citizenship claimed by said appellant. There is no evidence
that he ever returned to Utah, or has any interest in that estate, or that he ever intended to
return there.
Where plaintiffs themselves show a state of facts upon which they should not recover,
whether defendant pleaded such fact as a defense or not, their claim should be dismissed.
Evidence introduced without objection becomes property of the case and all the parties are
amenable to any favorable or unfavorable effects resulting from the evidence.
Appellants complain that they were not given opportunity to present evidence regarding the
fact found by the lower court that plaintiff A. W. Beam became in 1923 a resident and citizen
of California has no merit, because plaintiffs had in fact the opportunity, and taken
advantage of it, to present all the facts which, according to them, would entitle them to
recover and they cannot complain of their failure to present more evidence than that
appearing in the record. As a matter of fact, the evidence upon which the lower court
concluded that A. W. Beam became resident and citizen of California in 1923, consists in the
testimony of A. W. Beam himself and his witness John W. Haussermann.
Appellants contend that no evidence whatsoever has been adduced to prove the California law
of community property and that the trial court should not have taken into consideration the
provision of said law as quoted in the memorandum filed by the Solicitor General. Appellee
alleges that there is no dispute that California is a community property state, citing 31 C. J.,
12 and the decision in Osorio vs. Posadas (56 Phil., 748 and 756). Appellants themselves
assert that, in the absence of proof as to what the California law is, the presumption would
militate against them, because when a foreign law is pleaded and no evidence has been
presented as to said law it is presumed that the same is the law of the forum. (Yan Ka Lim vs.
Collector of Customs, 30 Phil., 46; Lim vs. Collector of Internal Revenue, 36 Phil., 472;
Miciano vs. Brimo, 50 Phil., 876.)
Accordingly, the properties in question which have been acquired by A.W. Beam and wife
during their marriage, should be considered as community property and upon the death of
the wife, the one that belonged to her passed by succession to her heirs, in accordance with
the provisions of articles 1401, 1407 and 1426 of the Civil Code, and therefore is subject to
the inheritance tax collected by appellee.
Appellants contended that A. W. Beam has not become a resident and citizen of California
since 1923 and that the evidence points out that he changed his residence from the
Philippines to California between the time he left Manila for Piedmont on April 18, 1934, and
the time of his wife's death on October 18, 1934. Appellants point to the testimony of A. W.
Beam that his departures before 1934 were without intention of permanently abandoning his
home in the Philippines, while when he left on April 18, 1934, he had no intention of
returning, for which reason he brought his car and all his household belongings with him,
and to the testimonies of Robert B. Dell, John W. Haussermann, W. H. Taylor, W. H.
Lawrence. These testimonies, all hearsay, except that A. W. Beam himself, notwithstanding,
Page 22 of 45
Conflicts of Law – Property
cannot change the effect of A. W. Beam's testimony to the effect that in 1923 he bought a
house in Oakland, California, used it as a residence until December 1930, when he built
another house in Piedmont, California, which he used and occupied as a residence from that
time to the present, and that his children were in school in California and Mrs. Beam wanted
to be with them and make a home for them, and from 1923 on his family spent most of their
time in California. He also testified that "he never really intended permanently to live in the
Philippines all my life." Under the provisions of the fourteenth amendment to the Federal
Constitution, "all persons born or naturalized in the United States are subject to the
jurisdiction thereof, are citizens of the United States and of the state wherein they reside."
A. W. Beam became citizen of California in 1923 when he established therein a permanent
residence for him and his family.
One's personal presence at the new domicile is not necessary when the intent to
change has been manifested and carried out by sending his wife and family there. (19
C. J., 425.)
As correctly stated by appellee, even granting appellant's contention that the deceased
became a resident of California only in 1934, she was a citizen of that state at the time of her
death and her national law applicable to the case, in accordance with article 10 of the Civil
Code, is the law of California which, in the absence of contrary evidence, is to be presumed to
be the same as the Philippine law.
The question raised by appellants regarding the situs of the properties in question, has no
merit in view of the express provisions of section 1536 of the Revised Administrative Code,
specifying shares issued by any corporation or sociedad anonima organized in the Philippines
among properties subject to inheritance tax. The pronouncement of the lower court that the
actual situs of the shares in question is in the Philippines is fully supported by the evidence
as, according to the testimony of John W. Haussermann, the corresponding certificates of
stock were in the Philippines before and after the death of Mrs. Beam, the owners were
represented by proxy at the stockholders' meetings and their shares voted by their attorney in
fact who had the power to collect dividends corresponding to the share.
The questions raised by appellants that are premised on the Utah citizenship of A. W. Beam
and his deceased wife cannot be countenanced after we have concluded that the lower court
declared correctly that they became California citizens since 1923.
The lower court's decision is affirmed with costs against appellants.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant,
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY
CORPORATION, respondents- appellees.
Balgos & Perez Law Office for private respondent in both cases.
PARAS, J.:
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L-
46513-R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs.
Maritime Company of the Philippines and National Development Company defendant-
appellants," affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First
Instance of Manila, Sixth Judicial District, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants National
Development Company and Maritime Company of the Philippines, to pay
jointly and severally, to the plaintiff Development Insurance and Surety
Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE
HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with
the legal interest thereon from the filing of plaintiffs complaint on April 22,
1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of
damages as and for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against the
defendant National Development Company, judgment is hereby rendered,
ordering the National Development Company to pay the cross-claimant
Maritime Company of the Philippines the total amount that the Maritime
Company of the Philippines may voluntarily or by compliance to a writ of
execution pay to the plaintiff pursuant to the judgment rendered in this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
Page 23 of 45
Conflicts of Law – Property
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum
agreement entered into between defendants NDC and MCP on September 13,
1962, defendant NDC as the first preferred mortgagee of three ocean going
vessels including one with the name 'Dona Nati' appointed defendant MCP as
its agent to manage and operate said vessel for and in its behalf and account
(Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York
loaded on board the vessel "Dona Nati" at San Francisco, California, a total of
1,200 bales of American raw cotton consigned to the order of Manila Banking
Corporation, Manila and the People's Bank and Trust Company acting for
and in behalf of the Pan Asiatic Commercial Company, Inc., who represents
Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded
on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui,
Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting
of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs.
M & M-1). En route to Manila the vessel Dofia Nati figured in a collision at
6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS
Yasushima Maru' as a result of which 550 bales of aforesaid cargo of
American raw cotton were lost and/or destroyed, of which 535 bales as
damaged were landed and sold on the authority of the General Average
Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed lost
(Exh. G). The damaged and lost cargoes was worth P344,977.86 which
amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as
holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-
2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were
the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order
of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total
loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as holder
of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff
had paid as insurer the total amount of P364,915.86 to the consignees or
their successors-in-interest, for the said lost or damaged cargoes. Hence,
plaintiff filed this complaint to recover said amount from the defendants-NDC
and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel.
(Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then
Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the
action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp.
7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965
(Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of
the motion to dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8,
1965, MCP filed its answer with counterclaim and cross-claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal,
pp. 22-24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal,
pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's complaint was stricken
off from the record for its failure to answer DISC's written interrogatories and to comply with
the trial court's order dated August 14, 1965 allowing the inspection or photographing of the
memorandum of agreement it executed with MCP. Said order of October 16, 1965 likewise
declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion
to set aside the order of October 16, 1965, but the trial court denied it in its order dated
September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial
court rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity
to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing
of the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00.
Likewise, in said decision, the trial court granted MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17,
1970 after its motion to set aside the decision was denied by the trial court in its order dated
February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the
decision of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No.
49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p.
103). On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and
submitted for decision on February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF
COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE
KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR
LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH
THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL
JURISDICTION OF THE PHILIPPINES.
Page 24 of 45
Conflicts of Law – Property
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR
REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE,
AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I VI
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT
DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS
AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT
DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF
ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF
ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES
IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE
COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT
OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE
FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA
MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA
NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A
SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT
NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS
SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO
RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA
MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR
DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE
CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER
BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT
PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE
THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS
NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY
JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE
FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS
FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the
Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss
or destruction of goods due to collision of vessels outside Philippine waters, and the extent of
liability as well as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act
should apply to the case at bar and not the Civil Code or the Code of Commerce. Under
Section 4 (2) of said Act, the carrier is not responsible for the loss or damage resulting from
the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship." Thus, NDC insists that based on the findings of
the trial court which were adopted by the Court of Appeals, both pilots of the colliding vessels
were at fault and negligent, NDC would have been relieved of liability under the Carriage of
Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC
and MCP were ordered to reimburse the insurance company for the amount the latter paid to
the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1
50 SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the
country to which the goods are to be transported governs the liability of the common carrier
in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule
was specifically laid down that for cargoes transported from Japan to the Philippines, the
liability of the carrier is governed primarily by the Civil Code and in all matters not regulated
by said Code, the rights and obligations of common carrier shall be governed by the Code of
Page 25 of 45
Conflicts of Law – Property
commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a
special law, is merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from
San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due
to a collision which was found to have been caused by the negligence or fault of both captains
of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines
will apply, and it is immaterial that the collision actually occurred in foreign waters, such as
Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and
for reasons of public policy are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of the passengers transported by them according to all
circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other
than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have
been at fault or to have acted negigently, unless it proves that it has observed the
extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil
Code, so that no reversible error can be found in respondent courses application to the case
at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively
with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is
imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the
losses and damages incurred after an expert appraisal. But more in point to the instant case
is Article 827 of the same Code, which provides that if the collision is imputable to both
vessels, each one shall suffer its own damages and both shall be solidarily responsible for the
losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839,
the shipowner or carrier, is not exempt from liability for damages arising from collision due to
the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier
in recognition of the universally accepted doctrine that the shipmaster or captain is merely
the representative of the owner who has the actual or constructive control over the conduct of
the voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply
only to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods
by Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act
in no uncertain terms, restricts its application "to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly
provided that "nothing in this Act shall be construed as repealing any existing provision of the
Code of Commerce which is now in force, or as limiting its application." By such
incorporation, it is obvious that said law not only recognizes the existence of the Code of
Commerce, but more importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance
and Surety Corporation, has no cause of action against it because the latter did not prove
that its alleged subrogers have either the ownership or special property right or beneficial
interest in the cargo in question; neither was it proved that the bills of lading were transferred
or assigned to the alleged subrogers; thus, they could not possibly have transferred any right
of action to said plaintiff- appellee in this case. (Brief for the Maritime Company of the
Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of
the duly endorsed bills of lading covering the shipments in question and an examination of
the invoices in particular, shows that the actual consignees of the said goods are the
aforementioned companies. Moreover, no less than MCP itself issued a certification attesting
to this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total
amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is
evident that said plaintiff-appellee has a cause of action to recover (what it has paid) from
defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the
manager and operator of the vessel Dona Nati not a ship agent. As the general managing
agent, according to MCP, it can only be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of
September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term
broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even
conferred all the powers of the owner of the vessel, including the power to contract in the
name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the
circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the
damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil.
281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for
the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing
Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil.
256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer
or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the Civil Code but more specially
as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the
Court held that both the owner and agent (Naviero) should be declared jointly and severally
liable, since the obligation which is the subject of the action had its origin in a tortious act
and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423
[1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable
Page 26 of 45
Conflicts of Law – Property
to the shippers and owners of the cargo transported by it, for losses and damages occasioned
to such cargo, without prejudice, however, to his rights against the owner of the ship, to the
extent of the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v.
McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00
per package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the
MCP argues that the law on averages should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of
lading and corroborated no less by invoices offered as evidence ' during the trial. Besides,
common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al.,
(51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or
loss was caused by its own negligence." Negligence of the captains of the colliding vessel being
the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes
and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law
on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS
Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need
not be discussed lengthily as said claim is not only at variance with NDC's posture, but also
contrary to the factual findings of the trial court affirmed no less by the Court of Appeals,
that both pilots were at fault for not changing their excessive speed despite the thick fog
obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading
issued allow trans-shipment of the cargo, which simply means that the date of arrival of the
ship Dona Nati on April 18,1964 was merely tentative to give allowances for such
contingencies that said vessel might not arrive on schedule at Manila and therefore, would
necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact,
because of the collision, the cargo which was supposed to arrive in Manila on April 18, 1964
arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in
question been saved, they could have arrived in Manila on the above-mentioned dates.
Accordingly, the complaint in the instant case was filed on April 22, 1965, that is, long before
the lapse of one (1) year from the date the lost or damaged cargo "should have been delivered"
in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the
assailed decision of the respondent Appellate Court is AFFIRMED.
SO ORDERED.
G.R. No. 205487 November 12, 2014
ORION SAVINGS BANK, Petitioner,
vs.
SHIGEKANE SUZUKI, Respondent.
DECISION
BRION, J.:
Before us is the Petition for Review on Certiorari1 filed by petitioner Orion Savings Bank
(Orion) under Rule 45 of the Rules of Court, assailing the decision2 dated August 23, 2012
and the resolution3 dated January 25, 2013 of the Court of Appeals (CA) in CA-G.R. CV No.
94104.
The Factual Antecedents
In the first week of August 2003, respondent Shigekane Suzuki (Suzuki), a Japanese
national, met with Ms. Helen Soneja (Soneja) to inquire about a condominium unit and a
parking slot at Cityland Pioneer, Mandaluyong City, allegedly owned by Yung Sam Kang
(Kang), a Korean national and a Special Resident Retiree's Visa (SRRV) holder.
At the meeting, Soneja informed Suzuki that Unit No. 536 [covered by Condominium
Certificate of Title (CCT) No. 18186]4 and Parking Slot No. 42 [covered by CCT No. 9118]5 were
for sale for ₱3,000,000.00. Soneja likewise assured Suzuki that the titles to the unit and the
parking slot were clean. After a brief negotiation, the parties agreed to reduce the price to
₱2,800,000.00. On August 5, 2003, Suzuki issued Kang a Bank of the Philippine Island (BPI)
Check No. 833496 for One Hundred Thousand Pesos (₱100,000.00) as reservation fee.7 On
August 21, 2003, Suzuki issued Kang another check, BPI Check No. 83350,8 this time for
₱2,700,000.00 representing the remaining balance of the purchase price. Suzuki and Kang
then executed a Deed of Absolute Sale dated August 26, 20039covering Unit No. 536 and
Parking Slot No. 42. Soon after, Suzuki took possession of the condominium unit and parking
lot, and commenced the renovation of the interior of the condominium unit.
Kang thereafter made several representations with Suzuki to deliver the titles to the
properties, which were then allegedly in possession of Alexander Perez (Perez, Orion’s Loans
Officer) for safekeeping. Despite several verbal demands, Kang failed to deliver the
documents. Suzuki later on learned that Kang had left the country, prompting Suzuki to
verify the status of the properties with the Mandaluyong City Registry of Deeds.
Page 27 of 45
Conflicts of Law – Property
Before long, Suzuki learned that CCT No. 9118 representing the title to the Parking Slot No.
42 contained no annotations although it remained under the name of Cityland Pioneer. This
notwithstanding, Cityland Pioneer, through Assistant Vice President Rosario D. Perez,
certified that Kang had fully paid the purchase price of Unit. No. 53610 and Parking Slot No.
42.11 CCT No. 18186 representing the title to the condominium unit had no existing
encumbrance, except for anannotation under Entry No. 73321/C-10186 which provided that
any conveyance or encumbrance of CCT No. 18186 shall be subject to approval by the
Philippine Retirement Authority (PRA). Although CCT No. 18186 contained Entry No.
66432/C-10186 dated February 2, 1999 representing a mortgage in favor of Orion for a
₱1,000,000.00 loan, that annotation was subsequently cancelled on June 16, 2000 by Entry
No. 73232/T. No. 10186. Despite the cancellation of the mortgage to Orion, the titles to the
properties remained in possession of Perez.
To protect his interests, Suzuki thenexecuted an Affidavit of Adverse Claim12 dated September
8, 2003, withthe Registry of Deeds of Mandaluyong City, annotated as Entry No. 3292/C-No.
18186 in CCT No. 18186. Suzuki then demanded the delivery of the titles.13 Orion, (through
Perez), however, refused to surrender the titles, and cited the need to consult Orion’s legal
counsel as its reason.
On October 14, 2003, Suzuki received a letter from Orion’s counsel dated October 9, 2003,
stating that Kang obtained another loan in the amount of ₱1,800,000.00. When Kang failed to
pay, he executed a Dacion en Pagodated February 2, 2003, in favorof Orion covering Unit No.
536. Orion, however, did not register the Dacion en Pago, until October 15, 2003.
On October 28, 2003, Suzuki executed an Affidavit of Adverse Claim over Parking Slot No. 42
(covered by CCT No. 9118) and this was annotated as Entry No. 4712/C-No. 9118 in the
parking lot’s title.
On January 27, 2004, Suzuki filed a complaint for specific performance and damages against
Kang and Orion. At the pre-trial, the parties made the following admissions and stipulations:
1. That as of August 26, 2003, Kang was the registered owner of Unit No. 536 and
Parking Slot No. 42;
2. That the mortgage in favor ofOrion supposedly executed by Kang, with Entry No.
66432/C-10186 dated February 2, 1999, was subsequently cancelled by Entry No.
73232/T No. 10186 dated June 16, 2000;
3. That the alleged Dacion en Pagowas never annotated in CCT Nos. 18186 and 9118;
4. That Orion only paid the appropriate capital gains tax and the documentary stamp
tax for the alleged Dacion en Pago on October 15, 2003;
5. That Parking Slot No. 42, covered by CCT No. 9118, was never mortgaged to Orion;
and
6. That when Suzuki bought the properties, he went to Orion to obtain possession of
the titles.
The RTC Ruling
In its decision14 dated June 29, 2009, the Regional Trial Court (RTC), Branch 213,
Mandaluyong City ruled infavor of Suzuki and ordered Orion to deliver the CCT Nos. 18186
and 9118 to Suzuki.
The court found that Suzuki was an innocent purchaser for value whose rights over the
properties prevailed over Orion’s. The RTC further noted that Suzuki exerted efforts to verify
the status of the properties but he did not find any existing encumbrance inthe titles.
Although Orion claims to have purchased the property by way of a Dacion en Pago, Suzuki
only learned about it two (2) months after he bought the properties because Orion never
bothered to register or annotate the Dacion en Pagoin CCT Nos. 18186 and 9116.
The RTC further ordered Orion and Kang to jointly and severally pay Suzuki moral damages,
exemplary damages, attorney’s fees, appearance fees, expenses for litigation and cost ofsuit.
Orion timely appealed the RTC decision with the CA.
The CA Ruling
On August 23, 2012, the CA partially granted Orion’s appeal and sustained the RTC insofar
as it upheld Suzuki’s right over the properties. The CA further noted that Entry No. 73321/C-
10186 pertaining to the withdrawal of investment of an SRRV only serves as a warning to an
SRRV holder about the implications of a conveyance of a property investment. It deviated
from the RTC ruling, however, by deleting the award for moral damages, exemplary damages,
attorney’s fees, expenses for litigation and cost of suit.
Orion sought a reconsideration of the CA decision but the CA denied the motion in its
January 25, 2013 resolution. Orion then filed a petition for review on certiorariunder Rule 45
with this Court.
The Petition and Comment
Orion’s petition is based on the following grounds/arguments:15
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Conflicts of Law – Property
1. The Deed of Sale executed by Kang in favor of Suzuki is null and void. Under
Korean law, any conveyance of a conjugal property should be made with the consent
of both spouses;
2. Suzuki is not a buyer in good faith for he failed to check the owner’s duplicate
copies of the CCTs;
3. Knowledge of the PRA restriction under Entry No. 73321/C-10186, which prohibits
any conveyance or encumbrance of the property investment, defeats the alleged claim
of good faith by Suzuki; and
4. Orion should not be faulted for exercising due diligence.
In his Comment,16 Suzuki asserts that the issue on spousal consent was belatedly raised on
appeal. Moreover, proof of acquisition during the marital coverture is a condition sine qua
nonfor the operation of the presumption of conjugal ownership.17 Suzuki additionally
maintains that he is a purchaser in good faith, and is thus entitled to the protection of the
law.
The Court’s Ruling
We deny the petition for lack of merit.
The Court may inquire into conclusions of fact when the inference made is manifestly
mistaken
In a Rule 45 petition, the latitude of judicial review generally excludes a factual and
evidentiary re-evaluation, and the Court ordinarily abides by the uniform factual conclusions
of the trial court and the appellate court.18 In the present case, while the courts below both
arrived at the same conclusion, there appears tobe an incongruence in their factual findings
and the legal principle they applied to the attendant factual circumstances. Thus, we are
compelled to examine certain factual issues in the exercise of our sound discretion to correct
any mistaken inference that may have been made.19
Philippine Law governs the transfer of real property
Orion believes that the CA erred in not ruling on the issue of spousal consent. We cannot
uphold this position, however, because the issue of spousal consent was only raised on
appeal to the CA. It is a well-settled principle that points of law, theories, issues, and
arguments not brought to the attention of the trial court cannot be raised for the first time on
appeal and considered by a reviewing court.20 To consider these belated arguments would
violate basic principles of fairplay, justice, and due process.
Having said these, we shall nonetheless discuss the issues Orion belatedly raised, if only to
put an end to lingering doubts on the correctness of the denial of the present petition.
It is a universal principle thatreal or immovable property is exclusively subject to the laws of
the country or state where it is located.21 The reason is found in the very nature of immovable
property — its immobility. Immovables are part of the country and so closely connected to it
that all rights over them have their natural center of gravity there.22
Thus, all matters concerning the titleand disposition ofreal property are determined by what
is known as the lex loci rei sitae, which can alone prescribe the mode by which a title canpass
from one person to another, or by which an interest therein can be gained or lost.23 This
general principle includes all rules governing the descent, alienation and transfer of
immovable property and the validity, effect and construction of wills and other conveyances.24
This principle even governs the capacity of the person making a deed relating to immovable
property, no matter what its nature may be. Thus, an instrument will be ineffective to
transfer title to land if the person making it is incapacitated by the lex loci rei sitae, even
though under the law of his domicile and by the law of the place where the instrument is
actually made, his capacity is undoubted.25
On the other hand, property relations between spouses are governed principally by the
national law of the spouses.26 However, the party invoking the application of a foreign law has
the burden of proving the foreign law. The foreign law is a question of fact to be properly
pleaded and proved as the judge cannot take judicial notice of a foreign law.27 He is presumed
to know only domestic or the law of the forum.28
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 inwhich the record is kept, and authenticated by
the seal of his office. (Emphasis supplied)
SEC. 25. What attestation ofcopy 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
Page 29 of 45
Conflicts of Law – Property
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.
Accordingly, matters concerning the title and disposition of real property shall be governed by
Philippine law while issues pertaining to the conjugal natureof the property shall be governed
by South Korean law, provided it is proven as a fact.
In the present case, Orion, unfortunately failed to prove the South Korean law on the
conjugal ownership ofproperty. It merely attached a "Certification from the Embassy of the
Republic of Korea"29 to prove the existence of Korean Law. This certification, does not qualify
as sufficient proof of the conjugal nature of the property for there is no showing that it was
properly authenticated bythe seal of his office, as required under Section 24 of Rule 132.30
Accordingly, the International Law doctrine of presumed-identity approachor processual
presumption comes into play, i.e., where a foreign law is not pleaded or, evenif pleaded, is not
proven, the presumption is that foreign law is the same as Philippine Law.31
Under Philippine Law, the phrase "Yung Sam Kang ‘married to' Hyun Sook Jung" is merely
descriptive of the civil status of Kang.32 In other words, the import from the certificates of title
is that Kang is the owner of the properties as they are registered in his name alone, and that
he is married to Hyun Sook Jung.
We are not unmindful that in numerous cases we have held that registration of the property
in the name of only one spouse does not negate the possibility of it being conjugal or
community property.33 In those cases, however, there was proof that the properties, though
registered in the name of only one spouse, were indeed either conjugal or community
properties.34 Accordingly, we see no reason to declare as invalid Kang’s conveyance in favor of
Suzuki for the supposed lack of spousal consent.
The petitioner failed to adduce sufficient evidence to prove the due execution of the Dacion en
Pago
Article 1544 of the New Civil Codeof the Philippines provides that:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
The application of Article 1544 of the New Civil Code presupposes the existence of two or
more duly executed contracts of sale. In the present case, the Deed of Sale dated August 26,
200335 between Suzuki and Kang was admitted by Orion36 and was properly identified by
Suzuki’s witness Ms. Mary Jane Samin (Samin).37
It is not disputed, too, that the Deed of Sale dated August 26, 2003 was consummated. In a
contract of sale, the seller obligates himself to transfer the ownership of the determinate thing
sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the
seller.38 The execution of the notarized deed of saleand the actual transfer of possession
amounted to delivery that produced the legal effect of transferring ownership to Suzuki.39
On the other hand, although Orion claims priority in right under the principle of prius
tempore, potior jure (i.e.,first in time, stronger in right), it failedto prove the existence and due
execution of the Dacion en Pagoin its favor.
At the outset, Orion offered the Dacion en Pagoas Exhibit "5"with submarkings "5-a" to "5-c"
to prove the existence of the February 6, 2003 transaction in its Formal Offer dated July 20,
2008. Orion likewise offered in evidence the supposed promissory note dated September 4,
2002 as Exhibit "12"to prove the existence of the additional ₱800,000.00 loan. The RTC,
however, denied the admission of Exhibits "5" and "12,"among others, in its order dated
August 19, 2008 "since the same [were] not identified in court by any witness."40
Despite the exclusion of its most critical documentary evidence, Orion failed to make a tender
ofexcluded evidence, as provided under Section 40, Rule 132 of the Rules of Court. For this
reason alone, we are prevented from seriously considering Exhibit "5" and its submarkings
and Exhibit "12" in the present petition.
Moreover, even if we consider Exhibit "5" and its submarkings and Exhibit "12" in the present
petition, the copious inconsistencies and contradictions in the testimonial and documentary
evidence of Orion, militate against the conclusion that the Dacion en Pagowas duly executed.
First, there appears to be no due and demandable obligation when the Dacion en Pago was
executed, contrary to the allegations of Orion. Orion’s witness Perez tried to impress upon the
RTC that Kang was in default in his ₱1,800,000.00 loan. During his direct examination, he
stated:
ATTY. CRUZAT:
Q: Okay, so this loan of ₱1.8 million, what happened to this loan, Mr. Witness?
Page 30 of 45
Conflicts of Law – Property
A: Well it became past due, there has been delayed interest payment by Mr.
Kangand...
Q: So what did you do after there were defaults[?]
A: We have to secure the money or the investment of the bank through loans and we
have executed a dacion en pagobecause Mr. Kang said he has no money. So we just
execute[d] the dacion en pago rather than going through the Foreclosure proceedings.
xxxx
Q: Can you tell the court when was this executed?
A: February 6, 2003, your Honor.41
A reading of the supposed promissory note, however, shows that there was nodefault to speak
of when the supposed Dacion en Pagowas executed.
Based on the promissory note, Kang’s loan obligation wouldmature only on August 27, 2003.
Neither can Orion claim that Kang had been in default in his installment payments because
the wordings of the promissory note provide that "[t]he principal of this loanand its interest
and other charges shall be paid by me/us in accordance hereunder: SINGLE PAYMENT
LOANS.42 "There was thus no due and demandable loan obligation when the alleged Dacion
en Pago was executed.
Second, Perez, the supposed person who prepared the Dacion en Pago,appears to only have a
vague idea of the transaction he supposedly prepared. During his cross-examination, he
testified:
ATTY. DE CASTRO:
Q: And were you the one who prepared this [dacion en pago] Mr. witness?
A: Yes, sir. I personally prepared this.
xxxx
Q: So this 1.8 million pesos is already inclusive of all the penalties, interest and
surcharge due from Mr. Yung Sam Kang?
A: It’s just the principal, sir.
Q: So you did not state the interest [and] penalties?
A: In the [dacion en pago], we do not include interest, sir. We may actually
includethat but....
Q: Can you read the Second Whereas Clause, Mr. Witness?
A: Whereas the first party failed to pay the said loan to the second party and as of
February 10, 2003, the outstanding obligation which is due and demandable
principal and interest and other charges included amounts to ₱1,800,000.00 pesos,
sir.
xxxx
Q: You are now changing your answer[.] [I]t now includes interest and other charges,
based on this document?
A: Yes, based on that document, sir.43
Third, the Dacion en Pago,mentioned that the ₱1,800,000.00 loan was secured by a
real estate mortgage. However, no document was ever presented to prove this real
estate mortgage aside from it being mentioned in the Dacion en Pago itself.
ATTY. DE CASTRO:
Q: Would you know if there is any other document like a supplement to that Credit
Line Agreement referring to this 1.8 million peso loan by Mr. Yung Sam Kang which
says that there was a subsequent collateralization or security given by Mr. Yung
[Sam]
Kang for the loan?
xxxx
A: The [dacion en pago], sir.44
Fourth,the Dacion en Pago was first mentioned only two (2) months after Suzuki and Samin
demanded the delivery of the titles sometime in August 2003,and after Suzuki caused the
annotation of his affidavit of adverse claim. Records show that it was only on October 9,
2003, when Orion, through its counsel, Cristobal Balbin Mapile & Associates first spoke of
the Dacion en Pago.45 Not even Perez mentioned any Dacion en Pago on October 1, 2003,
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Conflicts of Law – Property
when he personally received a letter demanding the delivery of the titles.Instead, Perez
refused to accept the letter and opted to first consult with his lawyer.46
Notably, even the October 9, 2003 letter contained material inconsistencies in its recital of
facts surrounding the execution of the Dacion en Pago. In particular, it mentioned that "on
[September 4, 2002], after paying the original loan, [Kang] applied and was granted a new
Credit Line Facility by [Orion] x x x for ONE MILLION EIGHT HUNDRED THOUSAND PESOS
(₱1,800,000.00)." Perez, however, testified that there was "no cash movement" in the original
₱1,000,000.00 loan. In his testimony, he said:
COURT:
xxxx
Q: Would you remember what was the subject matter of that real estate mortgage for
that first ₱1,000,000.00 loan?
A: It’s a condominium Unit in Cityland, sir.
xxxx
Q: Would you recall if there was any payment by Mr. Yung Sam Kang of this
₱1,000,000.00 loan?
A: None sir.
Q: No payments?
A: None sir.
Q: And from 1999 to 2002, there was no payment, either by way of payment to the
principal, by way ofpayment of interest, there was no payment by Mr. Yung Sam
Kang of this loan?
A: Literally, there was no actual cash movement, sir.
Q: There was no actual cash?
A: Yes, sir.
Q: And yet despite no payment, the bank Orion Savings Bank still extended an
₱800,000.00 additional right?
A: Yes, sir.47
Fifth, it is undisputed that notwithstanding the supposed execution of theDacion en Pago on
February 2, 2003, Kang remained in possession of the condominium unit. In fact, nothing in
the records shows that Orion even bothered to take possession of the property even six (6)
months after the supposed date of execution of the Dacion en Pago. Kang was even able to
transfer possession of the condominium unit to Suzuki, who then made immediate
improvements thereon. If Orion really purchased the condominium unit on February 2, 2003
and claimed to be its true owner, why did it not assert its ownership immediately after the
alleged sale took place? Why did it have to assert its ownership only after Suzuki demanded
the delivery of the titles? These gaps have remained unanswered and unfilled.
In Suntay v. CA,48 we held that the most prominent index of simulation is the complete
absence of anattempt on the part of the vendee to assert his rights of ownership over the
property in question. After the sale, the vendee should have entered the land and occupied
the premises. The absence of any attempt on the part of Orion to assert its right of dominion
over the property allegedly soldto it is a clear badge of fraud. That notwithstanding the
execution of the Dacion en Pago, Kang remained in possession of the disputed condominium
unit – from the time of the execution of the Dacion en Pagountil the property’s subsequent
transfer to Suzuki – unmistakably strengthens the fictitious nature of the Dacion en Pago.
These circumstances, aside from the glaring inconsistencies in the documents and testimony
of Orion’s witness, indubitably prove the spurious nature of the Dacion en Pago.
The fact that the Dacion en Pago
is a notarized document does not
support the conclusion that the
sale it embodies is a true
conveyance
Public instruments are evidence of the facts that gave rise to their execution and are to be
considered as containing all the terms of the agreement.49 While a notarized document enjoys
this presumption, "the fact that a deed is notarized is not a guarantee of the validity of its
contents."50 The presumption of regularity of notarized documents is not absolute and may be
rebutted by clear and convincing evidence to the contrary.51
In the present case, the presumption cannot apply because the regularity in the execution of
the Dacion en Pago and the loan documents was challenged in the proceedings below where
their prima facievalidity was overthrown by the highly questionable circumstances
surrounding their execution.52
Page 32 of 45
Conflicts of Law – Property

Effect of the PRA restriction on CRESCENT PETROLEUM, LTD., G.R. No. 155014 Petitioner,
the validity of Suzuki’s title to the Present:
property Puno, J.,
- versus - Chairman,
Orion argues that the PRA restriction in CCT No. 18186 affects the conveyance to Suzuki. In Austria-Martinez,
particular, Orion assails the status of Suzuki as a purchaser in good faith in view of the Callejo, Sr.,
express PRA restriction contained in CCT No. 18186.53 Tinga, and
*Chico-Nazario, JJ.

M/V LOK MAHESHWARI,

We reject this suggested approachoutright because, to our mind, the PRA restriction cannot THE SHIPPING CORPORATION
affect the conveyance in favor of Suzuki. On this particular point, we concur withthe following OF INDIA, and PORTSERV LIMITED Promulgated:
findings of the CA: and/or TRANSMAR SHIPPING, INC.,
Respondents. November 11, 2005
x x x the annotation merely servesas a warning to the owner who holds a Special Resident x--------------------------------------------------x
Retiree’s Visa(SRRV) that he shall lose his visa if he disposes his property which serves as his
investment in order to qualify for such status. Section 14 of the Implementing Investment DECISION
Guidelines under Rule VIII-A of the Rules and Regulations Implementing Executive Order No.
1037, Creating the Philippine Retirement Park System Providing Funds Therefor and For
Other Purpose ( otherwise known as the Philippine Retirement Authority) states:
PUNO, J.:
Section 14. Should the retiree-investor withdraw his investment from the Philippines, or
transfer the same to another domestic enterprise, orsell, convey or transfer his condominium
unit or units to another person, natural or juridical without the prior approval of the This petition for review on certiorari under Rule 45 seeks the (a) reversal of the November 28,
Authority, the Special Resident Retiree’s Visa issued to him, and/or unmarried minor child or
children[,] may be cancelled or revoked by the Philippine Government, through the
appropriate government department or agency, upon recommendation of the Authority.54 2001 Decision of the Court of Appeals in CA-G.R. No. CV-54920,[1]which dismissed for want of

Moreover, Orion should not be allowed to successfully assail the good faith of Suzuki on the jurisdiction the instant case, and the September 3, 2002 Resolution of the same appellate
basis of the PRA restriction. Orion knew of the PRA restriction when it transacted with Kang.
Incidentally, Orion admitted accommodating Kang’s request to cancel the mortgage
annotation despite the lack of payment to circumvent the PRA restriction. Orion, thus, is court,[2] which denied petitioners motion for reconsideration, and (b) reinstatement of the July
estopped from impugning the validity of the conveyance in favor of Suzuki on the basis of the
PRA restriction that Orion itself ignored and "attempted" to circumvent. 25, 1996 Decision[3] of the Regional Trial Court (RTC) in Civil Case No. CEB-18679, which held

With the conclusion that Orion failed to prove the authenticity of the Dacion en Pago, we see
no reason for the application of the rules on double sale under Article 1544 of the New Civil that respondents were solidarily liable to pay petitioner the sum prayed for in the complaint.
Code. Suzuki, moreover, successfully adduced sufficient evidence to establish the validity of
conveyance in his favor.
The facts are as follows: Respondent M/V Lok Maheshwari (Vessel) is an oceangoing vessel of
WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs against
petitioner Orion Savings Bank.
Indian registry that is owned by respondent Shipping Corporation of India (SCI), a corporation
SO ORDERED.
organized and existing under the laws of India and principally owned by the Government of
Page 33 of 45
Conflicts of Law – Property

India. It was time-chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly acknowledged and

South Korean company. Halla, in turn, sub-chartered the Vessel through a time charter to received the delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the

Transmar Shipping, Inc. (Transmar). Transmar further sub-chartered the Vessel to Portserv US$101,400.00 worth of the bunker fuels. Petitioner Crescent issued a check for the same

Limited (Portserv). Both Transmar and Portserv are corporations organized and existing under amount in favor of Marine Petrobulk, which check was duly encashed.

the laws of Canada.

Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated

On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. November 21, 1995 to Portserv Limited, and/or the Master, and/or Owners, and/or Operators,

(Crescent), a corporation organized and existing under the laws of Canada that is engaged in and/or Charterers of M/V Lok Maheshwari in the amount of US$103,544.00 with instruction

the business of selling petroleum and oil products for the use and operation of oceangoing to remit the amount on or before December 1, 1995. The period lapsed and several demands

vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and were made but no payment was received. Also, the checks issued to petitioner Crescent as

confirmed the request through an advice via facsimile dated November 2, 1995. As security for security for the payment of the bunker fuels were dishonored for insufficiency of funds. As a

the payment of the bunker fuels and related services, petitioner Crescent received two (2) consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for interest,

checks in the amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent tracking fees, and legal fees.

contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another Canadian On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner

corporation, for the physical delivery of the bunker fuels to the Vessel. 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
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

Page 34 of 45
Conflicts of Law – Property

Consequently, the latter are hereby ordered to pay plaintiff jointly and
solidarily, the following:
and SCI, Portserv and/or Transmar. The case was raffled to Branch 10 and docketed as Civil
(a) the sum of US$103,544.00, representing the outstanding
Case No. CEB-18679. obligation;

(b) interest of US$10,978.50 as of July 3, 1996, plus additional

On May 3, 1996, the trial court issued a writ of attachment against the Vessel with interest at 18% per annum for the period thereafter, until
the principal account is fully paid;
bond at P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary restraining
(c) attorneys fees of P300,000.00; and

order and posted the required bond. (d) P200,000.00 as litigation expenses.

SO ORDERED.
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,
On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals.
through Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte motion
They attached copies of the charter parties between respondent SCI and Halla, between Halla
to approve Pioneers letter of undertaking, to consider it as counter-bond and to discharge the
and Transmar, and between Transmar and Portserv. They pointed out that Portserv was a time
attachment. On May 29, 1996, the trial court granted the motion; thus, the letter of
charterer and that there is a clause in the time charters between respondent SCI and Halla,
undertaking was approved as counter-bond to discharge the attachment.
and between Halla and Transmar, which states that the Charterers shall provide and pay for

For failing to file their respective answers and upon motion of petitioner Crescent, the trial all the fuel except as otherwise agreed. They submitted a copy of Part II of the Bunker Fuel

court declared respondents Vessel and SCI, Portserv and/or Transmar in default. Petitioner Agreement between petitioner Crescent and Portserv containing a stipulation that New York

Crescent was allowed to present its evidence ex-parte. law governs the construction, validity and performance of the contract. They likewise

On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent, thus: submitted certified copies of the Commercial Instruments and Maritime Lien Act of the United
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiff [Crescent] and against the defendants [Vessel, SCI, Portserv
States (U.S.), some U.S. cases, and some Canadian cases to support their defense.
and/or Transmar].

Page 35 of 45
Conflicts of Law – Property

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

On November 28, 2001, the Court of Appeals issued its assailed Decision, which
reversed that of the trial court, viz:
WHEREFORE, premises considered, the Decision dated July 25,
1996, issued by the Regional Trial Court of Cebu City, Branch 10, is hereby
REVERSED and SET ASIDE, and a new one is entered DISMISSING the
instant case for want of jurisdiction.
controversy as the same has not been properly pleaded and proved;
7. Petitioner has legal capacity to sue before Philippine courts as
it is suing upon an isolated business transaction;
8. Respondents were duly served summons although service of
summons upon respondents is not a jurisdictional requirement, the
action being a suit quasi in rem;

9. The trial courts decision has factual and legal bases; and,

10. The respondents should be held jointly and solidarily liable.

The appellate court denied petitioner Crescents motion for reconsideration explaining

that it dismissed the instant action primarily on the ground of forum non
In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign
conveniens considering that the parties are foreign corporations which are not doing business
supplier in a foreign port to a vessel of foreign registry that is owned, chartered and sub-
in the Philippines.
chartered by foreign entities.

Hence, this petition submitting the following issues for resolution, viz:
1. Philippine courts have jurisdiction over a foreign vessel found Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs
inside Philippine waters for the enforcement of a maritime lien
against said vessel and/or its owners and operators;
exercise exclusive original jurisdiction (i)n all actions in admiralty and maritime where the
2. The principle of forum non conveniens is inapplicable to the
instant case; demand or claim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where
3. The trial court acquired jurisdiction over the subject matter of
the instant case, as well as over the res and over the persons of the such demand or claim exceeds four hundred thousand pesos (P400,000). Two (2) tests have
parties;

4. The enforcement of a maritime lien on the subject vessel is been used to determine whether a case involving a contract comes within the admiralty and
expressly granted by law. The Ship Mortgage Acts as well as the Code
of Commerce provides for relief to petitioner for its unpaid claim; maritime jurisdiction of a court - the locational test and the subject matter test. The English

5. The arbitration clause in the contract was not rigid or inflexible

but expressly allowed petitioner to enforce its maritime lien in rule follows the locational test wherein maritime and admiralty jurisdiction, with a few
Philippine courts provided the vessel was in the Philippines;
exceptions, is exercised only on contracts made upon the sea and to be executed thereon. This

Page 36 of 45
Conflicts of Law – Property
is totally rejected 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 transactions.[4] In International Harvester Company of the
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 criterion
a maritime service or a maritime transaction.
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 an action in personam. Thus: [7]
xxx
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 the Philippines, we have
a complete legislation, both substantive and adjective, under which to bring
an action in rem against a vessel for 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
Page 37 of 45
Conflicts of Law – Property

but also includes all persons who supply provisions and necessaries to a vessel, whether foreign preferred mortgages.[14] Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage

or domestic. It points out further that the law does not indicate that the supplies or necessaries Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage

must be furnished in the Philippines in order to give petitioner the right to seek enforcement of Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence finds

the lien with a Philippine court.[11] relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies

in the present case.

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 The various tests used in the U.S. to determine whether a maritime lien exists are the

Crescent as the provision refers only to a situation where the person furnishing the supplies is following:

situated inside the territory of the Philippines and not where the necessaries were furnished in
One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel
a foreign jurisdiction like Canada.[12]
in a foreign port, whether such lien exists, or whether the court has or will exercise jurisdiction,

We find against petitioner Crescent. 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
I.
Scotia,[16] reiterated in The Kaiser Wilhelm II[17] (1916), in The Woudrichem[18] (1921) and

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the in The City of Atlanta[19] (1924).

growth and development of the shipping industry and to extend the benefits accorded to
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-
overseas shipping under Presidential Decree No. 214 to domestic shipping. [13] It is patterned
factor methodologies as the law of the place of supply.[20]
closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to

Page 38 of 45
Conflicts of Law – Property

In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New York, joined the first announced in the case of Lauritzen were applicable not only to personal injury claims

crew of a ship of Danish flag and registry that is owned by a Danish citizen. He signed the ships arising under the Jones Act but to all matters arising under maritime law in general.[23]

articles providing that the rights of the crew members would be governed by Danish law and
Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones Act by a Greek
by the employers contract with the Danish Seamens Union, of which he was a member. While
seaman injured aboard a ship of Greek registry while in American waters. The ship was
in Havana and in the course of his employment, he was negligently injured. He sued the
operated by a Greek corporation which has its largest office in New York and another office in
shipowner in a federal district court in New York for damages under the Jones Act. In holding
New Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a
that Danish law and not the Jones Act was applicable, the Supreme Court adopted a multiple-
Greek citizen. The ship was engaged in regularly scheduled runs between various ports of the
contact test to determine, in the absence of a specific Congressional directive as to the statutes
U.S. and the Middle East, Pakistan, and India, with its entire income coming from either
reach, which jurisdictions law should be applied. The following factors were considered: (1)
originating or terminating in the U.S. The contract of employment provided that Greek law and
place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4)
a Greek collective bargaining agreement would apply between the employer and the seaman
allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign
and that all claims arising out of the employment contract were to be adjudicated by a Greek
forum; and (7) law of the forum.
court. The U.S. Supreme Court observed that of the seven factors listed in the Lauritzen

Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. test, four were in favor of the shipowner and against jurisdiction. In arriving at the

International Terminal Operating Co.[22] again considered a foreign seamans personal injury conclusion that the Jones Act applies, it ruled that the application of the Lauritzen test is not

claim under both the Jones Act and the general maritime law. The Court held that the factors 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

Page 39 of 45
Conflicts of Law – Property

omitted) Moreover, the list of seven factors in Lauritzen was not intended to be exhaustive. x x by a Norwegian Company and chartered by a London time charterer for unpaid fuel oil and

x [T]he shipowners base of operations is another factor of importance in determining whether marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed in

the Jones Act is applicable; and there well may be others. 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
The principles enunciated in these maritime tort cases have been extended to cases
and maritime law of the U.S. applied. The U.S. Court of Appeals recognized the modern
involving unpaid supplies and necessaries such as the
approach to maritime conflict of law problems introduced in the Lauritzen case. However, it
cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine
observed that Lauritzen involved a torts claim under the Jones Act while the present claim
Services v. M/V El Centroamericano.[26]
involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its

Three. The factors provided in Restatement (Second) of Conflicts of Law have also conclusion is limited to the unique circumstances surrounding a maritime lien as well as the

been applied, especially in resolving cases brought under the Federal Maritime Lien Act. Their statutory directives found in the Maritime Lien Statute and that the initial choice of law

application suggests that in the absence of an effective choice of law by the parties, the forum determination is significantly affected by the statutory policies surrounding a maritime

contacts to be considered include: (a) the place of contracting; (b) the place of negotiation of the lien. It ruled that the facts in the case call for the application of the Restatement (Second) of

contract; (c) the place of performance; (d) the location of the subject matter of the contract; and Conflicts of Law. The U.S. Court gave much significance to the congressional intent in enacting

(e) the domicile, residence, nationality, place of incorporation and place of business of the the Maritime Lien Statute to protect the interests of American supplier of goods, services or

parties.[27] 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
In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,[28] an admiralty

that serves the needs of the international legal system as well as the basic policies underlying
action in rem was brought by an American supplier against a vessel of Norwegian flag owned
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maritime law. The court also gave equal importance to the predictability of result and protection the contract under which the goods were supplied. As a result, the court found it more

of justified expectations in a particular field of law. In the maritime realm, it is expected that appropriate to consider the factors contained in Section 6 of the Restatement (Second) of

when necessaries are furnished to a vessel in an American port by an American supplier, the Conflicts of Law. The U.S. Court held that the primary concern of the Federal Maritime Lien

American Lien Statute will apply to protect that supplier regardless of the place where the Act is the protection of American suppliers of goods and services.

contract was formed or the nationality of the vessel.

The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.[30]

The same principle was applied in the case of Swedish Telecom Radio v. M/V
II.
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 Finding guidance from the foregoing decisions, the Court cannot sustain petitioner

this case, a Swedish company supplied radio equipment in a Spanish port to refurbish a Crescents insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978

Panamanian vessel damaged by fire. Some of the contract negotiations occurred in Spain and and hold that a maritime lien exists.

the agreement for supplies between the parties indicated Swedish companys willingness to
First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only

submit to Swedish law. The ship was later sold under a contract of purchase providing for the
falls under one the law of the forum. All other elements are foreign Canada is the place of the

application of New York law and was arrested in the U.S. The U.S. Court of Appeals also held
wrongful act, of the allegiance or domicile of the injured and the place of contract; India is the

that while the contacts-based framework set forth in Lauritzen was useful in the analysis of all
law of the flag and the allegiance of the defendant shipowner. Balancing these basic interests,

maritime choice of law situations, the factors were geared towards a seamans injury claim. As
it is inconceivable that the Philippine court has any interest in the case that outweighs the

in Gulf Trading, the lien arose by operation of law because the ships owner was not a party to
interests of Canada or India for that matter.

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Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following But under which law should petitioner Crescent prove the existence of its maritime lien?

the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act
In light of the interests of the various foreign elements involved, it is clear that Canada has the
of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect
most significant interest in this dispute. The injured party is a Canadian corporation, the sub-
Filipino suppliers and was not intended to create a lien from a contract for supplies between
charterer which placed the orders for the supplies is also Canadian, the entity which physically
foreign entities delivered in a foreign port.
delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada,

Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a and the supplies were delivered in Canada.

maritime lien exists would not promote the public policy behind the enactment of the law to
The arbitration clause contained in the Bunker Fuel Agreement which states that New
develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting
York law governs the construction, validity and performance of the contract is only a factor that
them a maritime lien under our laws even if they are not entitled to a maritime lien under their
may be considered in the choice-of-law analysis but is not conclusive. As in the cases of Gulf
laws will encourage forum shopping.
Trading and Swedish Telecom, the lien that is the subject matter of this case arose by

Finally. The submission of petitioner is not in keeping with the reasonable expectation operation of law and not by contract because the shipowner was not a party to the contract

of the parties to the contract. Indeed, when the parties entered into a contract for supplies in under which the goods were supplied.

Canada, they could not have intended the laws of a remote country like the Philippines to
It is worthy to note that petitioner Crescent never alleged and proved Canadian law as
determine the creation of a lien by the mere accident of the Vessels being in Philippine territory.
basis for the existence of a maritime lien. To the end, it insisted on its theory that Philippine

III. law applies. Petitioner contends that even if foreign law applies, since the same was not properly

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pleaded and proved, such foreign law must be presumed to be the same as Philippine law be necessity for the extension of the credit; and (5) the necessaries must be ordered by persons

pursuant to the doctrine of processual presumption. authorized to contract on behalf of the vessel.[34] These do not avail in the instant case.

Thus, we are left with two choices: (1) dismiss the case for petitioners failure to First. It was not established that benefit was extended to the vessel. While this is

establish a cause of action[31] or (2) presume that Canadian law is the same as Philippine law. presumed when the master of the ship is the one who placed the order, it is not disputed that

In either case, the case has to be dismissed. 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
It is well-settled that a party whose cause of action or defense depends upon a foreign
Crescent to prove that benefit was extended to the vessel. Petitioner did not.
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 Second. Petitioner Crescent did not show any proof that the marine products were

lien before our courts depended on the existence of a maritime lien under the proper law. By necessary for the continuation of the vessel.

erroneously claiming a maritime lien under Philippine law instead of proving that a maritime
Third. It was not established that credit was extended to the vessel. It is presumed
lien exists under Canadian law, petitioner Crescent failed to establish a cause of action.[33]
that in the absence of fraud or collusion, where advances are made to a captain in a foreign

Even if we apply the doctrine of processual presumption, the result will still be the port, upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute

same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the

for maritime liens on necessaries to exist: (1) the necessaries must have been furnished to and vessel, that they are made upon the credit of the vessel as well as upon that of her owners.[36] In

for the benefit of the vessel; (2) the necessaries must have been necessary for the continuation this case, it was the sub-charterer Portserv which requested for the delivery of the bunker

of the voyage of the vessel; (3) the credit must have been extended to the vessel; (4) there must fuels. The issuance of two checks amounting to US$300,000 in favor of petitioner Crescent
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prior to the delivery of the bunkers as security for the payment of the obligation weakens under a time charter, is not someone to whom the management of the vessel has been

petitioner Crescents contention that credit was extended to the Vessel. 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
We also note that when copies of the charter parties were submitted by respondents
vessel retains possession and control through the master and crew who remain his
in the Court of Appeals, the time charters between respondent SCI and Halla and between
employees.[37] Not enjoying the presumption of authority, petitioner Crescent should have
Halla and Transmar were shown to contain a clause which states that the Charterers shall
proved that Portserv was authorized by the shipowner to contract for supplies. Petitioner failed.
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 A discussion on the principle of forum non conveniens is unnecessary.

the credit of the vessel.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920,

Fourth. There was no proof of necessity of credit. A necessity of credit will be dated November 28, 2001, and its subsequent Resolution of September 3, 2002 are

presumed where it appears that the repairs and supplies were necessary for the ship and that AFFIRMED. The instant petition for review on certiorari is DENIED for lack of merit. Cost

they were ordered by the master. This presumption does not arise in this case since the fuels against petitioner.

were not ordered by the master and there was no proof of necessity for the supplies.
SO ORDERED.

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
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